CEDAR INCOME FUND LTD /MD/ - 10-Q Quarterly Report

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------------------------------

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended................June 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from..............to................

Commission file number.......................................0-14510

CEDAR INCOME FUND, LTD.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)

Maryland 42-1241468
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(State or other (IRS Employer
Jurisdiction of Identification No.)
Incorporation)

44 South Bayles Avenue, Port Washington, New York 11050
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (516) 767-6492

- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period 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 [ ]

The number of shares outstanding of the registrant's Common Stock $0.01
par value was 694,411 on August 12, 2002.

Cedar Income Fund, Ltd.
-----------------------

INDEX

Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December
31, 2001

Consolidated Statements of Shareholders' Equity for the six months ended
June 30, 2002 (unaudited)

Consolidated Statements of Operations for the three months and six months
ended June 30, 2002 and 2001 (unaudited)

Consolidated Statements of Cash Flows for the six months ended
June 30, 2002 and 2001 (unaudited)

Notes to Consolidated Financial Statements - June 30, 2002 (unaudited)

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Item 3. Quantitative and Qualitative Disclosure of Market Risk

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K

Signatures

Part I. Financial Information
Item 1. Financial Statements

Cedar Income Fund, Ltd.
Consolidated Balance Sheet

June 30, December 31,
2002 2001
-----------------------------
(unaudited)

Assets
Real estate
Land $ 14,217,648 $ 10,108,717
Buildings and improvements 65,018,347 47,513,267
-----------------------------
79,235,995 57,621,984
Less accumulated depreciation (1,316,107) (674,256)
-----------------------------
Real estate 77,919,888 56,947,728

Real estate held for sale - 4,401,800
Property deposits 250,000 -
Cash and cash equivalents 3,265,566 2,872,289
Restricted cash 1,051,074 1,402,654
Rents and other receivables 486,366 217,104
Deferred financing costs, net 1,291,925 1,195,047
Deferred legal, net 153,868 98,749
Prepaid expenses, net 694,876 130,557
Deferred lease commissions 623,998 392,823
Deferred rental income 193,430 47,924
Taxes held in escrow 504,253 641,715
-----------------------------

Total Assets $ 86,435,244 $ 68,348,390
=============================

Liabilities and Shareholders' Equity
Liabilities
Mortgage loans payable $ 64,835,067 $ 46,129,760
Loans payable 2,441,909 5,980,000
Accounts payable and accrued expenses 1,083,056 876,456
Security deposits 226,888 243,089
Advance rents 434,620 252,294
-----------------------------
Total Liabilities 69,021,540 53,481,599
-----------------------------

Minority Interests 5,546,986 2,235,239
Limited partner's interest in consolidated
Operating Partnership 8,408,114 8,964,366
Shareholders' Equity
Common stock ($.01 par value 50,000,000
shares authorized, 694,411 and 692,111 shares
issued and outstanding, respectively) 6,944 6,921
Additional paid-in capital 3,451,660 3,660,265
-----------------------------
Total Shareholders' Equity 3,458,604 3,667,186
-----------------------------
Total Liabilities and Shareholders' Equity $ 86,435,244 $ 68,348,390
=============================

Total Shareholders' Equity in the Company
and limited partner's (equity) interest in
Operating Partnership and minority interests $ 17,413,704 $ 14,866,791
=============================

See the accompanying notes to consolidated financial statements.

Cedar Income Fund, Ltd.
Consolidated Statements of Shareholders' Equity
(unaudited)

Additional Total
Common Pain-In Undistributed Shareholders'
Stock Capital Net Earnings Equity
- ----------------------------------------------------------------------------------------------------

Balance at December 31, 2001 $ 6,921 $3,660,265 $ - $3,667,186
-
Net loss for the six months
ended June 30, 2002 - (274,134) - (274,134)
-
Warrants 54,242 54,242

Conversion of Operating
Partnership units to Common
Stock 23 11,287 - 11,310
-------------------------------------------------------------

Balance at June 30, 2002 $ 6,944 $3,451,660 $ - $3,458,604
=============================================================

See the accompanying notes to consolidated financial statements.

Cedar Income Fund, Ltd.
Consolidated Statements of Operations
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------------------------- --------------------------------

REVENUE
Rents $2,650,540 $ 885,012 $5,150,532 $ 1,760,647
Other - - 3,648 -
Interest 5,283 80,906 11,960 188,550
---------- --------- ---------- -----------
Total Revenue 2,655,823 965,918 5,166,140 1,949,197
---------- --------- ---------- -----------
EXPENSES
Property expenses:
Payroll 32,235 13,417 54,638 27,427
Real estate taxes 304,131 83,324 592,805 175,312
Repairs and maintenance 161,005 85,702 388,341 173,107
Utilities 79,458 51,846 176,947 118,963
Management fee 117,910 34,254 214,900 66,172
Insurance 35,878 11,343 70,626 21,701
Leasing commissions 11,043 20,073 36,747 41,275
Other 165,058 41,452 264,788 67,904
---------- --------- ---------- -----------
Property expenses, excluding depreciation 906,718 341,411 1,799,792 691,861
and amortization
Depreciation 339,747 121,524 641,851 252,509
Amortization 221,559 8,181 470,642 53,583
---------- --------- ---------- -----------
Total property expenses 1,468,024 471,116 2,912,285 997,953
Interest 1,048,193 303,053 1,968,745 666,656
Directors' fees, directors' and officers'
insurance and expenses 32,244 30,084 63,006 48,936
Administrative and advisory fees 90,000 24,468 180,000 48,170
Legal and accounting 128,434 31,601 239,925 65,366
Other administrative 54,394 10,850 70,605 42,863
Loan repayment fee 268,500 - 268,500 -
---------- --------- ---------- -----------
Total Expenses 3,089,789 871,172 5,703,066 1,869,944
---------- --------- ---------- -----------
(Loss) income before minority interests and limited
partner's interest in Operating Partnership (433,966) 94,746 (536,926) 79,253
Minority interests 187,313 (18,413) 120,647 5,929
Limited partner's interest 209,891 (1,007,040) 331,272 (1,019,980)
Gain on sale - 1,638,416 - 1,638,416
Loss on sale (48,511) (295,610) (48,511) (295,610)
---------- --------- ---------- -----------
(Loss) before cumulative effect adjustment (85,273) 412,099 (133,518) 408,008
Cumulative effect of change in accounting principles
(net of limited partner's share of ($14,732)) - - - (6,014)
---------- --------- ---------- -----------
(Loss) income before extraordinary items $ (85,273) $ 412,099 $ (133,518) $ 401,994
Extraordinary items
Early extinguishment of debt (net of limited partner's
share of $346,110) $ (140,616) $ - $ (140,616) $ -
Early extinguishment of debt (net of limited partner's
share of $187,834) - (76,312) - (76,312)
---------- --------- ---------- -----------
Net (loss) income $ (225,889) $ 335,787 $ (274,134) $ 325,682
========== ========= ========== ===========
Net (loss) income per share before cumulative
effect adjustment (0.12) 0.60 (0.19) 0.59
Cumulative change in accounting principal per share - - - (0.01)
---------- --------- ---------- -----------
Net (earnings) loss per share before extraordinary item (0.12) 0.60 (0.19) 0.58
Extraordinary (loss) per share (0.20) - (0.20) -
Extraordinary (loss) per share - (0.11) - (0.11)
---------- --------- ---------- -----------
Net earnings (loss) per share $ (0.32) $ 0.49 $ (0.39) $ 0.47
========== ========= ========== ===========

Average number of shares outstanding 693,334 692,111 692,600 692,111
========== ========= ========== ===========

Cedar Income Fund, Ltd.
Consolidated Statements of Cash Flows
(unaudited)

Six Months Ended
June 30, 2002 June 30, 2001
------------------------------

Net (loss) income $ (274,134) $ 325,682
Adjustments to reconcile net loss to net cash
provided by operating activities:
Cumulative effect of change in accounting principle - 20,737
Minority interests (120,647) (5,929)
Limited partner's interest in Operating Partnership (331,272) 1,019,980
Gain on sale of Broadbent Business Center - (1,638,416)
Loss on sale of Corporate Center East - 295,610
Loss on sale of Southpoint Parkway 48,511 -
Early extinguishment of debt 486,726 264,146
Depreciation and amortization 1,112,493 306,092
(Increase) decrease in deferred rental receivable (145,506) 18,288

Changes in operating assets and liabilites:
(Increase) in rent and other receivables (269,262) (5,290)
Decrease in deferred legal - 20,058
(Increase) decrease in prepaid expenses (549,902) 15,593
(Increase) decrease in deferred lease commissions (231,175) 52,867
Decrease (increase) in taxes held in escrow 137,462 (44,745)
Increase (decrease) in accounts payable 206,600 (35,614)
Security deposits collected, net (16,201) (47,148)
Increase (decrease) in advance rents 181,791 (51,449)
----------------------------
Net cash provided by operating activities 235,484 510,462
----------------------------

