UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file number 0-14510
December 31, 1995
CEDAR INCOME FUND, LTD.
(Exact name of registrant as specified in its charter)
Iowa 42-1241468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4333 Edgewood Road N.E., Cedar Rapids, IA 52499
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 398-8975
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Common Stock, $1 Par Value
(Title of Class)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting shares of the registrant
held by non-affiliates at March 1, 1996 was $7,128,817.
The number of shares of common stock of the registrant
outstanding at March 1, 1996 was 2,245,411.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Part I.
Item 1. Business
Cedar Income Fund, Ltd. (the "Company") was incorporated in Iowa
on December 10, 1984 by AEGON USA Realty Advisors, Inc. ("AEGON
Realty Advisors"), the Company's advisor. The Company operates
as an equity-based real estate investment trust ("REIT"). To
qualify as a REIT under the Internal Revenue Code, the Company
must have a significant percentage of its assets invested in, and
income derived from, real estate and related sources. Cedar
Income Fund 2, Ltd. ("Cedar 2") was merged with and into the
Company on October 1, 1989. Cedar 2, another real estate
investment trust sponsored by AEGON Realty Advisors, was
incorporated in Iowa on October 30, 1986. The Company's
objectives are to provide its shareholders with a professionally
managed, diversified portfolio of commercial real estate
investments which will provide the best available cash flow and
present an opportunity for capital appreciation.
The Company's public offering of common stock commenced on May
29, 1985 and was completed on November 25, 1986. Net offering
proceeds, after commissions and registration costs, were
$12,410,658. Cedar 2's public offering of common stock commenced
on February 24, 1987 and was completed on August 22, 1988. Net
offering proceeds after commissions and registration costs, were
$6,335,765. The Company has invested the proceeds from these
offerings in four real estate properties and a mortgage loan
participation, utilizing only a minimum amount of indebtedness
against the properties. (See Note 6 to the Financial
Statements.)
The Company has no employees, as all services necessary to
conduct the day-to-day operations are performed by AEGON Realty
Advisors and its affiliates.
The Company's real estate investments are not expected to be
substantially affected by current federal, state or local laws
and regulations establishing ecological or environmental
restrictions on the development and operations of such property.
However, the enactment of new provisions or laws may reduce the
Company's ability to fulfill its investment objectives.
Mortgage Loan Receivable
On September 20, 1993, the Company purchased a 30% participation
in a promissory note from Life Investors Insurance Company of
America ("Life Investors"), an affiliate of AEGON Realty
Advisors. The participation was acquired for an investment of
$600,000 and yields 8.25% to the Company. The promissory note
matures in August 2000, and is secured by a deed of trust on the
Woodbury Office Plaza in Woodbury, Minnesota. Life Investors has
the right to repurchase principal sums of their discretion upon
thirty days written notice.
Item 2. Properties
Real Estate Investments
Germantown Square Shopping Center
Louisville, Kentucky
On September 28, 1988 the Company purchased a 50% undivided
interest in a neighborhood shopping center known as Germantown
Square Shopping Center in Louisville, Kentucky ("Germantown").
The remaining 50% undivided interest was purchased by Life
Investors. Germantown consists of two single-story buildings
totaling 74,267 square feet on a 9.0 acre site which includes
parking for 428 vehicles. The total acquisition cost of the
Company's 50% interest in Germantown was $3,707,599. Subsequent
improvements have increased the property's recorded cost to
$3,717,017.
Germantown represented 19% of the Company's total assets at
December 31, 1995 and provided 16% of total revenue. At December
31, 1995, Germantown was 100% leased to eleven tenants under
leases having a minimum term of five years (not including renewal
options). Annual base rents range from $7.77 to $15.50 per
square foot. Three leases representing 10% of the square feet at
Germantown expire during 1996. The anchor tenant, Winn Dixie (a
grocery store), pays a fixed base rent plus 1% of gross sales in
excess of a specified base. Winn Dixie occupies 59% of
Germantown under a lease term expiring in September 2008, with
five five-year options to renew. Winn Dixie provided 8% of the
Company's 1995 revenue.
Germantown experiences competition in attracting tenants in its
primary trade area from a number of shopping centers ranging in
size from 35,000 square feet to 600,000 square feet. The effect
of this competition is mitigated by the high occupancy rates
experienced in the area, as well as the locational attributes of
the Germantown site. Germantown's primary market area is mostly
developed, thereby limiting the possibility of additional retail
development.
Corporate Center East
Bloomington, Illinois
On March 24, 1988 the Company acquired Corporate Center East, a
25,200 square foot office building in Bloomington, Illinois for
$2,221,783 cash. Capital improvements have increased the
property's recorded cost to $2,223,819. The Hewlett Packard
Corporation occupied 20,400 square feet in Corporate Center East,
until December 31, 1995, providing 11% of the Company's 1995
revenue. The Company has begun marketing efforts to secure one or
more replacement tenants for this space. Given the market
conditions in Bloomington and the configuration of the Hewlett
Packard space, this lease-up effort is expected to take several
years. In 1996, the Company anticipates incurring lease
commissions, tenant improvements, and other costs of
approximately $200,000 for this purpose.
Corporate Center East is leased to two tenants: Metropolitan
Life Insurance Company occupies 2,590 square feet under a lease
expiring in December 1998, and a local law firm occupies 2,210
square feet under a lease expiring in July 1996. The Company is
negotiating a new six year lease which will relocate the law firm
into 4,000 square feet of the former Hewlett Packard space. The
anticipated capital cost of this relocation is approximately
$123,000 (included in the $200,000 stated above).
Corporate Center East represented 12% of the Company's total
assets at December 31, 1995 and provided 14% of 1995 revenue.
The property is subject to competition from several office
projects in the same geographic area.
Broadbent Business Center
Salt Lake City, Utah
Broadbent Business Center in Salt Lake City, Utah ("Broadbent"),
was acquired on March 31, 1987 for $4,057,950, subject to
mortgage loan indebtedness of $1,966,110. Approximately $300,000
was expended to upgrade the property immediately after
acquisition and subsequent improvements have increased the
property's recorded cost to $4,533,017. The original mortgage
indebtedness was scheduled to mature in September, 2008.
However, this loan was called by the lender pursuant to the terms
of the note. New financing was obtained in October, 1992 in the
amount of $1,500,000 to retire the original mortgage which had a
balance of $1,300,472 at the date of retirement.
Broadbent consists of eight single-story buildings totaling
119,500 square feet, approximately half of which is office use
and half service/warehouse, on a 12.5 acre site which includes
parking for approximately 320 vehicles. Broadbent represented
22% of the Company's total assets at December 31, 1995 and
provided 29% of 1995 revenue. At December 31, 1995 Broadbent was
95% occupied by 53 tenants under leases having a minimum term of
one month (not including renewal options) with annual base rents
ranging from $3.37 to $7.29 per square foot. Leases representing
30% of the square footage of Broadbent expire during 1996. The
Company anticipates most of these leases will be renewed or the
space will be leased to new tenants, resulting in stable
occupancy during 1996.
There is no direct competition in Broadbent's immediate
geographic area; however, there is significant competition from
newer projects within its market, most notably the Salt Lake
International Center, a 900 acre business park adjoining the Salt
Lake City International Airport.
Southpoint Parkway Center
Jacksonville, Florida
Southpoint Parkway Center in Jacksonville, Florida ("Southpoint")
was acquired on May 6, 1986 for $6,505,495 cash. Capital
expenditures made since the purchase date have increased the
property's recorded cost to $7,852,730. Southpoint is a single-
story office service center consisting of 79,010 square feet of
net leasable area on approximately 10.8 acres which includes 467
parking spaces. Southpoint represented 39% of the Company's
total assets at December 31, 1995 and provided 38% of its
revenue. The property is 99% leased to thirteen tenants with
terms ranging from three to ten years (not including renewal
options) and annual base rents ranging from $10.50 to $13.00 per
square foot. Six leases representing 27% of the square feet
expire in 1996. The Company anticipates most of these leases
will be renewed or the space will be leased to new tenants,
resulting in stable occupancy during 1996.
