CDR-PB

Cedar Income Fund, Ltd. (CEDR) - 10-K Summary

Business Context and Reporting Period

Period: Fiscal year ended December 31, 2001.
Company: Cedar Income Fund, Ltd. (CEDR), an advised Real Estate Investment Trust (REIT) operating under an umbrella partnership structure.
Strategy Shift: The Company executed a major portfolio transition in 2001, divesting three of its four original office/warehouse properties and reinvesting proceeds into supermarket-anchored retail shopping centers in Pennsylvania and New Jersey. As of year-end, the portfolio consisted of four retail properties and one office property (held for sale).

Key Financial Metrics

Portfolio Statistics: 807,463 sq. ft. total; 92% occupancy rate. The Point Shopping Center (Harrisburg, PA) represented 45% of revenues.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 58.6% to $5.1 million, driven by the full-year operation of The Point Shopping Center and the October 2001 acquisition of three new retail centers (Academy Plaza, Port Richmond Village, Washington Center Shoppes).
• Net Loss: The Company reported a net loss of $147,715 (loss per share of $0.21), compared to a loss of $12,083 in 2000. This was primarily due to a $1.34 million impairment loss on the Southpoint office property and increased interest expense ($1.89 million vs. $0.60 million).
• Debt Expansion: Total indebtedness nearly tripled to $52.1 million to fund acquisitions. This included assuming $28.3 million in mortgages and securing a $6 million bridge loan from SWH Funding Corp.
• Dividend Suspension: No dividends were paid in 2001 due to cash flow restrictions imposed by the SWH financing agreement and the need to fund mandatory debt payments.

Outlook, Risks, and Contingencies

• Liquidity & Debt Service: The Company faces a mandatory $4.5 million principal payment to SWH Funding Corp. in November 2002. Management plans to fund this via the pending sale of the Southpoint property (expected net proceeds ~$4.4 million), existing cash ($2.8 million), and a new $1 million line of credit.
• Pending Sale: A contract to sell the Southpoint Parkway Center (Jacksonville, FL) for $4.7 million is pending, with closing expected in Q2 2002. Proceeds are critical for debt reduction.
• Future Acquisitions: Agreements are in place to acquire a 293,000 sq. ft. shopping center in Pennsylvania and a 20% interest in a Philadelphia shopping center, subject to financing and fairness opinions.
• Related Party Transactions: Significant fees are paid to affiliates of the controlling shareholder (Cedar Bay Company) for advisory, management, and legal services. The Board recently amended the advisory agreement to reduce future acquisition/disposition fees.
• Market Risks: Management cites risks related to the post-9/11 insurance market (specifically terrorism coverage costs), interest rate fluctuations on floating-rate debt, and the ability to refinance maturing mortgages.

Investor Verification Checklist

• Southpoint Sale Completion: Verify the closing of the $4.7 million sale of the Southpoint property, as this is the primary source of funds for the upcoming $4.5 million debt payment.
• SWH Financing Terms: Review the specific covenants and "back-end" participation fees of the SWH Funding Corp. loan, which carries a 12.5% interest rate and equity kicker.
• Dividend Policy: Confirm if the suspension of dividends will continue in 2002 given the debt service requirements and cash flow restrictions.
• Refinancing of The Point: Monitor the refinancing of The Point Shopping Center's $17.9 million mortgage, which matures in June 2002.
• Related Party Fees: Assess the impact of the amended advisory agreement on future operating expenses and the potential liability for deferred fees.