Cash Flow from Investing Activities
Capital expenditures (954,492) (3,893,799)
Decrease in restricted cash 351,580 652,753
Property deposits (250,000) (350,000)
Decrease in construction payable - (343,090)
Sale of Broadbent Business Center - 4,839,941
Sale of Southpoint Parkway 4,353,289 -
Sale of Corporate Center East - 1,722,458
Acquisition of Red Lion Associates net of cash at acquisition (3,174,623) -
----------------------------
Net cash provided by investing activities 325,754 2,628,263
----------------------------

Cash Flow from Financing Activities
Repayment of The Point financing (17,900,000) -
Principal portion of scheduled mortgage payments (165,780) -
Proceeds from The Point mortgage financing 20,000,000 -
Proceeds from line of credit 500,000 -
Contribution from minority interest 4,030,290 -
Distribution to minority interest (597,896) -
(Repayment of) loans payable (4,925,210) (1,515,644)
Deferred financing costs (1,054,246) (145,468)
Deferred legal costs (55,119) -
----------------------------
Net cash (used in) financing activities (167,961) (1,661,112)
----------------------------

Net increase in cash and cash equivalents 393,278 1,477,613
Cash and cash equivalents at beginning of the period 2,872,289 841,111
----------------------------
Cash and cash equivalents at end of the period $ 3,265,567 $ 2,318,724
============================

Supplemental Disclosure of Cash Activities
Interest paid $ 1,777,180 $ 666,656
============================
Non-Cash activities
Warrants $ 198,095 $ -
============================
Red Lion note payable $ 887,142 $ -
============================
Red Lion mortgage assumed $16,778,156 $ -
============================

See the accompanying notes to consolidated financial statements.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

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. The
Company is the sole general partner of the Operating Partnership.

The Company's shares are traded on the NASDAQ (Small Cap) Market under
the symbol "CEDR".

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.

The Company continues to operate as a REIT. To qualify as a REIT under
applicable provisions of the Internal Revenue Code of 1986, as amended, and
Regulations thereto (the "Code"), 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
professional managed, diversified portfolio of commercial (primarily shopping
center) real estate investments which will provide the best available cash flow
and present an opportunity for capital appreciation.

The Company, through its Operating Partnership, directly or indirectly
through partnership interests or limited liability companies as of June 30,
2002, owned and operated the following shopping center properties:

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 1. Background, Organization and Reorganization of the Company (continued)

Ownership
Name Location Square Footage Interest (as G.P.)
---- -------- -------------- ------------------

Academy Plaza Philadelphia, PA 154,124 sq. ft. 100%
Port Richmond Village Philadelphia, PA 156,471 sq. ft. 100%
Washington Center Shoppes Sewell, NJ 157,146 sq. ft. 100%
Greentree Road (parcel) Sewell, NJ 47,000 sq. ft. 100%
The Point Shopping Center Harrisburg, PA 255,613 sq. ft. 50%
Red Lion Shopping Center Philadelphia, PA 217,874 sq. ft. 20%

Cedar Bay Realty Advisors, Inc., a New York corporation ("CBRA"),
serves as investment advisor to the Company pursuant to an Administrative and
Advisory Agreement (the "Advisory Agreement") with the Company. Brentway
Management LLC, a New York limited liability company ("Brentway"), provides
property management services for the Company's properties pursuant to a
Management Agreement dated April 1998 (the "Management Agreement") and through
individual management agreements for the respective properties with the Company
on arm's-length terms. SKR Management Corp., a New York corporation ("SKR"),
provides certain legal services to the Company through its in-house counsel and
Secretary of the Company, Stuart H. Widowski. CBRA and SKR are wholly-owned by
Leo S. Ullman. Brentway is owned by Leo Ullman and Brenda Walker. Leo S. Ullman
is President and Chairman of the Board of the Company and of the corporate
partners of CBC. Brenda Walker is Vice President and a Director of the Company
and Vice President of the corporate partners of CBC. The terms of the Advisory
Agreement and Management Agreement are further discussed in Note 8 to the
Consolidated Financial Statements.

Note 2. Acquisition of Red Lion Shopping Center and Related Matters

On May 31, 2002, Cedar-RL, LLC ("Cedar-RL"), a newly-formed special
purpose, wholly-owned subsidiary of the Operating Partnership, purchased from
Silver Circle Management Corp. ("Silver Circle") an affiliate of Leo S. Ullman
and CBC (the limited partner of the Operating Partnership and a 27.4% owner of
the Company's outstanding shares) a 20% interest in API Red Lion Shopping Center
Associates ("Red Lion Associates"), a partnership owned by Leo S. Ullman (as
limited partner with an 8% ownership interest) and Silver Circle (as sole
general partner with a 92% ownership interest). The purchase price was
$1,182,857, payable $295,714 at closing (May 31, 2002) and paid out of the
Company's available cash, with the balance evidenced by a promissory note (the
"Note") payable in three equal annual installments commencing one year after
closing and bearing interest at 7.5% due annually with each installment payment.
The Note may be prepaid in whole or in part at any time. The security for the
Note is a pledge by Cedar-RL of its interest in Red Lion Associates.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 2. Acquisition of Red Lion Shopping Center and Related Matters (continued)

Also on May 31, 2002, Silver Circle and Leo S. Ullman sold an aggregate
69% limited partnership interest in Red Lion Associates to Philadelphia
ARC-Cedar LLC ("ARC Cedar") for $4,360,500. As a result of such transactions,
Leo S. Ullman will have no continuing ownership interest in Red Lion Associates.
The proceeds of sale of Mr. Ullman's interest in Red Lion Associates were used
in their entirety to repay certain loans to Silver Circle. Mr. Ullman and Brenda
J. Walker, President and Vice President of the Company, respectively, are
officers of Silver Circle, but have no ownership interest in that entity.

The principal asset of Red Lion Associates is the Red Lion Shopping
Center, a 218,000 sq. ft. shopping center in Philadelphia, Pennsylvania with
Best Buy, Staples, Sports Authority and Pep Boys as anchor tenants. The property
was built in 1972, substantially "rehabbed" in 1990 and subsequently expanded in
1998, 1999 and 2000 to accommodate the tenancies for Best Buy, Staples and Pets
Plus, respectively.

The property is subject to a first mortgage with a principal balance of
approximately $16.8 million as of May 1, 2002, maturing in February 2010.

Silver Circle, in consideration of the purchase by Cedar-RL and
ARC-Cedar, has entered into a master lease for a period ending on the earlier of
(i) 10 years or (ii) the date on which approximately 49,600 sq. ft. of gross
leaseable area (vacant space formerly occupied by Ross Dress for Less and Cost
Less stores) has been leased to third parties meeting certain criteria at a
minimum rent of $11.50 per sq. ft. ($570,262 per annum) plus taxes, common area
maintenance and utilities payable by occupant. As security for such obligations,
Silver Circle has deposited $1.5 million into escrow to be drawn upon pursuant
to the master lease.

In addition, Silver Circle will guarantee monthly minimum rental
payments of the Sports Authority lease during the term of its existing lease
($43,825 per month) until the earlier to occur of (i) exercise by Sports
Authority of a renewal option, (ii) new leases to tenants approved by Red Lion
Associates or (iii) five years after the earlier to occur of the date of any
Sports Authority default or August 14, 2005, subject in each case to a maximum
of $200,000. This obligation and certain other obligations are secured by Silver
Circle's partnership interest in Red Lion Associates.

The purchases by Cedar-RL and ARC-Cedar were determined on an
arm's-length basis, based on a valuation of the Red Lion Shopping Center
property at approximately $23 million (approximately $6 million above existing
first mortgage financing of approximately $17 million). The Company previously
commissioned and received on December 14, 2001, an appraisal of the Red Lion
Shopping Center from St. John Realty Associates, Inc. at $23.7 million,
including the value of the master lease described above.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 2. Acquisition of Red Lion Shopping Center and Related Matters (continued)

The Board of Directors of the Company commissioned, and has received, a
"fairness" opinion from the investment banking firm, Robert A. Stanger & Co.
Inc., with respect to the purchase of the partnership interest in Red Lion
Associates by the Operating Partnership.

On May 31, 2002, contemporaneous with the closing of the Red Lion
Associates transaction, an Operating Unit Purchase Warrant was issued by the
Operating Partnership to ARC Properties, Inc., to purchase Units of the
Operating Partnership at an exercise price of $4.50 per Unit. Such Warrants were
issued and vested one-third on the closing of the transaction (83,333 warrants),
with the balance to vest one-third each on January 1, 2003 and 2004 (83,333,
respectively), provided that ARC Properties, Inc. performs future services for
the Company.