The General Services Administration ("GSA"), a United States
Government Agency, occupies 39,037 square feet in Southpoint
under a ten-year lease which expires in December, 2001. Under
the terms of the lease, the GSA has an option to terminate the
lease at any time on or after December 15, 1996. The GSA
provided 22% of the Company's 1995 revenue. The GSA lease was
negotiated in 1991, and in connection therewith, the Company
purchased 2.9 acres of adjacent land, constructed a parking lot
and made interior building improvements at a total cost of
$988,832 (included in the above $7,852,730).
Southpoint competes with other office buildings in the suburban
Jacksonville office market. During the early 1990's,
Jacksonville experienced an oversupply of office space due to new
office construction and consolidations by two major financial
services firms, both of which occurred in the late 1980's. Net
new absorption of office space in recent years has resulted in
improved office occupancies and stabilized rents in the
Southpoint market area.
The Company's properties are summarized in the table below:
<TABLE>
<CAPTION> Occupancy
at Assets at
Size December 31, Lease December 31, 1995 1995 Revenue
Name and Location (Sq. Ft.) 1995 Expiration Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Managed
Southpoint Parkway Center
Jacksonville, Florida 79,010 99% 1996-2001 $ 6,464,651 39% $ 945,799 38%
Broadbent Business Center
Salt Lake City, Utah 119,500 95 1996-1999 3,673,029 22 713,580 29
Corporate Center East
Bloomington, Illinois 25,200 19 1996-1998 1,886,974 12 347,125 14
Germantown Square
Louisville, Kentucky 74,267 100 1996-2008 3,214,298 19 393,769 16
297,977 15,238,952 92 2,400,273 97
Trust Operations --- 1,371,153 8 86,884 3
297,977 $16,610,105 100% $2,487,157 100%
</TABLE>
Current Value of Real Estate
Traditional accounting methods and generally accepted accounting
principles require that investments in real estate be presented
in the financial statements on the basis of historical cost,
reduced by related depreciation and any reasonable estimated
permanent decline in value, without recognition for appreciation.
Management believes that the current appraised value of real
estate is more relevant and useful in determining the Company's
financial position. Disclosure of current value information has
become widespread in the real estate industry.
An evaluation of the estimated current value of the real estate
assets owned by the Company was prepared by AEGON Realty
Advisors. The valuation was based on AEGON Realty Advisors'
review of each property's past operating performance, revenue and
expense projections, and capital expenditure requirements. The
economic and physical attributes of the property, its trade area,
existing mortgage financing, lease structure and growth potential
were also taken into consideration, as well as the independent
property appraisals obtained upon acquisition of the properties.
The estimate of the aggregate current value of the Company's real
estate as of December 31, 1995 was $12.8 million, which was $2.2
million less than its recorded book value. The Company believes
this is a temporary decline in value due to current market
conditions and, as a result, has not established a valuation
allowance in the Financial Statements. Current value estimates
for the Company's financial assets and liabilities are presented
in Notes 4 and 6 to the Financial Statements.
This information should be considered in the context with other
evaluations of financial condition and performance employed by
informed investors in their overall assessment of the results and
prospects of an ongoing real estate enterprise.
Item 3. Legal Proceedings
Legal Proceedings
The Company is not a party to any pending legal proceedings
which, in the opinion of management, are material to the
Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Dividend Information
The Company is required to distribute at least 95% of its taxable
income to continue qualification as a real estate investment
trust. In 1995, the Company paid dividends of $.10 per share in
February, May, August and November, totaling $.40 per share.
While the Company expects to continue paying dividends to
shareholders, there is no assurance of future dividends, as they
are dependent upon earnings, cash flow, the financial condition
of the Company and other factors.
A Form 1099 is mailed to shareholders at the end of each year
reflecting the dividends paid by the Company in that year. The
percentages indicated below, multiplied by the amount of
dividends paid for that year, result in the amount to be reported
for income tax purposes.
<TABLE>
<CAPTION>
Dividend Character
1995 1994 1993
<S> <C> <C> <C>
Ordinary income 94.35% 82.13% 60.71%
Nontaxable return of capital 5.65% 17.87% 39.29%
Total 100.00% 100.00% 100.00%
Dividends paid,
per share $.40 $.40 $.40
</TABLE>
Market Information
At March 1, 1996 the Company had 2,245,411 shares of common stock
issued and outstanding to 1,235 shareholders of record. The
Company's shares began trading on the National Association of
Securities Dealers Automated Quotations (NASDAQ) System by the
symbol CEDR on December 17, 1986. At March 1, 1996 the Company's
per share bid and asked prices were $4.125 and $4.50,
respectively, as obtained from Wedbush/Morgan Securities, Inc.,
Newport Beach, California and Herzog, Heine, Geduld, Inc., New
York, New York, the principal market makers for shares of the
Company. These prices reflect quotations between dealers without
adjustment for retail mark-up, mark-down or commission and do not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
Market Price Range
Quarter Over-the-Counter Bid Price
Ended High Low Close
<C> <C> <C> <C>
1995
March 31 4 1/2 3 3/4 3 3/4
June 30 4 1/2 3 5/8 4 1/4
September 30 4 1/2 4 1/8 4 1/8
December 31 4 1/2 4 4
1994
March 31 4 3/4 4 4 1/2
June 30 5 4 1/4 4 3/4
September 30 5 4 3/4 4 3/4
December 31 5 1/4 3 3/4 3 3/4
</TABLE>
Advisor
AEGON USA Realty Advisors, Inc.
Cedar Rapids, Iowa
Property Manager
AEGON USA Realty Management, Inc.
Cedar Rapids, Iowa
Stock Transfer and Dividend Reinvestment Agent
Cedar Income Fund, Ltd.
c/o Boston EquiServe, L.P.
P.O. Box 8200
Boston, MA 02266-8200
Telephone: 1-800-426-5523
Annual Meeting
The annual meeting of shareholders of Cedar Income Fund, Ltd.
will be held on April 30, 1996 at 9:30 a.m. at the AEGON
Financial Center, 4333 Edgewood Road N.E., Cedar Rapids, Iowa.
10-K Information
The 1995 Form 10-K filed with the Securities and Exchange
Commission (exclusive of certain exhibits) is available without
charge upon written request to Roger L. Schulz, Controller, Cedar
Income Fund, Ltd., 4333 Edgewood Road N.E., Cedar Rapids, Iowa
52499.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Revenue $ 2,487,157 2,383,889 2,228,371 2,121,921 1,810,066
Net Earnings $ 769,621 659,553 467,196 395,350 330,675
Dividends to Shareholders $ 898,164 898,164 898,165 903,987 989,721
Per Share
Net Earnings* $ .34 .29 .21 .17 .14
Dividends to Shareholders** $ .40 .40 .40 .40 .43
Total Assets $16,610,105 16,786,232 17,026,932 17,439,445 18,049,259
Mortgage Loan Payable $ 1,444,654 1,463,929 1,481,486 1,497,477 1,326,378
Shareholders' Equity $14,961,628 15,090,171 15,328,782 15,759,751 16,369,641
* Based on weighted average number of shares outstanding.
** Based on number of shares outstanding on respective record dates.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The discussion that follows should be read in the general context
of the discussion in "Item 1 Business" and "Item 2 Properties."
Results of Operations
Growth in the U.S. economy continued in 1995, with the Gross
Domestic Product gaining 4.2%. Job growth in the U.S. non-
agricultural employment increased by 1.7 million as of last
August compared to one year earlier. Retail sales in 1995 posted
a 5% increase over 1994. The Company benefited from these
positive economic factors and experienced an improvement in the
portfolio occupancy rate and operating results in 1995. In the
foreseeable future, "outlet megamalls" (giant retail facilities
ranging from one to two million square feet) have the potential
of becoming more common and thus compete with traditional centers
for consumer consumption.
