CDR-PB

Cedar Income Fund, Ltd. - 10-K Summary (Year Ended Dec 31, 1997)

Business Context and Reporting Period

Cedar Income Fund, Ltd. is an equity-based Real Estate Investment Trust (REIT) incorporated in Iowa, reporting for the fiscal year ended December 31, 1997. The Company owns a diversified portfolio of four commercial real estate properties (office, office/warehouse, and retail) located in Jacksonville, FL; Salt Lake City, UT; Bloomington, IL; and Louisville, KY. The Company has no employees; all administrative and property management services are provided by affiliates of AEGON USA Realty Advisors, Inc.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 11.3% to $2.47 million, driven by a 12.5% increase in rental income. This was primarily due to the successful re-leasing of 20,400 square feet at Corporate Center East (Bloomington, IL) previously vacated by Hewlett Packard, and higher base rents at Broadbent Business Center.
• Net Earnings Decline: Despite higher revenue, net earnings decreased 11% to $500,186. The decline was primarily attributed to a $144,000 increase in "Other administrative expenses" due to legal and consulting fees associated with a pending tender offer for the Company.
• Expense Increases: Property expenses (excluding depreciation) rose 15.4% to $1.02 million. This included a $130,000 increase in repairs and maintenance for tenant remodeling and parking improvements, offset by a 51% decrease in wages and salaries due to reduced on-site management personnel.
• Liquidity: Cash and cash equivalents decreased by $263,090 to $407,216, reflecting dividend payments of $898,164 and capital expenditures of $299,985.

Outlook, Risks, and Unusual Items

• Tender Offer (Material Event): On January 12, 1998, Cedar Bay Company (an affiliate of SKR Management Corp.) commenced a tender offer to purchase all outstanding shares for $7.00 per share in cash. The offer was extended to March 27, 1998. Upon consummation, current officers and directors will resign, and agreements with AEGON USA Realty Advisors will terminate.
• Dividend Policy: The Company paid $0.40 per share in 1997. While the Company expects to continue paying dividends, future payments depend on earnings and cash flow. The 1997 dividend consisted of 66.23% ordinary income and 33.77% nontaxable return of capital.
• Lease Expirations: Significant lease expirations are scheduled for 1998, including 51% of the square footage at Broadbent Business Center and 19% at Germantown Square. Management anticipates renewals or re-leasing to maintain stable occupancy.
• Year 2000 Issue: The Company relies on third-party service providers for computer systems. While steps are being taken to address Y2K compliance, there is no assurance that adverse impacts will be avoided.

Investor Verification Checklist

• Tender Offer Status: Verify the final outcome of the $7.00 per share tender offer by SKR Management Corp. and the subsequent change in corporate control.
• Lease Renewals: Monitor occupancy rates and rental rates for the 51% of Broadbent Business Center and 19% of Germantown Square leases expiring in 1998.
• Management Transition: Confirm the termination of the AEGON USA Realty Advisors agreements and the appointment of new management if the tender offer succeeds.
• Debt Maturity: Note the mortgage loan on Broadbent Business Center has a balloon payment of approximately $1.25 million due in November 2002.
• Dividend Composition: Review the tax characterization of future dividends, as a significant portion (33.77% in 1997) was a return of capital.