The first 83,333 of Warrants which were issued were capitalized as part
of the Red Lion transaction using the fair value method. The accounting
treatment of the subsequent issuance of Warrants will be determined by future
services performed by ARC Properties, Inc.

As a condition for the issuance of the Warrant, the holder has entered
into a "standstill" agreement which prohibits the holder from, among other
things, purchasing directly or indirectly any additional Shares or Units,
conducting a proxy contest or a tender offer to the Company's
shareholders/unitholders without the prior approval of the Company, or selling,
transferring, or pledging the Warrant or any Units or Shares except under
Securities and Exchange Commission ("SEC") Rule 144 volume restrictions or
through a broker/dealer, subject to certain restrictions to prevent
disqualification as a REIT.

Silver Circle, ARC-Cedar and Cedar-RL entered into an amended
partnership agreement for Red Lion Associates effective as of the closing date
with respect to the operation of the Red Lion Shopping Center. Cedar-RL under
such agreement is the sole general partner of Red Lion Associates; ARC-Cedar and
Silver Circle are limited partners.

Pursuant to the terms of the agreement, income and loss of the
partnership will be allocated to the respective partners in accordance with
their percentage interests. Silver Circle has a continuing right to receive on a
priority basis upon a capital event, an amount equal to cash left in the
partnership at closing in the amount of approximately $185,000, which amount
constitutes the approximate amount payable to the first mortgagee for one
month's debt service and reserves, respectively. Cash distributions from
operations or from liquidation will also be allocated in accordance with their
percentage interests.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 2. Acquisition of Red Lion Shopping Center and Related Matters (continued)

The general partner will be reimbursed only for actual costs and
expenses (including administrative) incurred for the partnership's operations.
Brentway, an affiliate of Mr. Ullman and Ms. Walker, will continue to provide
management services in accordance with the existing management agreement for the
property, which provides for leasing fees, construction management fees, and
property management fees at customary rates.

The general partner will be indemnified to the full extent of Red Lion
Associates' assets and the law against any loss or damage in connection with the
business of the partnership resulting from any act or omission performed in good
faith.

The Company's 20% indirect ownership interest as sole general partner
of Red Lion Associates, provides the Company with control over all significant
activities of Red Lion Associates. The specific narrow rights of the limited
partners, which, in turn, are contingent, have been described above.
Accordingly, the Company has reported consolidated results of Red Lion
Associates. In this manner, the accounting treatment for this property will be
similar to the accounting treatment for The Point Shopping Center property in
Harrisburg, Pennsylvania ("The Point"), in which the Operating Partnership,
through a single-purpose entity, is similarly the sole general partner with
controlling responsibility for the operations of that partnership.

SKR is entitled to, and has collected a fee from Silver Circle in
connection with the sale of its ownership interest in Red Lion Associates to
ARC-Cedar and Cedar-RL in an amount equal to 1% of the sales price with a
maximum of $100,000. The initial fee paid to SKR, based on cash proceeds of the
sales to Silver Circle, was $43,767. CBRA is generally entitled under the
Investment Advisory Agreement between CBRA and the Company to an acquisition fee
of 1% of the purchase price of any property acquired by the Company or the
Operating Partnership. The fee to which CBRA would otherwise be entitled with
respect to the purchase of the 20% interest in Red Lion Associates by the
Operating Partnership, has been waived by CBRA.

Note 3. Description of 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 June 30, 2002 and December 31, 2001, the results of their operations and
their operations for the three months and six months ended June 30, 2002, and
their cash flows for the six months ended June 30, 2002 and 2001, respectively.
All significant intercompany balances and transactions have been eliminated in
consolidation.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 3. Description of Significant Accounting Policies (continued)

Consolidation Policy and Related Matters (continued)

The accompanying interim unaudited financial statements have been
prepared by the Company's management pursuant to the rules and regulations of
the SEC. Certain information and footnote disclosure normally included in the
financial statements prepared in accordance with accounting principles generally
accepted in the United States ("GAAP") may have been condensed or omitted
pursuant to such rules and regulations, although management believes that the
disclosures are adequate to make the information presented not misleading. The
unaudited financial statements as of June 30, 2002, and for the three month and
six month periods ended June 30, 2002 and 2001 include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial information set forth herein. The
results of operations for the interim periods are not necessarily indicative of
the results that may be expected for the year ending December 31, 2002. These
financial statements should be read in conjunction with the Company's audited
financial statements and the notes thereto included in the Company's Form 10-K
for the year ended December 31, 2001.

The Company owns an approximate 29% partnership interest as sole
general partner in the Operating Partnership, which provides the Company with
control over all significant activities of the Operating Partnership.

As the Company has control over the Operating Partnership, the
Operating Partnership in turn is consolidated with the Company in the
accompanying financial statements as of June 30, 2002.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 3. Description of Significant Accounting Policies (continued)

Consolidation Policy and Related Matters (continued)

The limited partner's interest as of June 30, 2002 (currently owned
entirely by CBC) represents approximately a 71% limited partnership interest in
the equity of the Operating Partnership.

The minority interests represent the limited partner's 50% interest in
The Point Associates, L.P. ("The Point Associates") and the 69% and 11% limited
partners' interests in API Red Lion Shopping Center Associates ("Red Lion
Associates"). The Operating Partnership has a 50% general partnership interest
in The Point Associates and a 20% general partnership interest in Red Lion
Associates, which are consolidated in the accompanying financial statements for
similar reasons as set forth for the Operating Partnership. The limited partner
in The Point Associates is an affiliate of CBC. The 11% limited partner in Red
Lion Associates is also an affiliate of CBC, and the 69% limited partner is an
affiliate of ARC Properties, Inc. (see Note 2).

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

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.

Gain on sales of real estate is recorded when title is conveyed to the
buyer, subject to the buyer's financial commitment being sufficient to provide
economic substance to the sale.

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.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 3. Description of Significant Accounting Policies (continued)

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 by the Financial Accounting
Standard Board ("FASB") under Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation," 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. Of the Company's authorized shares of Common Stock, 500,000 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.

Effective July 10, 2001, the Board of Directors authorized the issuance
of options to purchase 10,000 shares at $3.50 per share, the stock price as of
that date, to each of the five Directors then in office and valid for ten years
thereafter.

Warrants

Warrants that are issued to non-employees are accounted for under EITF
96-18 Accounting for Equity Instruments that are issued to other than Employees
for Acquiring or in conjunction with selling Good or Services or Services are
recorded at fair value. The value of the Warrants are expensed or capitalized
based on the nature of the service provided for them.

Earnings Per Share

FASB Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share", was issued and adopted by the Company during 1997. SFAS
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Since the Company's financial
statements reflect a net loss for the period, dilutive securities are not
considered in the computation of basic and diluted net loss per share in
accordance with SFAS 128. Accordingly,

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 3. Description of Significant Accounting Policies (continued)

Earnings Per Share (continued)

basic and diluted net income (loss) per share is computed using the weighted
average number of shares outstanding during the periods (692,111 in 2001 and
692,600 in 2002).

Income Taxes

The Company generally will not be subject to federal income taxes as
long as it qualifies as a REIT under Sections 856-869 of 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 90% of its taxable income to qualify as a REIT.

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 based upon an estimate of value of the respective
property.

Recent Pronouncements

In June 2001, the FASB approved Statement of Financial Accounting
Standards No. 141 ("SFAS 141"), "Business Combinations", and Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets". SFAS 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. SFAS 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. The provisions of SFAS 142 are effective for fiscal
years beginning after December 15, 2001. The Company has adopted SFAS 142 as of
January 1, 2002. The Company believes that the adoption of this standard will
have no impact on the Company's financial position or results of operations.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 3. Description of Significant Accounting Policies (continued)

Recent Pronouncements (continued)

In August 2001, the FASB approved Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets". SFAS 144 supersedes SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of business. SFAS 144 retains the
requirements of SFAS 121 for recognition and measurement of an impairment loss
on long-lived assets, and establishes a single accounting model for all
long-lived assets to be disposed of by sale, whether previously held and used or
newly acquired. The provisions of SFAS 144 are effective for fiscal years
beginning after December 15, 2001. The Company has adopted SFAS 144 as of
January 1, 2002. The Company believes that the adoption of this Standard will
have no impact on the Company's financial position or results of operations.

Reclassifications

Certain prior year amounts have been reclassified to conform to the
current year presentation.

Derivative Financial Instruments

On January 1, 2001 the Company adopted Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," as amended by Statement of Financial
Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments. Specifically,
SFAS 133 requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and to measure those
instruments at fair value. In the normal course of business, the Company is
exposed to the effect of interest rate changes. The Company limits these risks
by following established risk management policies and procedures including those
for the use of derivatives. The only hedging transaction entered into by the
Company was the purchase of an interest rate cap during 2000. The Company does
not use derivatives for trading or speculative purposes. Further, the Company
has a policy of only entering into contracts with major financial institutions
based upon their credit ratings and other factors.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 4. 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.
The Company incurred capital expenditures of $954,492 and $3,893,799 for the six
months ended June 30, 2002 and 2001, respectively.