The Company owns office, office/warehouse, and retail properties
in four U.S. cities. On December 31, 1995, the combined
occupancy rate of the Company's four properties was 91%. As more
fully described in the discussion in "Item 2 Properties," the
Hewlett Packard Corporation lease expired in 1995 creating a
20,400 square foot vacancy. Operating results in the forthcoming
year will be influenced by the Company's ability to release the
Hewlett Packard space, renew other expiring tenant leases and
obtain new leases at competitive rental rates.
1995 compared to 1994
Rental income was $2,400,273 in 1995 compared to $2,316,229 in
1994, an increase of 3.6%. This increase is due to higher
occupancy and rental rates at Broadbent and Southpoint. During
1995 rental income increased $60,350 at Broadbent and $43,457 at
Southpoint, representing gains of 9% and 5%, respectively, over
1994. Germantown was 100% occupied during 1995; however, rental
income decreased $25,185 primarily due to a decrease in expense
recoveries from tenants as operating expenses, namely real estate
taxes, decreased from 1994. Rental income at Corporate Center East
increased by $5,421 as expense recoveries from tenants increased in
1995. Interest income was $86,884 in 1995 compared to $67,660 in
1994, an increase of 28%. This increase was attributable to higher
investable cash balances and higher interest rates in 1995.
Property expenses, excluding depreciation, declined from $940,123
in 1994 to $932,431 in 1995. Contributing to the decrease in
property expenses was a $23,317 decrease in wages and salaries
due to a reduction of property management personnel at Broadbent.
Management fees increased $4,201 in 1995, an increase of 4%,
corresponding to the increase in rental income. Insurance
expense increased from $15,699 in 1994 to $16,521 in 1995 due to
higher insurance premiums. The remaining property expenses each
experienced less than a 3% increase from 1994. Property
expenses, excluding depreciation, as a percent of rental income,
decreased to 39% in 1995 compared to 41% in 1994. Other
administrative expense increased in 1995 as a result of an
increase in mailing costs which was partially off-set by a
reduction in directors fees and expenses.
The net effect of the higher revenues and lower expenses was a
17% increase in net earnings from $659,553 in 1994 to $769,621 in
1995.
1994 compared to 1993
Rental income was $2,316,229 in 1994 compared to $2,172,985 in
1993, an increase of 7%. This increase is primarily due to
higher occupancy and rental rates at Southpoint and stable
occupancy and higher rental rates at Broadbent. During 1994,
rental income increased $115,798 at Southpoint and $23,465 at
Broadbent, representing gains of 15% and 4%, respectively, over
1993. Germantown maintained 100% occupancy for all of 1994 and
recorded a $9,695 increase in rental income, a gain of 2% over
1993. Rental income at Corporate Center East fell $5,713 in
1994, a decline of 2% from 1993, due primarily to lower expense
recoveries. Interest income was $67,660 in 1994 compared to
$55,386 in 1993, an increase of 22%. This increase was
attributable to higher investable cash balances and higher
interest rates received on these balances in 1994.
Property expenses, excluding depreciation, declined from $979,119
in 1993 to $940,123 in 1994. The primary reason for the decrease
in property expenses was a $25,044 decrease in repairs and
maintenance expense due primarily to lower remodeling costs for
new and existing tenants at Southpoint in 1994 compared to 1993.
Also contributing to the decrease in property expenses was a
decline in property taxes of $9,760 due to a lower assessed
valuation at Southpoint. Insurance expense also decreased from
$19,374 in 1993 to $15,699 due to lower premiums. Management
fees increased $7,164 in 1994, an increase of 7%, corresponding
to the increase in rental income. Property expenses, excluding
depreciation, as a percent of rental income, decreased to 41% in
1994 from 45% in 1993.
The net effect of higher revenues and lower expenses was a 41%
increase in net earnings from $467,196 in 1993 to $659,553 in
1994.
Cash Flow and Funds from Operations
In 1994, the Company adopted "funds from operations" as a
measurement of operating performance. "Funds from operations,"
as used in this report, is defined as: net income (computed in
accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation. The Company has adopted this
definition of "funds from operations" as a more meaningful
measurement of the ongoing performance of a real estate entity
than either "net cash provided by operating activities,"
identified in the Statements of Cash Flows, or "earnings from
operations," identified in the Statements of Earnings.
Funds from operations takes into consideration the accrual of
revenue and expenses which more appropriately reflects operating
performance. Net cash provided by operating activities, on the
other hand, represents cash receipts and disbursements without
regard to when income is earned or expense incurred. Earnings
from operations considers the accrual of revenue and expenses,
but is limited as a measurement of the ongoing performance of a
real estate entity because it includes depreciation, a non-cash
expense. The Company intends to continue using funds from
operations as a measure of operating performance.
Liquidity and Capital Resources
The Company's capital resources consist of its current equity in
real estate investments (current value less mortgage
indebtedness) and a participation in a mortgage loan receivable.
The Company maintains the real estate in good condition and
provides adequate insurance coverage. Liquidity is considered
sufficient to meet current obligations, and is represented by
cash and cash equivalents of $772,144 and a mortgage loan
participation of $582,769 as of December 31, 1995.
Net cash provided by operating activities, as shown in the
Statements of Cash Flows, was $1,235,761 for the year ended
December 31, 1995. Dividends to shareholders of $898,164
constituted the major use of cash in 1995. Dividends to
shareholders of $224,541 were also paid in the first quarter of
1996. The Board of Directors continues to closely monitor
occupancies, leasing activity, overall Company operations, and
liquidity in determining quarterly dividends.
The Board of Directors of the Company has authorized the
repurchase from time to time of up to 200,000 shares of the
Company's own common stock. As of December 31, 1995, the Company
had repurchased 83,117 shares. The Company purchased 55,502
shares in 1991 and 27,615 shares in 1992, but no shares have been
purchased since then.
The Company's debt service commitments for the mortgage loan
payable are described in Note 6 to the Financial Statements. In
addition, the Company anticipates incurring lease commissions,
tenant improvements and capital expenditures of $200,000 for
releasing the vacant space at Corporate Center East in 1996.
There were no other material commitments at December 31, 1995.
Inflation
Low to moderate levels of inflation during the past few years
have favorably impacted the Company's operations by stabilizing
operating expenses. At the same time, low inflation has the
indirect effect of reducing the Company's ability to increase
tenant rents. The Company's properties have tenants whose leases
include expense reimbursements and other provisions to minimize
the effect of inflation. These factors, in the long run, are
expected to result in more attractive returns from the Company's
real estate portfolio as compared to short-term investment
vehicles.
