Cedar Income Fund, Ltd. - 10-Q Summary (Q3 1996)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 1996, for Cedar Income Fund, Ltd., a real estate investment trust. The company operates a portfolio of commercial properties, including Corporate Center East in Illinois, Germantown Square in Kentucky, Southpoint Parkway Center in Florida, and Broadbent Business Center in Utah. The fund was originally established with a self-liquidating structure, with an initial expectation of liquidation ten years after its 1986 stock offering.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 1996 | Nine Months Ended Sep 30, 1996 |
|---|---|---|
| Revenue (Rents + Interest) | $557,005 | $1,684,200 |
| Net Earnings | $132,676 | $427,621 |
| Net Earnings Per Share | $0.06 | $0.19 |
| Funds from Operations (9 months) | N/A | $755,371 |
| Net Cash from Operating Activities (9 months) | N/A | $835,551 |
| Cash and Cash Equivalents | $903,972 | $903,972 |
| Total Debt (Mortgage Payable) | $1,428,969 | $1,428,969 |
| Dividends Paid Per Share (9 months) | N/A | $0.30 |
Material Changes vs. Prior Period
- Revenue Decline: Rental income decreased significantly year-over-year. For the nine months ended September 30, 1996, rents were $1,613,391 compared to $1,807,266 in 1995. This is primarily due to the expiration of the Hewlett Packard lease at Corporate Center East in December 1995, which contributed approximately $210,000 in rent during the first three quarters of 1995.
- Profitability Drop: Net earnings for the nine months ended September 30, 1996, fell to $427,621 from $562,239 in the same period in 1995. Earnings per share dropped from $0.25 to $0.19.
- Expense Shifts: Total property expenses (excluding depreciation) decreased to $675,142 from $722,808. However, utility expenses increased because the company now covers utilities for the vacated Hewlett Packard space, whereas previously the tenant paid. Repairs and maintenance decreased due to the absence of tenant remodeling costs incurred in 1995.
- Occupancy: The overall portfolio occupancy rate was 90% as of September 30, 1996. The company has re-leased 8,000 square feet of the 20,400 square feet vacated by Hewlett Packard.
Outlook, Risks, and Management Commentary
- Liquidation Strategy: The Board of Directors is exploring various options regarding the company's eventual liquidation, consistent with its original self-liquidating intent. There is no legal requirement for a specific liquidation date.
- Dividends: A dividend of $0.10 per share was declared, payable November 18, 1996. Future dividends will depend on leasing prospects and operating results.
- Liquidity: Management considers current liquidity, represented by cash equivalents, mortgage loan participation, and operating cash flow, sufficient to meet current obligations.
- Corporate Governance: The filing notes the passing of long-time director Edwin B. Lancaster on October 25, 1996.
Investor Verification Checklist
- Verify the current leasing status and rental rates for the remaining 12,400 square feet of the vacated Corporate Center East space.
- Confirm the timeline and strategy for the company's potential liquidation or asset sales.
- Monitor the impact of the increased utility expenses on future operating margins as the portfolio occupancy fluctuates.
- Review the company's ability to maintain the $0.10 per share quarterly dividend given the decline in net earnings.