Note 5. Real Estate Held for Sale and Sales of Real Estate

As a result of a financing through SWH Funding Corp. ("SWH"), and the
related mandatory payments (see Note 7), the Company's Southpoint Parkway Center
property in Jacksonville, Florida ("Southpoint") had been actively marketed for
sale and was classified as "real estate held for sale" effective October 9,
2001. On May 24, 2002, the Operating Partnership sold its interest in Southpoint
to Southpoint Parkway Center, L.C. for $4.7 million.

The Operating Partnership incurred closing costs and adjustments of
approximately $330,000, including brokers' commissions of $172,000 and legal and
other closing adjustments of approximately $158,000. Other closing costs
included a disposition fee paid to CBRA, in accordance with the terms of the
Advisory Agreement between CBRA and the Company, in the amount of $46,750,
representing 1% of the sales price.

The net sales proceeds of approximately $4,370,000 were used to paydown
the then-existing $6 million financing entered into with SWH in connection with
the purchase of three supermarket-anchored shopping centers (two in
Philadelphia, and one in southern New Jersey) during the fourth quarter of 2001.
In connection with the paydown, approximately $487,000 of deferred financing
costs were written off.

The net cost basis of Southpoint on the books of the Operating
Partnership as of the closing date was approximately $4,440,000. The net sales
price after closing costs and adjustments was approximately $4,391,000,
resulting in a capital loss of approximately $49,000. The cost basis for the
property had been reduced by $1,341,759 on the books of the Company during the
fourth quarter of 2001, to adjust the value to fair market when the property was
reclassified to "real estate held for sale".

The Southpoint property was the only remaining office property of the
Company and the last of the four properties acquired shortly after organization
of the Company in 1985-1986. The Company's remaining portfolio consists
primarily of supermarket-anchored shopping centers in Pennsylvania and New
Jersey.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 6. Commitments and Contingencies

The Operating Partnership has entered into agreements to purchase an
approximate 7 acre parcel of land in Fort Washington, Pennsylvania, on which it
has agreed to build a 41,000 sq. ft. health club facility, net-leased pursuant
to an executed lease agreement to L.A. Fitness International, L.L.C., subject to
certain governmental approvals.

The Fort Washington development is expected to be financed with a
third-party construction loan, which, upon completion, will become a permanent
loan of $5 million (the aggregate term of the loan including the construction
period will be five years), third-party participating equity of $1 million,
approximately $1.7 million from the tenant and approximately $300,000 in equity
contributions from the Company out of currently-available cash.

As of June 30, 2002, the Company had committed to purchase the Loyal
Plaza Shopping Center in Williamsport, Pennsylvania. The purchase of that
property was subsequently completed and is described in Note 9.

Note 7. Mortgage Loans, Other Loans Payable, and Line of Credit

Properties owned by the Company are subject to the following
property-specific mortgage loans payable:

o Academy Plaza, Philadelphia, Pennsylvania, has a first mortgage with a
principal balance of approximately $10,621,000 as of June 30, 2002, at
7.275% due March 10, 2013, with a 30-year amortization schedule.

o Port Richmond Village, Philadelphia, Pennsylvania, has a first mortgage
with a principal balance of approximately $11,508,000 as of June 30, 2002,
at 7.174% due April 10, 2007, with a 30-year amortization schedule.

o Washington Center Shoppes, Sewell, New Jersey, has a first mortgage with a
principal balance of approximately $5,934,000 as of June 30, 2002, at 7.53%
with an anticipated payment date of November 11, 2007, with a 30-year
amortization schedule with a contractual maturity date of November 11,
2027.

As discussed in Note 5, the Company's Southpoint property was sold on May
24, 2002. The net proceeds of approximately $4,370,000 were used to pay
down the $6 million SWH financing. In addition, reserves of approximately
$153,000 were applied to the outstanding principal balance, and the second
mandatory payment of $300,000 was made in May 2002. The approximate
principal balance at June 30, 2002 was $1,055,000. Deferred financing costs
of approximately

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 7. Mortgage Loans, Other Loans Payable, and Line of Credit (continued)

$487,000 were written off as an extraordinary item during the second
quarter of 2002.

A wholly-owned subsidiary of SWH and the Operating Partnership have
together formed Cedar Center Holdings L.L.C. 3, which, in turn, is the sole
member of each of the four limited liability companies which own,
indirectly through other limited liability companies, the three shopping
center properties and development parcel acquired by the Operating
Partnership in October 2001. SWH has no interest in profits or assets of
Cedar Center Holdings L.L.C. 3; however, SWH has the right to acquire
operating control of the above mentioned three shopping center properties
in the event of a default by the Operating Partnership or its affiliates of
certain terms of the SWH financing.

As additional security for the SWH financing, the Operating Partnership has
pledged to SWH, its rights to distributions from the entity which controls
the limited liability companies which own each of the three shopping center
properties. Under the pledge, SWH has no rights to such distributions
unless and until an event of default occurs.

The SWH financing arrangements involve a term of three years, maturing
November 1, 2004, with a right to extend for two additional eighteen month
periods upon payment of certain fees, and subject to certain additional
minimum monthly and annual or "back-end" payments, and to certain
additional participations in gain in value payable at the earliest of the
repayment date, maturity or the date of sale of the three shopping center
properties described above.

Payments to SWH pursuant to the financing arrangements shall be at a rate
of 12.5% per annum on the outstanding balance. In addition, an "equity fee"
in an amount equal to the greater of $350,000 or 10% of the gain in value
of the properties as determined by appraisal is payable at maturity.
Further, SWH shall be entitled to "exit fees" of $120,000 if the entire
principal is paid prior to October 2002, thereafter additional amounts
accrue at 1/3% per month during the period October 2002 - November 2004;
1/2% per month during the extension period from November 2004 - November
2005; and 2/3% per month during the extension periods from November 2005 -
November 2007. A loan fee of $225,000 was paid to SWH at closing.

Commencing as of December 1, 2001, amortization payments of $10,000 are
required during each of the first three months, $20,000 for each of the 4th
through 6th months, $35,000 for each of the 7th through the 12th months,
$45,833.33 for the 13th through the 24th months, and $41,666.67 for the
25th through the 36th months.

The obligations of the Operating Partnership under the SWH financing
agreement are guaranteed by the Company.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 7. Mortgage Loans, Other Loans Payable, and Line of Credit (continued)

o The Point Associates, in which the Company has a 50% general partnership
interest, had a first mortgage in the amount of $17,900,000, at LIBOR plus
2.25%, due June 1, 2002. On May 29, 2002, the Company completed a
refinancing of the property.

The new loan, for which the lender is Protective Life Insurance Company of
Birmingham, Alabama, has a ceiling loan amount of $21 million, of which a
floor loan amount of $20 million was drawn down on May 29, 2002. The
additional $1 million ceiling amount can be earned by the borrower with a
lease-up, within two years of the date of closing, of approximately 22,500
sq. ft. (consisting primarily of the former Eckerd drug store premises) at
$11.50 per sq. ft. for a 10-year period to an acceptable creditworthy
tenant. In the event the lease-up conditions are not satisfied and the $1
million ceiling amount has not been funded within such two year period,
borrower's rights to any of such ceiling amounts will be terminated.

The interest rate on the initial $20 million funding is 7.625%. The
maturity date of the loan is 25 years. The call date (at which time the
lender can call for replacement of the loan and the borrower shall have the
continuing option of repaying the loan without penalty) is 10 years. The
amortization is on a 25-year schedule.

Certain title costs, borrower's and lender's counsel fees, and other
closing costs aggregating approximately $96,000 were paid (a commitment fee
to the lender of $420,000 was fully refunded). An "exit" fee was paid to
Salomon Smith Barney in the amount of $268,500 (1.5% of the loan balance).
A placement fee of $210,000 was paid to Ekstein Rothenberg Corp.; $100,000
was paid to Brentway, the management company for The Point, which is an
affiliate of Leo S. Ullman and Brenda J. Walker pursuant to the Management
Agreement. The Operating Partnership received a distribution of
approximately $600,000 of such proceeds in connection with its 50%
ownership interest in The Point Shopping Center, LLC and approximately
$900,000, including a $300,000 priority distribution, was distributed to
the affiliate of the limited partnership which owns the other 50% interest.

Debt service under the loan (at the initial funding level of $20 million)
is $1,781,816.50 per annum ($148,484.71 per month).

The loan may be pre-paid in full at any time upon 90-days' prior written
notice and payment of a prepayment premium equal to the greater of (i) 1%
of the then-unpaid principal balance of the loan, or (ii) a yield
maintenance formula.