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Balance Sheets
December 31,
1995 1994
<S> <C> <C>
Assets
Real Estate
Land $ 4,126,044 $ 4,126,044
Buildings and improvements 14,200,539 14,200,539
18,326,583 18,326,583
Less accumulated depreciation (3,318,273) (2,881,997)
15,008,310 15,444,586
Mortgage loan receivable 582,769 590,834
15,591,079 16,035,420
Cash and cash equivalents 772,144 447,015
Rent and other receivables 80,213 62,543
Interest receivable 4,007 6,103
Prepaid expenses 44,275 53,583
Deferred lease commissions 114,807 171,264
Taxes held in escrow 3,580 10,304
Total Assets $16,610,105 $16,786,232
Liabilities and Shareholders' Equity
Liabilities
Mortgage loan payable $ 1,444,654 $ 1,463,929
Accounts payable and accrued expenses 99,673 86,059
Due to affiliates 28,762 29,062
Security deposits 66,869 68,127
Advance rents 8,519 48,884
1,648,477 1,696,061
Shareholders' equity
Common stock, $1 par value, 5,020,000
shares authorized, 2,245,411 shares
issued and outstanding 2,245,411 2,245,411
Additional paid-in capital 12,716,217 12,844,760
14,961,628 15,090,171
Total Liabilities and Stockholders' Equity $16,610,105 $16,786,232
See the accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenue
Rents $2,400,273 $2,316,229 $2,172,985
Interest 86,884 67,660 55,386
2,487,157 2,383,889 2,228,371
Expenses
Property expenses:
Real estate taxes 228,006 226,426 236,186
Repairs and maintenance 318,633 315,393 340,437
Utilities 134,362 130,667 132,123
Management fee 120,013 115,812 108,648
Wages and salaries 19,911 43,228 44,873
Insurance 16,521 15,699 19,374
Other 94,985 92,898 97,478
Property expenses, excluding depreciation 932,431 940,123 979,119
Depreciation 436,276 436,562 436,563
Total property expenses 1,368,707 1,376,685 1,415,682
Interest 140,096 141,814 143,990
Administrative fees 99,359 98,797 98,431
Directors' fees and expenses 44,228 49,994 51,372
Other administrative 65,146 57,046 51,700
1,717,536 1,724,336 1,761,175
Net earnings $ 769,621 $ 659,553 $ 467,196
Net earnings per share* $ .34 $ .29 $ .21
Dividends to shareholders $ 898,164 $ 898,164 $ 898,165
Dividends to shareholders per share* $ .40 $ .40 $ .40
* Net earnings per share are based on the weighted average
number of shares outstanding (2,245,411) for the years 1995,
1994, and 1993. Dividends to shareholders per share are based on
the actual number of shares outstanding on the respective record
dates.
See the accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Rents collected $ 2,328,138 $ 2,315,720 $ 2,275,050
Interest received 88,980 66,394 55,508
Payments for operating expenses (1,044,928) (1,114,146) (1,151,661)
Interest paid (136,429) (138,148) (139,713)
Net cash provided by operating activities 1,235,761 1,129,820 1,039,184
Cash flows from investing activities:
Purchase of participation in --- --- (600,000)
mortgage loan receivable
Principal collection on mortgage --- --- 611,968
loans receivable
Principal portion of scheduled
mortgage loan collections 8,065 7,410 5,146
Security deposits collected, net (1,258) 3,798 1,360
Net cash provided by investing activities 6,807 11,208 18,474
Cash flows from financing activities:
Principal portion of scheduled
mortgage loan payments (19,275) (17,557) (15,991)
Dividends paid to shareholders (898,164) (898,164) (898,165)
Net cash used by financing activities (917,439) (915,721) (914,156)
Net increase in cash and cash equivalents 325,129 225,307 143,502
Cash and cash equivalents at beginning of year 447,015 221,708 78,206
Cash and cash equivalents at end of year $ 772,144 $ 447,015 $ 221,708
Reconciliation of net earnings to net
cash provided by operating activities:
Net earnings $ 769,621 $ 659,553 $ 467,196
Add (deduct) reconciling adjustments:
Depreciation 436,276 436,562 436,563
Amortization 3,667 3,666 4,277
Decrease (increase) in rent and
other operating receivables (10,946) (162) 87,079
Decrease (increase) in interest receivable 2,096 (1,266) 122
Decrease in prepaid expenses 5,641 3,606 1,313
Decrease in deferred lease commissions 56,457 16,191 9,547
Increase in operating accounts payable,
accrued expenses and due to affiliates 13,314 4,991 451
Increase (decrease) in advance rents (40,365) 6,679 32,636
Net cash provided by operating activities $ 1,235,761 $ 1,129,820 $ 1,039,184
See the accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Shareholders' Equity
Years Ended December 31, 1995, 1994, and 1993
Additional Undistributed Total
Common Paid-In Net Shareholders'
Stock Capital Earnings Equity
<S> <C> <C> <C> <C>
Balance at January 1, 1993 $ 2,245,411 $13,514,340 $ --- $15,759,751
Net earnings --- --- 467,196 467,196
Dividends to shareholders --- (430,969) (467,196) (898,165)
Balance at December 31, 1993 2,245,411 13,083,371 --- 15,328,782
Net earnings --- --- 659,553 659,553
Dividends to shareholders --- (238,611) (659,553) (898,164)
Balance at December 31, 1994 2,245,411 12,844,760 --- 15,090,171
Net earnings --- --- 769,621 769,621
Dividends to shareholders --- (128,543) (769,621) (898,164)
Balance at December 31, 1995 $ 2,245,411 $12,716,217 $ --- $14,961,628
See the accompanying notes to financial statements.
</TABLE>
Notes to Financial Statements
1. Organization and Accounting Policies
Cedar Income Fund, Ltd. (the "Company") was incorporated as Cedar
Income Fund 1, Ltd. ("Cedar 1") in 1984. On October 1, 1989, the
Company merged with Cedar Income Fund 2, Ltd. ("Cedar 2"), a real
estate investment trust organized in 1986, and changed its name
to Cedar Income Fund, Ltd. The merger qualified as a tax-free
reorganization under the Internal Revenue Code and was accounted
for as a pooling of interests.
The Company is in the business of investing in real estate.
Investments in real estate are stated at cost. The Company will
provide an allowance for valuation if it is ever determined that
the value of real estate has permanently declined below recorded
book value.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, which
requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement No.
121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company's adoption of Statement
No. 121 in 1995 had no impact on the Company's operations.
A provision for possible losses on rents receivable is made when
it is determined that collection of the receivable is doubtful.
Rent receivable is stated net of an allowance for uncollectible
accounts of $29,257 in 1995 and $35,034 in 1994. The Company
follows the operating method of accounting for leases, whereby
scheduled rental income is recognized on a straight-line basis
over the lease term. Contingent rental income is recognized in
the period in which it arises.
Cash equivalents include investments with original maturities of
three months or less.
Costs incurred in connection with the registration of the
Company's public offering of shares, including the public
offering of Cedar 2, have been recorded as a reduction of the
offering proceeds. Costs of the merger were expensed in 1989,
and expenses incurred in connection with the organization of the
Company have been fully amortized.
Expenditures for repairs and maintenance which do not add to the
value or extend the useful life of property are expensed when
incurred. Expenditures which do add to the value or extend the
useful life of property are capitalized. Depreciation is
calculated using the straight-line method over the estimated
useful lives of the respective assets.
Expenditures for lease commissions are being amortized on a
straight-line basis over the lease term as an operating expense.
Net earnings per share is computed using the weighted average
number of shares outstanding during the year.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. The actual
results of the Company could differ as a result of those
estimates.
2. Cash and Cash Equivalents
At December 31, 1995 the Company had $4,092 in cash and $768,052
invested in a money market fund. Information regarding the money
market investment is presented in the following table:
<TABLE>
<CAPTION>
Cost at
Name of Issuer and Principal December 31,
Type of Issue Maturity Date Amount 1995*
<S> <C> <C> <C>
Fidelity Investments Money Market
Trust, approximate average, 5.62% Demand $768,052 $768,052
* Represents the amount at which carried on the balance sheet,
which also approximates market value at that date.
</TABLE>
3. Real Estate
The Company's properties are leased to various tenants, whereby
the Company incurs normal real estate operating expenses
associated with ownership. Information regarding the Company's
investment in each property is presented in the Schedule of Real
Estate and Accumulated Depreciation below.
