Cedar Income Fund, Ltd. - 10-Q Summary (Period Ended September 30, 2001)
Business Context and Reporting Period
This Form 10-Q covers the nine-month period ended September 30, 2001, for Cedar Income Fund, Ltd. (the "Company"), a Maryland corporation operating as a Real Estate Investment Trust (REIT). The Company manages a portfolio of commercial real estate, primarily office and retail properties. During the reporting period, the Company executed a significant portfolio restructuring, divesting two office properties and acquiring three supermarket-anchored shopping centers in Pennsylvania and New Jersey via a Section 1031 like-kind exchange.
Key Financial Metrics
| Metric | Nine Months Ended Sep 30, 2001 | Nine Months Ended Sep 30, 2000 |
|---|---|---|
| Total Revenue | $2,809,723 | $2,276,467 |
| Net Income (Loss) | $298,715 | $(14,374) |
| Diluted EPS (Net) | $0.43 | $(0.02) |
| Net Cash from Operating Activities | $684,638 | $1,067,972 |
| Total Assets | $34,591,089 | $35,603,756 |
| Total Liabilities | $18,171,133 | $20,256,236 |
| Cash and Cash Equivalents | $2,530,988 | $841,111 |
| Restricted Cash | $4,437,541 | $7,298,671 |
| Debt (Mortgage Payable) | $17,900,000 | $17,900,000 |
Note: The Company had no line of credit outstanding as of September 30, 2001, having paid it off in May 2001 using proceeds from property sales.
Material Changes vs. Prior Period
- Portfolio Restructuring: The Company sold the Broadbent Business Center (Utah) for a net gain of approximately $1.6 million and Corporate Center East (Illinois) for a net loss of approximately $300,000. Proceeds were utilized to acquire three new retail properties (Academy Plaza, Port Richmond Village, and Washington Centre Shoppes) and a land parcel in October 2001.
- Revenue Fluctuation: Rental revenue increased for the nine-month period due to the inclusion of "The Point" shopping center, though quarterly revenue declined due to the divestiture of office properties.
- Profitability: Net income improved significantly compared to the prior year, driven primarily by the gain on the sale of Broadbent. This was partially offset by the loss on the sale of Corporate Center East and an extraordinary loss of $76,312 related to the early extinguishment of debt.
- Liquidity: Cash and cash equivalents increased by approximately $1.7 million, largely due to proceeds from the sale of Corporate Center East. However, restricted cash decreased as funds were deployed for the new acquisitions.
Guidance, Outlook, and Risks
- Dividend Policy: The Board suspended regular quarterly dividends from July 1, 2000, through June 30, 2001. The Company intends to distribute only the minimum amount necessary in 2001 to maintain REIT qualification (90% of taxable income).
- Future Capital Needs: The Company expects to use proceeds from the sale of its remaining office property (Southpoint Parkway Center in Jacksonville, FL) and refinancing of "The Point" to meet mandatory payments on a new $6 million financing arrangement with SWH Funding Corp. secured by the new retail acquisitions.
- Market Risk: The Company is exposed to interest rate fluctuations on its floating debt. An interest rate cap agreement (capping rates at 7.5%) was in place but had effectively no value as of September 30, 2001. A 1% increase in base rates would decrease net income by approximately $179,000.
- Occupancy: The Southpoint office property was 99% occupied, while The Point shopping center was approximately 88% occupied following a major redevelopment.
Investor Verification Checklist
- REIT Compliance: Verify the Company's ability to meet the 90% distribution requirement for 2001 given the suspension of regular dividends.
- Debt Service Coverage: Confirm the ability to service the new $6 million SWH Financing (12.5% interest rate plus equity fees) and the mandatory principal payments due within 12 and 18 months.
- Asset Valuation: Review the appraisal values of the three newly acquired shopping centers versus the purchase price to assess immediate equity position.
- Related Party Fees: Note that significant acquisition and disposition fees to the advisor (CBRA) were waived or deferred, which may impact future expense recognition.
- Southpoint Sale: Monitor the status of the Southpoint Parkway Center, which is classified as "held for sale" to generate liquidity for debt obligations.