The borrower is required to escrow with the lender, amounts equal to annual
real estate taxes and insurance premiums.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 7. Mortgage Loans, Other Loans Payable, and Line of Credit (continued)

The new loan replaces a 2-year floating rate borrowing in the amount of
$17.9 million from Salomon Smith Barney, which was due June 1, 2002, but
was subject to two six-month extensions. The proceeds of such loan,
together with certain additional amounts contributed by the borrower; were
used to construct improvements to the center, including, without
limitation, the new +/-55,000 sq. ft. Giant supermarket, a new facade on
the Burlington Coat store, parking lot and site improvements, new store
premises, demolition of the former mall space of approximately 110,000 sq.
ft., construction of a new Pennsylvania Liquor Control Board store and
related matters. The Company incurred a $268,500 loan repayment fee.

o Red Lion Associates, in which the Company has a 20% general partnership
interest, has a first mortgage with a principal balance of approximately
$16,772,000 as of June 30, 2002, at 8.6% due February 2010, with a 30-year
amortization schedule.

o As discussed in Note 2, the Company purchased a 20% interest in Red Lion
Associates for $1,182,857, payable $295,714 at closing from available cash,
with the balance evidenced by a promissory note in the amount of $887,143,
payable in three equal annual installments commencing one year after
closing and bearing interest at 7.5% due annually with each installment
payment.

o The Operating Partnership obtained a line of credit, effective March 4,
2002, in the amount of $1,000,000 from North Fork Bank, Melville, New York.
The term of the line of credit is for one year with a maturity date of
March 4, 2003. The line, at the sole discretion of the bank, may be used
for (i) real estate investment, (ii) real estate management, (iii) working
capital and (iv) other purposes as applicable and as approved by the bank.
The interest rate on any drawdown will be the greater of 6% or the bank's
prime rate plus 1%. Interest on the outstanding loan balance is to be paid
to the bank monthly in arrears. The line of credit's availability is
subject to certain conditions as defined. The outstanding loan balance at
June 30, 2002 was $500,000. The proceeds of the $500,000 drawdown were used
in fact to acquire the 20% general partnership interest in Red Lion
Associates and for an earnest money deposit on a contract to acquire an
additional property. The Company expects to repay such balance out of
available cash.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 7. Mortgage Loans, Other Loans Payable, and Line of Credit (continued)

The combined aggregate future principal payments of mortgage loans and
other loan(s) at June 30, 2002, are as follows:

Year Mortgage loans payable Other loans payable
- -------------- ------------------------ --------------------
2002 $ 400,484 $ 220,883
2003 778,656 1,341,548
2004 832,016 583,814
2005 907,547 295,664
2006 980,236 -
Thereafter 60,936,128 -
------------ -----------
$ 64,835,066 $ 2,441,909
============ ===========

Note 8. Related Party Transactions

Ownership

In June 1998, CBC, following a tender offer completed in April 1998 for
the purchase of the Company's shares, became the Company's largest shareholder.

CBC is a New York general Partnership. CBC is owned 55% by Duncomb
Corp., 40% by Lindsay Management Corp. and 5% by Hicks Corp. Mr. Ullman,
President and Chairman of the Board of Directors of the Company, is an executive
officer and a Director of each of those corporations. Ms. Walker, Vice President
and Director of the Company, is an executive officer of each of the corporations
which own CBC. Neither Mr. Ullman nor Ms. Walker have any ownership interest in
CBC or the corporations that own CBC.

CBC is an affiliate of the limited partner in The Point Associates, in
which the Operating Partnership acquired a 50% general partnership interest in
July 2000.

CBC is also an affiliate of the 11% limited partner in Red Lion
Associates, in which the Operating Partnership acquired a 20% general
partnership interest on May 31, 2002 (see Note 2).

Advisory Services

The Company does not have any employees and has contracted with CBRA to
provide administrative, advisory, acquisition and divestiture services to the
Company pursuant to the Advisory Agreement entered into in April 1998, and
amended as of August 21, 2000 and January 1, 2002. CBRA is wholly-owned by Leo
S. Ullman. Mr.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 8. Related Party Transactions (continued)

Advisory Services (continued)

Ullman is President and a director of, and Brenda J. Walker is Vice President
of, CBRA. The term of the amended Advisory Agreement commenced as of August 21,
2000, and extends for a period of five years. The Advisory Agreement is
automatically renewed annually thereafter for additional one-year periods,
subject to the right of a majority of independent directors to cancel the
Advisory Agreement upon sixty days' written notice. While Mr. Ullman and Ms.
Walker are not employed by the Company, they do receive remuneration from CBRA,
Brentway, and SKR each of which receives fees from the Company.

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, (subject to audit committee approval), 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 SEC and similar state agencies.

The Advisory Agreement may be terminated (i) for cause upon not less
than sixty days' 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.

Pursuant to the Advisory Agreement as in effect through December 31,
2001, CBRA was generally entitled to receive acquisition and disposition fees of
5% of the gross purchase price and 3% of the gross sales price, respectively.

CBRA had 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. Further, CBRA had agreed to defer certain fees otherwise payable
with respect to the sales in 2001 of the Operating Partnership's Corporate
Center East and Broadbent Business Center properties.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 8. Related Party Transactions (continued)

Advisory Services (continued)

With respect to the sales of these two properties, the Operating
Partnership paid to CBRA aggregate disposition fees of $71,600, representing 1%
of the sales prices. CBRA agreed with the Board of Directors and management to
defer an additional 2% (aggregate $143,200) to which it would otherwise be
entitled pursuant to the terms of the agreement, which provided generally that
the deferred amounts would be reduced and eventually eliminated if CBRA remained
investment advisor to the Company beyond December 31, 2009.

On December 18, 2001, the Board of Directors approved an Amendment to
the Advisory Agreement, reflecting a reduction in acquisition and disposition
fees payable to CBRA by the Company. Effective as of January 1, 2002, CBRA will
earn a disposition or acquisition fee, as applicable, equal to 1% of the
sale/purchase price; no other fees will be payable in connection with such
transactions.

Pursuant to the Advisory Agreement, CBRA was originally entitled to
receive an acquisition fee in the maximum amount of $1,737,500 (5%) with respect
to the acquisition of the three supermarket-anchored shopping centers and land
parcel acquired on October 9, 2001. Initially, CBRA agreed to accept a cash fee
in the amount of $173,750 (one-half of 1%). As for the balance of the fee, CBRA
had agreed to (1) waive a portion in the amount of $868,750 (2.5%) and (2) defer
a portion in the amount of $696,000 (2%). Subsequently, with agreement of the
Board of Directors, the cash fee portion paid to CBRA was increased to 1%
(aggregate $347,500), and the deferred portion was waived in its entirety by
CBRA.

In connection with the sale of Southpoint, a disposition fee of $46,570
was paid to CBRA. This represents 1% of the sales price after adjustments.

The fee to which CBRA would otherwise be entitled with respect to the
purchase of the 20% interest in Red Lion Associates by the Operating
Partnership, has been waived by CBRA. SKR is entitled to and has collected a fee
from Silver Circle, an affiliate of CBC, in connection with the sale of its
ownership interest in Red Lion Associates to ARC-Cedar and Cedar-RL in an amount
equal to 1% of the sales price, with a maximum amount of $100,000. The fee paid
to SKR during the second quarter of 2002 was $43,767 and is based on the cash
proceeds of the sales ($4,081,000 from ARC-Cedar and $295,714 from Cedar-RL).

As a result of the Amendment, it is expected that there will be no
further deferrals or waivers of fees payable by the Company to CBRA.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 8. Related Party Transactions (continued)

Advisory Services (continued)

The following is a schedule of acquisition and disposition fees payable
by the Company to CBRA reflecting the impact of the amendment and the reduced
acquisition and disposition fees related to the shopping centers:

Property Deferred Paid Total
- -----------------------------------------------------------------------------------------

2002 Transactions (through 6/30/02)
- -----------------------------------
Southpoint Parkway $ - $ 46,750 $ 46,750

2001 Transactions
- -----------------
Broadbent Business Center 106,000 53,000 159,000

Corporate Center 37,200 18,600 55,800

The three supermarket-anchored
shopping centers (2) - 347,500 347,500

2000 Transaction
- ----------------
Germantown 52,500 22,500 75,000
--------------------------------------------

Total fees $ 195,700(1) $ 488,350 $ 684,050
============================================

(1) Amount owed if the Administrative and Advisory Agreement with CBRA is not
continued beyond December 31, 2004.
(2) The three supermarket-anchored shopping centers consist of Academy Plaza,
Port Richmond Village and Washington Center (including development parcel
adjacent to Washington Center).