<TABLE>
<CAPTION>
Schedule of Real Estate and Accumulated Depreciation
Initial Cost to Company Gross Amount at Which Carried
December 31, 1995
Amount Buildings Subsequent Buildings
Property Description of & Cost &
Name and Location of Property Encumbrance Land Improvements Capitalized Land Improvements Total
<S> <C> <C> <C> <C> <C> <C> <C>
Southpoint Parkway Center $ --- 2,005,495 4,500,000 1,347,235 2,377,369 5,475,361 7,852,730
Jacksonville, Floria
(Office/Service Facility
Broadbent Business Center 1,444,654 595,000 3,462,950 475,067 595,000 3,938,017 4,533,017
Salt Lake City, Utah
(Office/Service Facility)
Corporate Center East --- 475,000 1,746,783 2,036 475,000 1,748,819 2,223,819
Bloomington, Illinois
(Office Building)
Germantown Square --- 678,675 2,284,999 753,343 678,675 3,038,342 3,717,017
Louisville, Kentucky
(Shopping Center)
$1,444,654 3,754,170 11,994,732 2,577,681 4,126,044 14,200,539 18,326,583
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Property Description Accumulated Date Date Depreciation is
Name and Location of Property Depreciation Built Acquired Computed (in
years)
<S> <C> <C> <C> <C>
Southpoint Parkway Center 1,512,543 1984 5/86 10-40
Jacksonville, Floria
(Office/Service Facility
Broadbent Business Center 929,914 1978 3/87 10-40
Salt Lake City, Utah
(Office/Service Facility)
Corporate Center East 340,621 1987 3/88 40
Bloomington, Illinois
(Office Building)
Germantown Square 535,195 1988 9/88 10-40
Louisville, Kentucky
(Shopping Center)
3,318,273
</TABLE>
The activity in real estate and related accumulated depreciation
for the three year period ended December 31, 1995 is summarized
in the table below:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Real Estate
Cost
Beginning of year $18,326,583 18,326,583 18,326,583
Additions during year
Improvements --- --- ---
End of year $18,326,583* 18,326,583 18,326,583
Accumulated Depreciation
Beginning of year 2,881,997 2,445,435 2,008,872
Additions during year
Depreciation expense 436,276 436,562 436,563
End of year $ 3,318,273 2,881,997 2,445,435
* Also represents cost for federal income tax purposes.
</TABLE>
4. Mortgage Loan Receivable
On September 20, 1993, the Company purchased a $600,000
participation in a promissory note owned by Life Investors
Insurance Company of America, an affiliate of AEGON Realty
Advisors. The note is secured by real estate and the
participation yields 8.25% to the Company. Principal payments
reduced the receivable balance to $582,769 at December 31, 1995.
The estimated fair value of the mortgage loan receivable at
December 31, 1995 was $609,818. The interest rate applied to
discount the cash flows was lower than the stated rate of the
loan, and as a result, the estimated fair value exceeded the
carrying value of the mortgage loan receivable. The Company's
previous investment in a similar mortgage with Bankers United
Life Assurance Company, also an affiliate of AEGON Realty
Advisors, was prepaid on July 27, 1993. Information regarding
the mortgage receivable at December 31, 1995 is presented in the
Schedule of Mortgage Loan Receivable below:
<TABLE>
<CAPTION>
Schedule of Mortgage Loan Receivable
Periodic Payment Terms
Date Stated Final Annual Balloon Face Amount Carrying
of Interest Maturity Principal Payment of Mortgage Amount of
Mortgage Rate Date and at Receivable Mortgage
Interest Maturity at December
Acquisition 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Woodbury Plaza
Woodbury, Minnesota 8-1-93 8.25% 8-1-00 $56,453 $535,664 $600,000 $582,769
</TABLE>
<TABLE>
<CAPTION>
The activity in mortgage loan receivable for the three year
period ended December 31, 1995, is summarized as follows:
Years Ended December 31,
Mortgage Loan Receivable 1995 1994 1993
<S> <C> <C> <C>
Principal
Beginning of year $ 590,834 598,244 615,358
Additions during year
Purchase of participation --- --- 600,000
Deductions during year
Scheduled payments (8,065) (7,410) (5,146)
Prepayments --- --- (611,968)
End of year $ 582,769 590,834 598,244
</TABLE>
5. Leased Assets
<TABLE>
<CAPTION>
The Company's properties are leased to tenants under short-term,
non-cancellable operating lease agreements. Future minimum lease
rentals to be received under the terms of these lease agreements
are as follows:
Year Amount
<S> <C>
1996 $1,401,144
1997 728,885
1998 324,909
1999 193,814
2000 174,733
Thereafter 1,397,864
$4,221,349
</TABLE>
Contingent rentals provided by various leases were included in
rental income for 1995, 1994, and 1993 of $284,887, $292,622, and
$281,168, respectively. The Company derived 10% or more of its
revenue from two major tenants in 1995, 1994, and 1993. Revenues
from these tenants were $541,814 and $278,553 in 1995, $490,799
and $265,645 in 1994 and $492,528 and $276,951 in 1993.
One of the Company's major tenants, Hewlett Packard Corporation,
vacated 20,400 square feet in Corporate Center East when their
lease expired on December 31, 1995. The Hewlett Packard
Corporation provided 11% of the Company's 1995 revenue.
6. Mortgage Loan Payable
Broadbent was acquired on March 31, 1987 subject to a mortgage
loan obligation. The mortgage was scheduled to mature in
September, 2008; however, the lender elected to call the loan
pursuant to terms of the note. A payment of $1,300,472 was paid
to the lender on October 30, 1992 to retire the obligation, at
which time new financing was obtained. Information regarding the
new mortgage is presented in the Schedule of Mortgage Loan on
Real Estate below:
<TABLE>
<CAPTION>
Periodic Payment Terms
Property Description Date Stated Final Annual Balloon Prepayment Penalty Face Amount Carrying
Name and Location of of Interest Maturity Principal Payment Provisions of Mortgage Amount of
Property Note Rate Date and at at Mortgage
Interest Maturity Acquisition December 31,
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Broadbent Business Center 10/92 9.375% 11/02 $155,704 1,264,582 No prepayment 1st $1,500,000 $1,444,654
Salt Lake City, Utah 5 years, 5% in 6th
year declining 1%
per year
thereafter
</TABLE>
The estimated fair market value and the carrying value of the
mortgage loan payable at December 31, 1995 were $1,600,859 and
$1,444,654, respectively. The fair market value exceeds the
carrying value as a result of the current interest rate applied
to discount cash flows being lower than the stated rate of the
note. The activity in mortgage loans payable for the three year
period ended December 31, 1995 is summarized in the table below:
<TABLE>
<CAPTION>
Years Ended December 31,
Mortgage Loan Payable 1995 1994 1993
<S> <C> <C> <C>
Principal
Beginning of year $ 1,463,929 1,481,486 1,497,477
Deductions during year
Principal payments (19,275) (17,557) (15,991)
End of year $ 1,444,654 1,463,929 1,481,486
</TABLE>
Scheduled monthly payments will partially amortize the principal
balance of the mortgage loan over its term, leaving a balloon
payment at maturity in November, 2002. Amortized payments on the
outstanding balance due in the next five years are summarized as
follows:
<TABLE>
<CAPTION>
Year Amortized
Payments
<S> <C>
1996 21,162
1997 23,233
1998 25,507
1999 28,004
2000 30,742
</TABLE>
7. Federal Income Taxes
The Company conducts its operations so as to qualify as a real
estate investment trust under the Internal Revenue Code which
requires, among other things, that at least 95% of the Company's
taxable income be distributed to shareholders. The Company has
distributed all of its taxable income for 1995, 1994 and 1993;
accordingly, no provision has been made for federal income taxes
since the Company did not have taxable income after the
deductions allowed for dividends paid to shareholders.
Differences between taxable income and financial accounting
income result from different methods required for depreciation of
real estate; such differences are relatively insignificant.
8. Common Stock Repurchases
The Company has purchased 83,117 shares of its common stock under
a program authorized by the Board of Directors to repurchase from
time to time up to 200,000 shares. The Company purchased 55,502
shares in 1991 and 27,615 shares in 1992. No shares were
purchased in 1995, 1994 or 1993.
