Business Context and Reporting Period
Company: Cedar Income Fund, Ltd. (CEDR), a Maryland corporation operating as a Real Estate Investment Trust (REIT).
Reporting Period: Three months ended March 31, 2001 (unaudited).
Operations: The Company owns and operates four office/retail properties aggregating approximately 484,000 square feet in Jacksonville, FL; Salt Lake City, UT; Bloomington, IL; and Harrisburg, PA. The Harrisburg property ("The Point") is currently undergoing redevelopment. The Company operates under an "umbrella partnership REIT" structure.
Key Financial Metrics
| Metric | Q1 2001 | Q1 2000 |
|---|---|---|
| Total Revenue | $983,279 | $696,440 |
| Net Loss (Income) | $(8,631) | $63,575 |
| Net Loss per Share | $(0.02) | $0.07 |
| Operating Cash Flow | $274,229 | $328,425 |
| Cash and Equivalents | $1,072,881 | $2,205,630 |
| Total Debt (Mortgage + Line of Credit) | $19,415,644 | Filing text does not provide clear Q1 2000 total debt figure |
| Dividends Paid | $0 | $94,211 |
Debt Structure: Includes a $17,900,000 mortgage on The Point Shopping Center and a $1,515,644 drawdown on a $10,000,000 line of credit. The Company has $5,944,365 in restricted cash held for interest, taxes, and tenant improvements.
Material Changes vs. Prior Period
- Revenue Increase: Total revenue increased by approximately $287,000 (41%) compared to Q1 2000. This is primarily due to the acquisition of The Point Shopping Center in July 2000 and increased interest income from escrow funds.
- Expense Surge: Total expenses rose to $995,844 from $489,391. Property expenses (excluding depreciation) increased by $133,567, and interest expense jumped from $31,507 to $377,479 due to the refinancing of The Point and the line of credit.
- Profitability Shift: The Company reported a net loss of $8,631 in Q1 2001, a reversal from the $63,575 net income in Q1 2000. This decline is attributed to higher interest, amortization, and financing costs.
- Dividend Suspension: No dividends were paid in Q1 2001. The Board suspended dividends for the period July 1, 2000, through June 30, 2001.
Outlook, Risks, and Unusual Items
- Asset Sale: On March 7, 2001, the Company entered a contract to sell the Broadbent Business Center for $5,300,000. The closing is expected around May 15, 2001. The Company anticipates a potential gain of approximately $1,800,000 after fees, which it expects to defer for tax purposes under Section 1031.
- Capital Deployment: Proceeds from the Broadbent sale (approx. $4.9 million net) are planned to pay down the line of credit ($1.5 million) and fund the acquisition of new shopping centers in Pennsylvania and New Jersey ($2.0–$2.5 million).
- Accounting Change: The Company adopted FASB Statement No. 133 (Derivatives) effective January 1, 2001. This resulted in a cumulative effect adjustment of $6,014 (net of partnership share) reducing net income.
- Market Risk: The Company utilizes an interest rate cap (7.5% fixed rate) on its $17.9 million mortgage to hedge against LIBOR fluctuations. As of March 31, 2001, the hedge had no value.
- Occupancy: Combined occupancy for the three office properties was approximately 84% as of March 31, 2001. The Point is expected to be 88% occupied upon redevelopment completion in September 2001.
Investor Verification Checklist
- Closing of Broadbent Sale: Verify the successful closing of the $5.3 million sale of the Broadbent Business Center and the actual net proceeds received.
- Dividend Policy: Confirm the status of the dividend suspension beyond June 30, 2001, and the Company's ability to resume distributions.
- Reinvestment Strategy: Monitor the execution of the planned acquisitions in Pennsylvania and New Jersey using the Broadbent sale proceeds.
- Debt Covenants: Review the restrictions on the $10 million line of credit and the impact of the $17.9 million mortgage on future liquidity.
- Occupancy Trends: Track occupancy rates at the office properties, particularly given the 16% vacancy and tenant defaults noted previously at the Bloomington property (held for sale).