As indicated above, deferred disposition and acquisition fees will be
reduced by 50% if CBRA remains investment advisor to the Company for the period
after December 31, 2004, but prior to December 31, 2005. In the event of
termination or expiration of the Agreement after December 31, 2005, such fees
payable to Advisor shall be reduced by 10 percentage points for each subsequent
calendar year the Agreement remains in effect, until reduced to zero in any
event after December 31, 2009. Any deferred disposition and acquisition fees
payable to CBRA will also be waived as of the effective date of termination of
services by CBRA if the services of CBRA are terminated voluntarily by CBRA.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 8. Related Party Transactions (continued)

Advisory Services (continued)

Based on the above, it is probable that a liability has been incurred.
However, the liability at this point can only be estimated to be in the range of
zero and the full fee. There is no best estimate within the range. This reflects
the fact that depending on how long CBRA's services are being used, the ultimate
fee amount payable may well be zero. Accordingly, none of the deferred fees have
been reflected in the accompanying financial statements.

In addition to acquisition and disposition fees payable to CBRA, CBRA
also receives 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.

Property Management Services

Brentway provides property management, leasing, construction management
and loan placement services to the Company's real properties pursuant to the
Management Agreement between Brentway and the Company and through individual
management agreements between Brentway and each of the Company's respective
properties on arm's-length terms 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 and Ms. Walker is Vice President
and Director of the Company. The term of the Management Agreement is for one
year and is automatically renewed annually for additional one-year periods
subject to the right of either party to cancel the Management Agreement upon
sixty 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 for the Company regarding property operations, and
maintenance of insurance.

As discussed above, Brentway has entered into individual management
agreements with each entity holding title to the properties owned by the
Company. Such individual management agreements are required by the properties'
first mortgage lenders and in some instances by the individual partnership
agreements. The following table outlines the fees provided in the Management
Agreement and the fees provided in each property's management agreement
(Greentree Road is vacant land and as such there is no individual management
agreement):

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 8. Related Party Transactions (continued)

Property Management Services (continued)

Management Leasing Construction Loan Placement
Subject Fee Fee [3] Management Fee Fee
- -------------------------------------------------------------------------------------------------

Management Agreement of April 1998 5% 6% N/A N/A

Academy Plaza [4] 4% 4.5% 5% 1%

Port Richmond Village [4] 4% 4.5% 5% 1%

Washington Center [4] 4% 4.5% 5% 1%

The Point Shopping Center [4] 3% 4.5% 5% 1% [1]

Red Lion Shopping Center [2] [4] 4% 4.5% 5% 1% [1]

- -------------------------------------------------------------------------------------------------

[1] Up to a maximum of $100,000.
[2] As of May 31, 2002, 20% of all fees paid to Brentway are in turn paid to
ARC-Cedar Manager LLC pursuant to terms of the purchase agreement regarding the
acquisition by ARC-Cedar of a 69% limited partnership interest in Red Lion
Associates.
[3] Only if no outside broker.
[4] In the event an outside broker is involved, then the fee to Brentway is
generally 2.25%. In the event Brentway can achieve savings vis-a-vis the outside
broker's full commission, then Brentway shall be entitled to one-half of the
savings on the outside broker's otherwise full commission.

Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
June 30, 2002
(unaudited)

Note 8. Related Party Transactions (continued)

Property Management Services (continued)

Schedule of Administrative and Advisory, Property Management, Leasing and Other
Fees Paid or Accrued to Related Parties:

January 1 - January 1 -
June 30, 2002 June 30, 2001
-------------------------------------

Administrative and Advisory Fees
Cedar Bay Realty Advisors, Inc. $ 180,000 $ 48,936
-------------------------------------
Property Management Fees
Brentway $ 202,006 $ 43,908
-------------------------------------
Construction Management Fees
Brentway $ 20,000 $ -
-------------------------------------
Leasing Fees
Brentway $ 259,829 $ -
-------------------------------------
Legal Fees
Stuart H. Widowski / SKR Management Corp. (1) $ 86,613 $ 60,938
-------------------------------------
Loan Placement Fees
Brentway (2) $ 100,000 $ -
-------------------------------------

(1) Fees of $86,613 were paid to Stuart H. Widowski, Esq., SKR'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.

(2) Paid in connection with the refinancing of The Point Loan on May 29, 2002
(see Note 7).

Leasing fees paid by the Company during this period were also paid to
third parties. Brentway has subcontracted with a local management company for
site management and leasing services for the Company's office property in
Jacksonville, Florida, which was sold on May 24, 2002.

Note 9. Subsequent Event

On July 2, 2002, the Operating Partnership purchased, through a
newly-created limited partnership, the sole general partnership interest,
ranging from 25% initially to a 50% residual interest in a 293,000 sq. ft.
supermarket-anchored shopping center in Williamsport, Pennsylvania. The center
is anchored by a 67,000 sq. ft. Giant supermarket and is 92% leased.

Cedar Income Fund, Ltd.
-----------------------

Item 2. 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 the Company and related notes.

The Company considers certain statements set forth herein to be
"forward-looking" statements within the meaning of Section 27A of the Securities
Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, with respect to the Company's expectations for future
periods. Certain forward-looking statements, including, without limitation,
statements related to the timing and success of acquisitions and the completion
of development or redevelopment of properties, the financing of the Company's
operations, the ability to lease vacant space and the ability to renew or relet
space under expiring leases, involve certain risks and uncertainties. Although
the Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, the actual results may differ
materially from those set forth in the forward-looking statements and the
Company can give no assurance that its expectations will be achieved. Certain
factors that might cause the results of the Company to differ materially from
those indicated by such forward looking statements include, among other factors,
general economic conditions, general real estate industry risks, tenant default
and bankruptcies, loss of major tenants, the impact of competition and
acquisition, redevelopment and development risks including delays in completion
and cost overruns, the ability to finance business opportunities, increase in
interest rates and local real estate markets. Consequently, such forward-looking
statements should be regarded solely as reflections of the Company's current
operating and development plans and estimates. These plans and estimates are
subject to revisions from time to time as additional information becomes
available, and actual results may differ from those indicated in the referenced
statement.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions in certain circumstances that affect amounts reported
in the Company's consolidated financial statements and related notes. In
preparing these financial statements, management has utilized information
available including its past history, industry standards and the current
economic environment among other factors in forming its estimates and judgments
of certain amounts included in the consolidated financial statements, giving due
consideration to materiality. It is possible that the ultimate outcome as
anticipated by management in formulating its estimates inherent in these
financial statements might not materialize. However, application of the critical
accounting policies below involves the exercise of judgment and use of
assumptions as to future uncertainties and, as a result, actual results could
differ from these estimates. In addition, other companies may utilize different
estimates, which may impact comparability of the Company's results of operations
to those of similar businesses.

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Consolidation Policy

The accompanying consolidated financial statements include the
(unaudited) consolidated financial position of the Company and the Operating
Partnership as of June 30, 2002 and December 31, 2001(audited), and the results
of their operations for the three months and six months ended June 30, 2002 and
2001, respectively, and their cash flows for the six months ended June 30, 2002
and 2001, respectively. All significant intercompany balances and transactions
have been eliminated in consolidation.

The Company owns an approximate 29% partnership interest as sole
general partner in the Operating Partnership, which provides the Company with
control over all significant activities of the Operating Partnership.

The Company has control over the Operating Partnership based on its
general partnership interest, and, accordingly, the Operating Partnership is
consolidated with the Company in the accompanying financial statements as of
December 31, 2001. The Operating Partnership in turn owns a 50% general
partnership interest in The Point Associates, and a 20% general partnership
interest in Red Lion Associates, which entities are also included in the
consolidated financial statements of the Company.

Revenue Recognition and Accounts Receivable

Rental revenue is recognized on a straight-line basis, which averages
minimum rents over the terms of the leases. The excess of rents recognized over
amounts contractually due are included in deferred rents receivable on the
Company's balance sheets. The leases also typically provide for tenant
reimbursements of common area maintenance and other operating expenses and real
estate taxes. Ancillary and other property related income is recognized in the
period earned.

The Company makes estimates of the collectibility of its accounts
receivable related to base rent, tenant escalations and reimbursements and other
revenue or income. The Company specifically analyzes tenant receivables and
analyzes historical bad debts, customer creditworthiness, current economic
trends and changes in customer payment terms when evaluating the adequacy of its
allowance for doubtful accounts. In addition, when tenants are in bankruptcy,
the Company makes estimates of the expected recovery of pre-petition
administrative and damage claims. In some cases, the ultimate resolution of
those claims may extend beyond a year. Such estimates may have a direct impact
on the Company's net income, as a greater bad debt reserve will result in less
net income.

Gain on sales of real estate are recorded when title is conveyed to the
buyer, subject to the buyer's financial commitment being sufficient to provide
economic substance to the sale.

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Real Estate

Land, buildings and improvements, furniture, fixtures and equipment are
recorded at cost. Tenant improvements, which are included in buildings and
improvements, are also stated at cost. Expenditures for maintenance and repairs
are charged to operations as incurred. Renovations and/or replacements, which
improve or extend the life of the asset are capitalized and depreciated over
their estimated useful lives.

