Cedar Income Fund, Ltd. - 10-Q Summary (Period Ended June 30, 2001)
Business Context and Reporting Period
This Form 10-Q covers the six-month period ended June 30, 2001, for Cedar Income Fund, Ltd. (CEDR), a Maryland corporation operating as a Real Estate Investment Trust (REIT). The Company manages a portfolio of commercial real estate, currently consisting of an office property in Jacksonville, Florida, and a 50% interest in a supermarket-anchored shopping center in Harrisburg, Pennsylvania ("The Point"), which is undergoing redevelopment. During the reporting period, the Company executed a significant portfolio restructuring by disposing of two non-core office properties to fund future retail acquisitions.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2001 | Six Months Ended June 30, 2000 |
|---|---|---|
| Total Revenue | $1,949,197 | $1,297,278 |
| Net Income | $325,682 | $7,960 |
| Net Income Per Share | $0.47 | $0.01 |
| Cash and Cash Equivalents | $2,318,724 | $2,363,386 |
| Restricted Cash | $6,645,918 | $7,298,671 |
| Total Debt (Mortgage Payable) | $17,900,000 | $17,900,000 |
| Line of Credit | $0 | $1,515,644 |
| Net Cash from Operating Activities | $510,462 | $650,035 |
Material Changes vs. Prior Period
- Portfolio Dispositions: The Company sold the Broadbent Business Center (Salt Lake City, UT) for $5.3 million, recognizing a gain of approximately $1.6 million. It also sold Corporate Center East (Bloomington, IL) for $1.86 million, recognizing a loss of approximately $300,000.
- Debt Restructuring: Proceeds from the Broadbent sale were used to fully repay and cancel a $1.5 million line of credit. The Company incurred an extraordinary loss of $76,312 related to the early extinguishment of this debt.
- Revenue Growth: Total revenue increased by approximately 50% compared to the prior year period, driven by the inclusion of "The Point" shopping center (acquired July 2000) and higher interest income from escrow funds, partially offset by the sale of Germantown (2000) and Broadbent (2001).
- Dividend Suspension: The Board suspended regular quarterly dividends for the period July 1, 2000, through June 30, 2001. Distributions will be made only as necessary to maintain REIT status.
Outlook, Management Commentary, and Risks
- Acquisition Strategy: Management intends to reinvest net proceeds from the property sales into three supermarket-anchored shopping centers in eastern Pennsylvania and southern New Jersey (approx. 470,000 sq. ft.). A $350,000 deposit has been placed. The Company plans to utilize Section 1031 "like-kind exchange" provisions to defer capital gains taxes.
- Redevelopment: "The Point" shopping center redevelopment is expected to be completed by September 15, 2001. Upon completion, the center will be approximately 88% occupied, with a new Giant Supermarket commencing rent on July 30, 2001.
- Liquidity: Liquidity improved significantly with cash and equivalents rising to $2.3 million. However, approximately $3.3 million of the Broadbent sale proceeds are held in restricted escrow accounts pending the 1031 exchange.
- Risks: Future operating results depend on tenant lease renewals and the ability to secure new leases at competitive rates. The Company faces interest rate risk on its $17.9 million variable-rate mortgage, though it holds an interest rate cap (7.5% fixed) expiring June 2002.
Investor Verification Checklist
- 1031 Exchange Status: Verify the closing status of the three new shopping center acquisitions to ensure the deferral of capital gains taxes on the Broadbent and Corporate Center East sales.
- Dividend Policy: Confirm the Board's decision regarding year-end 2001 distributions required to maintain REIT qualification.
- Redevelopment Timeline: Monitor the completion of "The Point" redevelopment and the lease-up rate of the new Giant Supermarket and surrounding retail space.
- Related Party Fees: Note that significant disposition fees to the investment advisor (CBRA) were deferred; verify the terms and potential future impact on cash flow.