9. Transactions with Affiliates
The Company has entered into an agreement with AEGON Realty
Advisors to provide administrative and advisory services for a
monthly base fee of 1/12 of 3/4 of 1% of the estimated current
value of real estate plus 1/12 of 1/4 of 1% of the estimated
current value of all assets of the Company other than real
estate, and an annual subordinated incentive fee equal to 15% of
the gain on property sold, subject to certain limitations. AEGON
Realty Advisors also provides real estate acquisition services
for a fee equal to 5% of the gross purchase price of property
acquired and disposition services for a fee equal to 3% of the
gross sales price of property sold, subject to certain
limitations. The administrative and advisory agreement is for a
period of one year, automatically renewed annually and
cancellable upon 60 days written notice by either party. The
Company paid AEGON Realty Advisors $99,359, $98,797, and $98,431
in administrative fees for 1995, 1994, and 1993, respectively.
No acquisition fees were paid in 1995, 1994 and 1993 and no
incentive or disposition fees have been paid since the Company's
inception.
AEGON USA Realty Management, Inc. (the "Property Manager"), a
wholly-owned subsidiary of AEGON Realty Advisors, provides
property management services to the Company for a monthly fee
equal to 5% of the gross income from properties managed. The
Property Manager also provides leasing services to the Company
for a fee of up to 6% of the rent to be paid during the term of
the lease procured. The management agreement is for a period of
one year, automatically renewed annually and cancellable upon 60
days written notice by either party. The Company paid the
Property Manager $120,013, $115,812, and $108,648 in management
fees for 1995, 1994, and 1993, respectively, and $18,809,
$40,150, and $21,546 in leasing fees for 1995, 1994 and 1993,
respectively.
AEGON Realty Advisors provides dividend disbursement, stock
certificate preparation, recordkeeping and other shareholder
services to the Company for a quarterly fee of $.875 per
shareholder account (as defined) and $1.00 per shareholder
account for dividends processed. The Company paid AEGON Realty
Advisors $10,281, $10,892, and $11,434 in shareholder service
fees for 1995, 1994, and 1993, respectively. AEGON Realty
Advisors has subcontracted with Boston EquiServe, L.P., a
subsidiary of State Street Bank and Trust Company, for delivery
of these services.
AEGON Realty Advisors administers the Company's common stock
repurchase program, earning $.0625 per share for each share
repurchased. No shares were repurchased and no fees were paid in
1995, 1994 or 1993.
The Company has purchased participations in promissory notes
owned by various affiliates of AEGON Realty Advisors (see note
4). The Company received interest income from the participations
of $48,388, $49,028, and $44,692 for 1995, 1994 and 1993,
respectively.
AEGON Realty Advisors is a wholly-owned subsidiary of AEGON USA,
Inc. which, through AEGON Realty Advisors and various other
wholly-owned subsidiaries, beneficially owns 584,567 shares of
the Company, representing approximately 26% of the shares
outstanding at December 31, 1995.
<TABLE>
<CAPTION>
10. Selected Quarterly Financial Data (Unaudited)
Quarter Ended Year Ended
Year 3/31 6/30 9/30 12/31 12/31
<S> <C> <C> <C> <C> <C>
1995
Revenue $619,893 621,256 629,480 616,528 2,487,157
Net earnings 184,870 171,659 205,710 207,382 769,621
Net earnings per share .08 .08 .09 .09 .34
1994
Revenue 575,151 595,603 617,720 595,415 2,383,889
Net earnings 163,373 147,053 153,708 195,419 659,553
Net earnings per share .07 .07 .07 .09 .29
1993
Revenue 534,926 579,347 561,573 552,525 2,228,371
Net earnings 50,112 137,101 109,623 170,360 467,196
Net earnings per share .02 .06 .05 .08 .21
</TABLE>
Report of Independent Auditors
The Board of Directors and Shareholders
Cedar Income Fund, Ltd.
We have audited the accompanying balance sheets of Cedar Income
Fund, Ltd. as of December 31, 1995 and 1994, and the related
statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Cedar Income Fund, Ltd. at December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Des Moines, Iowa
February 16, 1996
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
Part III.
Item 10. Directors and Executive Officers of the Registrant
Information About Directors
Certain information about the nominees for Director appears
below. (See "Item 13 Certain Relationships and Related
Transactions" for a description of the Company's relationship
with AEGON USA Realty Advisors, Inc. and other subsidiaries of
AEGON USA, Inc.)
PATRICK E. FALCONIO, age 54, has served as Chairman of the Board
and a Director of the Company since 1988. He is Executive Vice
President and Chief Investment Officer of AEGON USA, Inc.
(insurance and financial services), Cedar Rapids, Iowa, where he
has been employed since 1987. Mr. Falconio is a Director of
AEGON USA Realty Advisors, Inc. and various other subsidiaries of
AEGON USA, Inc. He is also Chairman of the Board of Trustees of
USP Real Estate Investment Trust (real estate investment company)
and a Director of Firstar Bank Cedar Rapids, N.A. (commercial
bank).
EDWIN L. INGRAHAM, age 69, has served as a Director of the
Company from inception to 1988, and again since 1991. He retired
in 1988 as Executive Vice President, Treasurer and Chief
Investment Officer of AEGON USA, Inc., where he had been employed
since 1982. He is a Trustee of USP Real Estate Investment Trust
(real estate investment company). Mr. Ingraham is a member of
the Audit Committee.
JAMES C. KAFES, age 60, has served as a Director of the Company
since 1989. He was a Director of Cedar Income Fund 2, Ltd. (real
estate investment company) from its inception in 1986 to 1989,
when it was merged with and into the Company. He is a Managing
Director of Landauer Associates, Inc. (real estate counseling),
New York, New York where he has been employed since 1986.
(Landauer Associates, Inc. is a wholly-owned subsidiary of AEGON
USA Realty Advisors, Inc.). Mr. Kafes is a member of the Audit
Committee.
EDWIN B. LANCASTER, age 79, has served as a Director of the
Company since its inception. He has been self-employed as a
consultant since retirement in 1981 as Executive Vice President
of Metropolitan Life Insurance Company, New York, New York. Mr.
Lancaster is Chairman of the Audit Committee.
ALEX A. MEYER, age 65, has served as a Director of the Company
since its inception. He retired in 1992 as Senior Vice President
of Amana Refrigeration, Inc., Amana, Iowa, a subsidiary of
Raytheon Company (manufacturing), where he had been employed in
various executive and marketing positions since 1956. He is a
Director of the Toro Company (equipment manufacturing). Mr.
Meyer is a member of the Audit Committee.
Information About Other Executive Officers
Certain information about the executive officers of the Company
who are not also nominees appears below. The term of office of
each executive officer will expire at the Annual Meeting of the
Board of Directors which will precede the Annual Meeting of
Shareholders. (See "Item 13 Certain Relationships and Related
Transactions" for a description of the Company's relationship
with AEGON USA Realty Advisors, Inc. and other subsidiaries of
AEGON USA, Inc.)
DAVID L. BLANKENSHIP, age 45, has served as President of the
Company since its inception. He has been employed by AEGON USA,
Inc. since 1977 in various administrative and management
positions related to real estate investment activities and is
Chairman of the Board and President of AEGON USA Realty Advisors,
Inc.
MAUREEN DEWALD, age 45, has served as Vice President and
Secretary of the Company since its inception. She has been
employed by AEGON USA, Inc. since 1983 as an attorney for real
estate investment activities and is Senior Vice President,
Secretary and General Counsel of AEGON USA Realty Advisors, Inc.
JEFFRY DIXON, age 42, has served as Director of Investor
Relations and Assistant Secretary of the Company since 1994. He
has been employed by AEGON USA, Inc. since 1984 in real estate
acquisition and mortgage lending positions and is a Portfolio
Manager of AEGON USA Realty Advisors, Inc.