Depreciation is computed utilizing the straight-line method over the
estimated useful life of ten to forty years for buildings and improvements, and
five to ten years for furniture, fixtures and equipment. Tenant improvements are
amortized on a straight-line basis over the term of the related leases.

The Company is required to make subjective assessments as to the useful
lives of its properties for purpose of determining the amounts of depreciation
to be reflected on an annual basis with respect to those properties. These
assessments have a direct impact on the Company's net income. Should the Company
lengthen the expected useful life of a particular asset, it would be depreciated
over more years, and result in less depreciation expense and higher annual net
income.

Assessments by the Company of certain other lease-related costs as well
as any recorded straight-line rent receivable must be made when the Company has
a reason to believe that the tenant will not be able to perform under the terms
of the lease as originally expected.

Impairment of Long-Lived Assets

On a periodic basis, management assesses whether there are any
indicators that the value of the real estate properties may be impaired. A
property's value is impaired only if management's estimate of the aggregate
future cash flows (undiscounted and without interest charges) to be generated by
the property are less than the carrying value of the property. Such cash flows
consider factors such as expected future operating income, trends and prospects,
as well as the effects of demand, competition and other factors. To the extent
impairment has occurred, the loss will be measured as the excess of the carrying
amount of the property over the fair value of the property.

The Company is required to make subjective assessments as to whether
there are impairments in the value of its real estate properties and other
investments. Any assessment resulting in a determination of impairment will have
a direct negative impact on the Company's net income.

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Overview and Background

The Company is an advised REIT specializing in the acquisition,
leasing, financing, management and development of retail properties. The
Company's growth strategy is focused primarily on the real estate markets in
Pennsylvania and southern New Jersey.

The Company owns all of its interests in real property, directly or
indirectly, through the Operating Partnership. As of June 30, 2002, the Company
owned and operated five retail properties (four located in Pennsylvania and one,
with an adjacent separate development parcel, in southern New Jersey). As of
June 30, 2002, the five retail properties had combined lease occupancy of
approximately 88%. As further discussed in Note 9 to the financial statements,
the Company, subsequent to June 30, 2002 and prior to the filing of this report,
purchased one additional retail property (Loyal Plaza in Williamsport,
Pennsylvania).

In the course of refocusing the Company's portfolio of real estate
investments toward retail properties, the Company has sold the office properties
and other properties which it previously owned. Thus, on May 22, 2001, the
Company sold its interest in the Broadbent Business Center, Salt Lake City, Utah
("Broadbent") for $5.3 million. The Company incurred closing expenses of
approximately $500,000, including a broker's commission of $250,000, a "Rent
Guarantee Deposit" of $100,000, a disposition fee of $53,000 and other closing
adjustments of approximately $100,000.

The net cost basis of Broadbent on the books of the Operating
Partnership as of the closing date was $3,210,723, resulting in a gain of
approximately $1.6 million. In October 2001, management reinvested the proceeds
of sale in three supermarket-anchored shopping centers and one adjacent
development parcel located in eastern Pennsylvania and southern New Jersey,
which constitute part of the six shopping centers mentioned above. The
reinvestment was structured to defer income tax on such gain pursuant to the
"like-kind exchange" provisions of Section 1031 of the Internal Revenue Code
(see further discussion below). The purchase arrangements have been described in
detail in earlier filings with the SEC.

On June 28, 2001, the Company sold its interest in Corporate Center
East, Bloomington, Illinois ("Corporate Center") for $1.86 million plus closing
expenses of approximately $86,000. The net cost basis of Corporate Center on the
books of the Operating Partnership as of the closing date was approximately
$2,050,000. The resulting capital loss was approximately $360,000. The cost
basis for the property had been reduced by approximately $204,000 on the books
of the Company during the second quarter of 2000, to adjust the value to fair
market when the property was reclassified to "real estate held for sale".

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Overview and Background (continued)

As earlier indicated, in October 2001, the Company purchased three
shopping center properties and a certain parcel of land. The purchase price was
approximately $35 million, plus closing costs, adjustments and reserves of
approximately $2.8 million. The properties were purchased with certain financing
from SWH (see Note 7).

On May 24, 2002, the Company sold its interest in Southpoint for $4.7
million.

The net sales proceeds of approximately $4,370,000 from Southpoint were
used to paydown the then-existing $6 million SWH financing. In connection with
the paydown, approximately $487,000 of deferred financing costs were written
off.

The net cost basis of Southpoint on the books of the Operating
Partnership as of the closing date was approximately $4,440,000, thus resulting
in a capital loss of approximately $49,000. The cost basis for the property had
been reduced by $1,341,759 on the books of the Company during the fourth quarter
of 2001, to adjust the value to fair market when the property was reclassified
to "real estate held for sale".

The Point, in which the Company acquired a 50% general partnership
interest in July 2000, had a first mortgage in the amount of $17,900,000, at
LIBOR plus 2.25%, due June 1, 2002. On May 29, 2002, the Company completed a
refinancing of that loan, as further discussed in Note 7.

On May 31, 2002, as described in Note 2 above, the Company purchased a
20% interest in Red Lion Associates, which owns the 218,000 sq. ft. Red Lion
Shopping Center in Philadelphia, Pennsylvania. The purchase price was
$1,182,857, payable $295,714 at closing (May 31, 2002), paid out of the
Company's available cash with the balance evidenced by the Note, and payable in
three equal annual installments commencing one year after closing and bearing
interest at 7.5% due annually with each installment payment.

Management expects the Company to continue to seek acquisition
opportunities primarily with respect to supermarket-anchored shopping center
properties in the Pennsylvania and southern New Jersey markets.

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Results of Operations

Property operating revenue for the three months and six months ended
June 30, 2002 and 2001 was $2,655,823 and $5,166,140 compared to $965,918 and
$1,949,197 for the corresponding period in 2001, an increase of approximately
$1,689,905 and $3,216,943, respectively. This increase is attributable to the
acquisition of the three supermarket-anchored shopping center properties in
October 2001, the increase in rental revenue at The Point as a result of the
opening of the Giant supermarket in July 2001, and the additional revenue
generated by the newly-acquired participation in Red Lion Associates. This
increase is offset, in part, by the sales of Corporate Center and Broadbent
during the second quarter of 2001.

Property operating expenses (excluding depreciation and amortization)
and real estate taxes ("Property Expenses") were $1,468,024 and $2,912,285 for
the three and six months ended June 30, 2002 compared to $471,116 and $997,953
for the corresponding periods in 2001, an increase of approximately $997,000 and
$1,915,000, respectively. This increase is attributable to the acquisition of
the three supermarket-anchored shopping centers, the full years' operation of
The Point, and the additional expenses applicable to Red Lion Associates, and is
offset, in part, by the sales of Corporate Center and the Broadbent.

Interest expense for the three months and six months ended June 30,
2002 was $1,048,193 and $1,968,745 compared to $303,053 and $666,656 for the
corresponding periods in 2001. This increase is attributable to the October 2001
acquisition of the aforementioned shopping center properties with the assumption
of $28.3 million of mortgage debt, $6 million SWH financing and the assumption
of the $16,771,000 mortgage on the Red Lion property. As a result of the
increase in estimated value of the Company's assets, administrative fees
increased by approximately $65,000 and $132,000 for the three months and six
months ended June 30, 2002, over the corresponding periods in 2001. Professional
fees were $128,434 and $239,925 for the three months and six months ended June
30, 2002 compared to $31,601 and $65,366 for the corresponding periods in 2001.
This is due to an increase in the Company's audit and legal fees as a result of
the growth of the real estate portfolio.

Net (loss) was ($225,889) and ($274,134) for the three months and six
months ended June 30, 2002, compared to net income of $335,787 and $325,682 for
the corresponding periods in 2001. These decreases are attributable to the
increase in interest expense, the repayment fee incurred on The Point loan and
an increase in administrative, legal and accounting fees.

Summary of Cash Flows

The Company's rental revenues for the three and six months ended June
30, 2002 were $2,650,540 and $5,154,580 compared to $885,012 and $1,760,647 for
the three months and six months ended June 30, 2001. Vacancy within the 988,228
sq. ft. (including 47,000 sq. ft. of land) of the

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Summary of Cash Flows (continued)

Company's properties is projected to be 51,400 sq. ft. or 5.2% by the end of
2002. Such projection reflects management's expectation that certain leasing
discussions will ultimately be consummated lease deals. Such expectation assumes
that the 47,000 sq. ft. of land plus 22,200 sq. ft. of building premises will be
leased by year-end.

The operating expenses of the five properties owned by the Company
through its Operating Partnership as well as the recently-sold Southpoint
property are paid from the respective properties' rental revenues. Management
has prepared operating budgets for each of these properties and the aggregate
revenues more than cover the operating expenses, first mortgage debt service,
tenant improvements and commissions.