ALAN F. FLETCHER, age 46, has served as Vice President and
Treasurer of the Company since its inception and as Assistant
Secretary since 1987. He has been employed by AEGON USA, Inc.
since 1981 in various financial and administrative positions
related to investment activities and is Senior Vice President and
Chief Financial Officer of AEGON USA Realty Advisors, Inc.
ROGER L. SCHULZ, age 34, has served as Controller and Assistant
Secretary of the Company since January, 1996. He has been
employed by AEGON USA, Inc. since 1985 in real estate accounting
and financial reporting positions and since November, 1995, as
Manager - Financial Reporting for AEGON USA Realty Advisors, Inc.
Item 11. Executive Compensation
The officers and Directors of the Company who are also affiliated
with AEGON USA Realty Advisors, Inc. (see "Item 10 Directors and
Executive Officers of the Registrant") receive no remuneration
for their services to the Company other than reimbursement of
travel and other expenses incurred in connection with their
duties. During 1995, with the exception of Messrs. Falconio and
Kafes, each Director received an annual fee of $5,000 plus $750
for each Board meeting attended. There is an additional fee of
$500 for any special activity (property inspection, committee
meeting, etc.) unless such activity coincides with a meeting of
the Board of Directors. Messrs. Falconio and Kafes have waived
all fees for their services as Directors so long as they continue
to be affiliated with AEGON USA Realty Advisors, Inc. (see "Item
10 Directors and Executive Officers of the Registrant). Total
fees paid to all Directors as a group were $23,250 for 1995.
(See "Item 13 Certain Relationships and Related Transactions" for
information regarding compensation to AEGON USA Realty Advisors,
Inc.)
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Security Ownership of Certain Benefical Owners
The following table sets forth information with respect to each
person and group (as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known by the Company to be the
beneficial owner of more than five percent (5%) of the
outstanding Shares of the Company as of March 1, 1996. Each such
owner has sole voting and investment powers with respect to the
Shares owned by it.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C>
Board of Trustees of Policemen and Firemen
Retirement System of the City of Detroit 150,000 6.68%
908 City-County Building
Detroit, Michigan 48226
AEGON USA, Inc. 584,567 26.03%
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
</TABLE>
AEGON USA, Inc. is an indirect, wholly-owned subsidiary of AEGON
N.V., a holding company organized under the laws of The
Netherlands which is controlled by Vereniging AEGON, an
association organized under the laws of The Netherlands. AEGON
USA, Inc. has sole voting and investment powers with respect to
the above Shares.
Security Ownership of Management
The following table sets forth the number of Shares of the
Company beneficially owned as of March 1, 1996 by each Director,
nominee, and officer and by all Directors, nominees and officers
as a group (10 persons).
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C>
Patrick E. Falconio(1) 584,567 26.03%
Edwin L. Ingraham(2) 300 *
James C. Kafes(3) 1,000 *
Edwin B. Lancaster(4) 1,500 *
Alex A. Meyer(5) 300 *
David L. Blankenship(6) 893 *
Maureen DeWald(7) 2,892 *
Jeffry Dixon 0 *
Alan F. Fletcher(8) 500 *
Roger L. Schulz(9) 400 *
Directors, nominees and officers
as a group 592,352 26.38%
</TABLE>
(1) Mr. Falconio may be deemed to be the beneficial owner
of 584,567 Shares owned beneficially by AEGON USA, Inc. by
reason of his position as Chief Investment Officer of AEGON
USA, Inc. (see "Item 10 Directors and Executive Officers of
the Registrant"). Mr. Falconio disclaims beneficial ownership
of such Shares.
(2) Mr. Ingraham is the direct owner of 300 Shares held
jointly with his wife and shares voting and investment powers
with respect to such Shares.
(3) Mr. Kafes is the direct owner of 1,000 Shares for
which he has sole voting and investment powers.
(4) Mr. Lancaster is the direct owner of 1,500 Shares held
jointly with his wife and shares voting and investment powers
with respect to such Shares.
(5) Mr. Meyer is the direct owner of 300 Shares for which
he has sole voting and investment powers.
(6) Mr. Blankenship may be deemed to be the beneficial
owner of 893 Shares held in an individual retirement account
owned by his wife for which she has sole voting and investment
powers through the custodian.
(7) Ms. DeWald is the direct owner of 2,892 Shares for
which she has sole voting and investment powers.
(8) Mr. Fletcher is the direct owner of 200 Shares for
which he has sole voting and investment powers and is the
beneficial owner of 300 Shares held in an individual
retirement account for which he has sole voting and investment
powers through the custodian.
(9 Mr. Schulz is the direct owner of 400 Shares for which
he has sole voting and investment powers.
*Such holdings represent less than one percent of the
outstanding Shares.
Item 13. Certain Relationships and Related Transactions
The Company has no employees and has contracted with various
subsidiaries of AEGON USA, Inc., an indirect, majority-owned
subsidiary of AEGON N.V., to provide the Company with
administrative, advisory, acquisition, divestiture, property
management, leasing and shareholder services. A description of
the relationships between AEGON USA, Inc. and its various
subsidiaries and of such subsidiaries' agreements with the
Company follows. The description of the agreements is qualified
in its entirety by reference to the terms and provisions of such
agreements. AEGON USA, Inc. is the beneficial owner of 584,567
shares of the Company as of March 1, 1996 which represents 26.03%
of the outstanding shares of the Company. AEGON USA, Inc. has
sole voting and investment powers with respect to the above
shares. (See "Item 12 Security Ownership of Certain Beneficial
Owners and Management" for a description of the relationship
between AEGON USA, Inc. and AEGON N.V.)
Administrative and Advisory Services
AEGON USA Realty Advisors, Inc. ("AEGON Advisors"), a wholly-
owned subsidiary of AEGON USA, Inc., provides administrative,
advisory, acquisition and divestiture services to the Company
pursuant to an Administrative and Advisory Agreement (the
"Advisory Agreement"). The term of the Advisory Agreement is for
one (1) year and is automatically renewed annually for an
additional year subject to the right of either party to cancel
the Advisory Agreement upon 60 days written notice.
Under the Advisory Agreement, AEGON Advisors is obligated to:
(a) provide office space and equipment, personnel and general
office services necessary to conduct the day-to-day operations of
the Company; (b) select and conduct relations with accountants,
attorneys, brokers, banks and other lenders, and such other
parties as may be considered necessary in connection with the
Company's business and investment activities, including, but not
limited to, obtaining services required in the acquisition,
management and disposition of investments, collection and
disbursement of funds, payment of debts and fulfillment of
obligations of the Company, and prosecuting, handling and
settling any claims of the Company; (c) provide property
acquisition and disposition services, research, economic and
statistical data, and investment and financial advice to the
Company; and (d) maintain appropriate legal, financial, tax,
accounting and general business records of activities of the
Company and render appropriate periodic reports to the directors
and shareholders of the Company and to regulatory agencies,
including the Internal Revenue Service, Securities and Exchange
Commission, and similar state agencies.
AEGON Advisors receives fees for its administrative and advisory
services as follows: (a) a monthly base fee of 1/12 of 3/4 of 1%
of the estimated current value of real estate plus 1/12 of 1/4 of
1% of the estimated current value of all assets of the Company
other than real estate, and a subordinated incentive fee equal to
15% of the gain on property sold (as defined). No subordinated
incentive fee is payable until cumulative cash distributions have
been paid to shareholders representing the total proceeds raised
by the Company in its initial public offering (less certain
amounts) plus an annual 10% cumulative return on such amount.