Net cash provided by operating activities totaled $235,484 for the six
months ended June 30, 2002, and $510,462 for the corresponding period in 2001.
The decrease in 2002 compared to 2001 is predominantly due to the increase in
interest expense, administrative, legal and accounting fees, and the repayment
fee incurred on The Point loan.

Net cash provided by investing activities totaled $325,754 for the
six months ended June 30, 2002, and $2,628,263 for the corresponding period in
2001.

Net cash used in financing activities totaled ($167,961) for the six
months ended June 30, 2002, and ($1,661,112) for the corresponding period in
2001.

The net differential in cash and cash equivalents for the six months
ended June 30, 2002 and 2001 were $393,277 and $1,477,613, respectively. This
reduction in the change in cash and cash equivalents is attributable to the
decrease in net income discussed above, as well as a decrease in cash provided
by investing activities during 2002, resulting from the purchase of the 20%
interest in Red Lion. This decrease in cash from investing activities is offset,
in part, by the sale of Southpoint during the second quarter of 2002.

The cash and cash equivalents of $3,265,566 include $900,497 in The
Point partnership, in which the Company has a 50% interest, and $252,615 in Red
Lion partnership, in which the Company has a 20% interest.

Liquidity and Capital Resources

Real estate before deduction for accumulated depreciation amounted to
$33.00 per share/OP Unit based on shares/OP Units outstanding as of June 30,
2002. Real estate at cost, less accumulated deductions for depreciation,
amounted to $32.46 per share/OP Unit on shares/OP Units outstanding as of June
30, 2002.

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Liquidity and Capital Resources (continued)

Historically, rental revenue has been the principal source of funds to
pay operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures of the Company.

The Operating Partnership has entered into agreements to purchase an
approximate 7 acre parcel of land in Fort Washington, Pennsylvania, on which it
has agreed to build a 41,000 sq. ft. health club facility, net-leased pursuant
to an executed lease agreement to L.A. Fitness International, L.L.C., subject to
certain governmental approvals.

The Fort Washington development is expected to be financed with a
third-party construction loan, which, upon completion of construction, will
become a permanent loan of $5 million (the aggregate term of the loan including
the construction period will be five years), third-party participating equity of
$1 million, approximately $1.7 million from the tenant and approximately
$300,000 in equity contributions from the Company out of currently-available
cash.

The Company's indebtedness at June 30, 2002 was approximately $67
million. The Company funded the two mandatory payments due with respect to the
SWH financing ($4,370,000 and $300,000 due by November 2002 and May 2003,
respectively) from a combination of (i) net proceeds of the sale of the
Southpoint property, and (ii) a portion of the net proceeds of the refinancing
of The Point.

The Operating Partnership obtained a line of credit, effective March 4,
2002, in the amount of $1,000,000 from North Fork Bank, Melville, New York. The
term of the loan is for one (1) year with a maturity date of March 4, 2003. The
loan, at the sole discretion of the bank, may be used for (i) real estate
investment, (ii) real estate management, (iii) working capital and (iv) other
purposes as applicable and as approved by the bank. The interest rate is the
greater of 6% or the bank's prime rate plus 1%. Interest on the outstanding loan
balance is to be paid to the bank monthly in arrears. The line of credit's
availability is subject to certain conditions, including, but not limited to,
quarterly submission of 10-Q filings, annual submission of 10-K filings and a
30-day annual "clean up" (i.e. the outstanding balance of drawdowns under the
line of credit must be reduced to zero for 30 days). The line of credit does not
require any fees to be paid by the Company or the Operating Partnership. The
Company views the availability of this line of credit to be sound business
practice and an augment to its liquidity. Of the line of credit, $500,000 has
been drawn down, and is expected to be repaid from available cash.

The foregoing is a summary prepared by management and is subject to the
terms and provisions of the underlying agreement with respect to these
transactions previously filed with the SEC.

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Liquidity and Capital Resources (continued)

The Company expects that capital markets in the United States will
continue to be active and will provide funds for the refinancing of its
properties' first mortgages as such mortgages mature. However, there can be no
assurances that the Company will be able in fact to refinance any of its
mortgages. All such mortgages are amortizing loans. The balances due at
maturity, and the annual amortization payments due are summarized below.

The Company believes that its liquidity and expected sources of future
cash, including (i) the $3.3 million of cash and cash equivalents, (ii)
drawdowns on the remaining $500,000 available line of credit, and (iii) net
proceeds of sales of partial interests in one or more of the Company's other
properties will be sufficient to meet current and near-term obligations, which
include capital expenditures, property acquisition commitments, and debt service
payments. There can be no assurances that the Company will be able to sell any
of its properties on terms acceptable to the Company.

The tragedy of September 11, 2001 had a significant adverse effect on
the real estate industry. The real estate industry has been experiencing a
significant change in the property insurance markets that has resulted in
significantly higher premiums for landlords whose policies are subject to
renewal in 2002, primarily in the area of terrorism insurance coverage. The
Company renewed its insurance coverages effective July 1, 2002. Generally, such
premiums, exclusive of terrorism coverage, increased 35% over the prior one year
period. The Company has opted to purchase $50 million of blanket terrorism
coverage for its properties; a potential liability not previously covered by
insurance. Also, as a result of investigations of Enron and other reported
investigations of financial reporting, the insurance coverage and premium costs
for officers and directors insurance has been adversely affected. The Company's
annual premium for such insurance increased by approximately 29%.

The following table sets forth the Company's significant debt
obligations at June 30, 2002, by scheduled principal cash flow payments and
maturity date:

Cedar Income Fund, Ltd.
-----------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Liquidity and Capital Resources (continued)

Year Mortgage loans payable Other loans payable
- -------------- ------------------------ ---------------------
2002 $ 400,484 $ 220,883
2003 778,656 1,341,548
2004 832,016 583,814
2005 907,547 295,664
2006 980,236 -
Thereafter 60,936,128 -
------------ -----------
$ 64,835,066 $ 2,441,909
============ ===========

In order to qualify as a REIT for federal income tax purposes, the
Company is required to make distributions to its stockholders of at least 90% of
REIT taxable income. The Company expects to use its cash on-hand and cash flow
from operating activities for this purpose if distributions to partners and
stockholders are required in order to continue to qualify as a REIT.

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 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.

Management's Summaries

The materials herein include summaries prepared by management of
written agreements with respect to a number of transactions. Such summaries are
intended in many cases to reflect and describe terms and provisions of various
agreements with respect to the transactions described, and are subject in each
case, to the terms and provisions of the underlying agreements, where
applicable, previously filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to changes in interest rates primarily from its
floating debt arrangements. The Company's $1 million line of credit from North
Fork Bank, which outstanding balance was $500,000 as of June 30, 2002, is the
only floating rate debt. The rate payable is the greater of 6% or the bank's
prime rate plus 1%. The line of credit is further discussed above in Note 7.

The Company does not use derivative financial instruments for trading
purposes.

Cedar Income Fund, Ltd.
-----------------------

Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)

The Company has an aggregate of $66,776,976 of mortgage loans and other
loans payable at fixed interest rates. A substantial increase in general
interest rates would potentially prevent the Company from refinancing the
mortgage loans and the other loan at rates favorable to the Company.

Cedar Income Fund, Ltd.
-----------------------

Part II Other Information

Item 6. Exhibits and Reports on Form 8-K

8-K reporting under Item 2 on the sale of Southpoint Parkway
Center dated May 24, 2002; and
8-K reporting under Item 2 on the purchase of a 20% interest
in Red Lion Shopping Center, Warrants with ARC-Cedar and the
refinancing of The Point Shopping Center dated May 29, 2002

Cedar Income Fund, Ltd.
-----------------------

June 30, 2002

Signatures

Pursuant to the requirements 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
Chairman of the Board and President Vice President and Director
(principal executive officer) (principal financial officer)

/s/ Ann Maneri
------------------------------------
Ann Maneri
Controller
(principal accounting officer)

August 14, 2002

CERTIFICATION

I, Leo S. Ullman, Chief Executive Officer of the Cedar Income Fund, Ltd. (the
"Company"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby
certify as follows:

1. The quarterly report on Form 10-Q of the Company for the period ended June
30, 2002, fully complies with the requiremetns of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. The information contained in such Form 10-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this Certification this 14th day of August,
2002.

/s/ Leo S. Ullman
--------------------------------------
Leo S. Ullman, Chief Executive Officer

I, Brenda J. Walker, Chief Financial Officer of the Cedar Income Fund, Ltd. (the
"Company"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby
certify as follows:

3. The quarterly report on Form 10-Q of the Company for the period ended June
30, 2002, fully complies with the requiremetns of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

4. The information contained in such Form 10-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this Certification this 14th day of August,
2002.

/s/ Brenda J. Walker
-----------------------------------------
Brenda J. Walker, Chief Financial Officer