The incentive fee is further limited to 15% of the remaining gain
from the sale of the Company's assets after payment to
shareholders of the original issue price plus an annual 6%
cumulative return on the original issue price. Notwithstanding
the foregoing, the combined base and incentive fees for any year
cannot exceed the amount permitted by the limitation on operating
expenses as provided in the Company's Articles of Incorporation,
which limitation is the greater of 2% of the Company's average
invested assets or 25% of its net income for such year. In
addition, AEGON Advisors receives acquisition fees equal to 5% of
the gross purchase price of property acquired and disposition
fees equal to 3% of the gross sales price of property sold,
subject to certain limitations. The Company paid AEGON Advisors
$99,359 in administrative fees for 1995. No incentive,
acquisition or disposition fees were paid in 1995.
Management Services
AEGON USA Realty Management, Inc. ("AEGON Management"), a wholly-
owned subsidiary of AEGON Advisors, provides property management
and leasing services to the Company pursuant to a Management
Agreement. The term of the Management Agreement is for one (1)
year and is automatically renewed annually for an additional year
subject to the right of either party to cancel the Management
Agreement upon 60 days written notice. Under the Management
Agreement, AEGON Management is obligated to provide property
management services, which include leasing and collection of
rent, maintenance of books and records, establishment of bank
accounts and payment of expenses, maintenance and operation of
property, reporting and accounting to the Company regarding
property operations, and maintenance of insurance. All of the
duties of AEGON Management are to be fulfilled at the Company's
expense; provided, however, the Company is not required to
reimburse AEGON Management for personnel expenses other than for
on-site personnel at the properties managed. AEGON Management
receives fees for its property management services as follows: a
monthly management fee equal to 5% of the gross income from
properties managed and leasing fees of up to 6% of the rent to be
paid during the term of the lease procured. The Company paid
AEGON Management $120,013 in management fees and $18,809 in
leasing fees for 1995.
Shareholder Services
AEGON Advisors provides shareholder services to the Company
pursuant to a Shareholder Services Agreement (the "Agreement").
Under the Agreement, AEGON Advisors is obligated to provide
dividend disbursement, stock certificate preparation,
recordkeeping and other shareholder services for which AEGON
Advisors receives the following fees: a quarterly fee of $.375
per shareholder account based on the total number of active and
inactive accounts, a quarterly fee of $.50 per shareholder
account based on the number of active accounts, a fee of $1.00
per shareholder account for each dividend processed and such
other compensation as from time to time agreed upon by the
Company and AEGON Advisors. The Company paid AEGON Advisors
$10,281 in shareholder service fees for 1995. AEGON Advisors has
subcontracted for stock transfer and dividend disbursement
services with Boston EquiServe, L.P., a subsidiary of State
Street Bank and Trust Company.
AEGON Advisors also administers the Company's common stock
repurchase program and earns $.0625 per share for each share
repurchased. Under the program, the Company is authorized by the
Board of Directors to repurchase from time to time up to 200,000
shares. To date, 83,117 shares have been repurchased. No shares
were repurchased in 1995.
Other
On September 20, 1993, the Company purchased from Life Investors
Insurance Company of America, a wholly-owned subsidiary of AEGON
USA, Inc., a $600,000 participation in a promissory note secured
by a mortgage on real estate. The note matures in 2000 and the
participation yields 8.25% to the Company. The Company received
$8,065 in principal and $48,388 in interest from the mortgage
participation in 1995.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of Documents
1. Financial Statements.
The following financial statements are included in Item 8:
Balance Sheets, December 31, 1995 and 1994.
Statements of Operations, Years Ended December 31, 1995, 1994, and 1993.
Statements of Cash Flows, Years Ended December 31, 1995, 1994, and 1993.
Statements of Shareholders' Equity, Years Ended December 31, 1995, 1994,
and 1993.
Notes to Financial Statements.
Report of Independent Auditors.
2. Financial Statement Schedules.
Financial Statement Schedules. (Included in Notes to Financial Statements)
(III) Schedule of Real Estate and Accumulated Depreciation. Note 3
(IV) Schedule of Mortgage Loans on Real Estate. Note 4
All other schedules have been omitted because they are not
required, or because the required information, where
material, is included in the financial statements or
accompanying notes.
Part IV (continued)
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
(a) List of Documents (continued)
3. Exhibits
(3) Articles of Incorporation dated September 14, 1989,
incorporated herein by reference to Item 14(a)3, Exhibit (3)
of Form 10-K for the year ended December 31, 1989.
(3.1) Bylaws, as amended July 24, 1991, incorporated herein by
reference to Item 14(a)3, Exhibit (3.1) of Form 10-K for
the year ended December 31, 1991.
(4) Article III of the Articles of Incorporation dated
September 14, 1989, incorporated herein by reference
to Item 14(a)3, Exhibit (4) of Form 10-K for the year
ended December 31, 1989.
(4.1) Articles II, V, and VII of the Bylaws, as amended
July 24, 1991, incorporated herein by reference to
Item 14(a)3, Exhibit (4.1) of Form 10-K for the year
ended December 31, 1991.
(10) Administrative and Advisory Agreement dated October 1, 1989,
incorporated herein by reference to Item 14(a)3, Exhibit
(10) of Form 10-K for the year ended December 31, 1989.
(10.1) Management Agreement dated October 1, 1989, incorporated
herein by reference to Item 14(a)3, Exhibit (10.1) of
Form 10-K for the year ended December 31, 1989.
(10.2) Shareholder Services Agreement dated October 1, 1989, as
amended January 1, 1992 and assigned January 27, 1992,
incorporated herein by reference to Item 14(a)3, Exhibit
(10.2) of Form 10-K for the year ended December 31, 1991.
(b) No reports on Form 8-K were filed during the fourth quarter of 1995.
(c) The required exhibits applicable to this section are listed in
Item 14(a)3.
(d) There are no financial statement schedules applicable to this section.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
CEDAR INCOME FUND, LTD.
Patrick E. Falconio Alan F. Fletcher
Chairman of the Board Vice President and Treasurer
(principal executive officer) (principal financial officer)
Roger L. Schulz
Controller
(principal accounting officer)
March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and as of the date indicated.
Patrick E. Falconio Edwin B. Lancaster
Director Director
Edwin L. Ingraham Alex A. Meyer
Director Director
James C. Kafes
Director
March 25, 1996
EXHIBIT INDEX
Exhibit
Item Title or Description
(3) Articles of Incorporation dated September 14, 1989, incorporated
herein by reference to Item 14(a)3, Exhibit (3) of Form 10-K for
the year ended December 31, 1989.
(3.1) Bylaws, as amended July 24, 1991, incorporated herein by reference
to Item 14(a)3, Exhibit (3.1) of Form 10-K for the year ended
December 31, 1991.
(4) Article III of the Articles of Incorporation dated September 14,
1989, incorporated herein by reference to Item 14(a)3, Exhibit (4)
of Form 10-K for the year ended December 31, 1989.
(4.1) Articles II, V, and VII of the Bylaws, as amended July 24, 1991,
incorporated herein by reference to Item 14(a)3, Exhibit (4.1)
of Form 10-K for the year ended December 31, 1991.
(10) Administrative and Advisory Agreement dated October 1, 1989,
incorporated herein by reference to Item 14(a)3, Exhibit (10)
of Form 10-K for the year ended December 31, 1989.
(10.1) Management Agreement dated October 1, 1989, incorporated herein
by reference to Item 14(a)3, Exhibit (10.1) of Form 10-K for
the year ended December 31, 1989.
(10.2) Shareholder Services Agreement dated October 1, 1989, as amended
January 1, 1992 and assigned January 27, 1992, incorporated herein
by reference to Item 14(a)3, Exhibit (10.2) of Form 10-K for the
year ended December 31, 1991.
All Exhibit Items are omitted from this report, but a copy will be furnished
upon payment of $13.00, representing a charge of fifty cents ($.50) per
page, accompanying a written request to Roger L. Schulz, Controller, Cedar
Income Fund, Ltd., 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499.
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