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 December 31, 1999
Commission file number 0-14510
UNI-INVEST (U.S.A.), LTD.
(Exact name of registrant as specified in its charter)
Maryland 42-1241468
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
44 South Bayles Avenue, #304, Port Washington, NY 11050
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 767-6492
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
- - ----------------------------- ------------------------
Common Stock, $0.01 par value The NASDAQ Stock Market
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. [ ]
Based on the closing sales price on March 8, 2000 of $6.1875 per share, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $3,726,657.
The number of shares outstanding of the registrant's common stock $.01 par value
was 942,651 on March 8, 2000.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
TABLE OF CONTENTS
Form 10-K
Item No. Report Page
- - -------- -----------
PART I
1. Business........................................................... I-1
2. Properties......................................................... I-5
3. Legal Proceedings.................................................. I-10
4. Submission of Matters to a Vote of Security Holders................ I-10
PART II
5. Market for Registrant's Common Equity and Related Stockholders'
Matters................................................... II-1
6. Selected Financial Data............................................ II-3
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. II-4
7(a). Quantitative and Qualitative Disclosures about Market Risk......... II-9
8. Financial Statements and Supplemental Data......................... II-10
9. Changes in, and Disagreements with Accountants on, Accounting
and Financial Disclosure.................................. II-33
PART III
10. Directors and Executive Officers of the Registrant................. III-1
11. Executive Compensation............................................. III-2
12. Security Ownership of Certain Beneficial Owners and
Management................................................ III-3
13. Certain Relationships and Related Transactions..................... III-4
PART IV
14. Financial Statements and Schedules, Exhibits and Reports on
Form 8-K................................................... IV-1
15. Signatures.......................................................... IV-3
Part I.
Item 1. Business
Cedar Income Fund, Ltd. ("Old Cedar") was incorporated in Iowa on December 10,
1984. Old Cedar's public offerings of Common Stock, completed in 1986 and 1988,
raised approximately $19 million. Old Cedar 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. The
mortgage loan participation has since been liquidated.
On April 2, 1998, Cedar Bay Company, ("CBC") a New York general partnership,
pursuant to a tender offer to purchase all of the outstanding shares of Common
Stock of Old Cedar for $7.00 per share in cash (the "Offer"), acquired
1,893,038.335 shares of Old Cedar's outstanding Common Stock, $1.00 par value
per share ("Old Common Stock"), representing approximately 85% of the
then-outstanding shares.
On June 26, 1998, Old Cedar merged with and into Cedar Income Fund, Ltd., a
Maryland corporation, (the "Company") newly formed as a wholly-owned subsidiary
of Old Cedar. Immediately thereafter, the Company assigned substantially all of
its assets and liabilities to a newly-formed Delaware limited partnership, Cedar
Income Fund Partnership, L.P. (the "Operating Partnership"), in exchange for an
aggregate of 2,245,411 operating partnership units of the Operating Partnership
("Units"), which constituted the sole general partnership interest and all of
the limited partnership interests in the Operating Partnership. After such
assignment, CBC exchanged 1,703,300 shares of the Company's Common Stock, $0.01
par value per share ("New Common Stock"), for 1,703,300 limited partnership
units in the Operating Partnership owned by the Company. The shares of New
Common Stock were cancelled by the Company upon their exchange by CBC. Following
these transactions, CBC owned 189,737 shares of New Common Stock, aggregating
approximately 35% of the then issued and outstanding shares of New Common Stock.
The Company, in the spring of 1999, received notice from The NASDAQ Stock Market
("NASDAQ") stating that the "public float" of common stock of the Company was
less than the minimum requirements of NASDAQ, and that, accordingly, the
Company's shares would be delisted if the company failed to satisfy such
requirements and to demonstrate its ability to continue to comply with such
requirements. A hearing was subsequently held before a NASDAQ Listing
Qualifications Panel (the "Panel") in September 1999, and the Company made
certain filings required by the Panel.
On or about November 15, 1999, as a result of the private placement of 250,000
shares of newly issued Common Stock of the Company with a number of private
investors at $4.50 per share (which price as of the date of issue was higher
than the quoted price for such shares on NASDAQ) as set forth in such filings,
the "public float" of shares of Common Stock of the Company became, to the best
of its knowledge, approximately 600,000 shares. Accordingly, the Company has now
fully complied with the NASDAQ minimum "public float" requirements. None of the
new shareholders, all of whom are resident outside the United States, owns,
directly or indirectly, more than 10% of the shares of Common Stock of the
Company.
I-1
Item 1: Business (continued)
As of November 5, 1999, a Subscription Agreement was entered into by and between
the Company and Uni-Invest Holdings (U.S.A.) B.V., pursuant to which Uni-Invest
Holdings (U.S.A.) B.V. acquired on or about November 15, 1999, through a private
placement, 150,000 shares of Common Stock of the Company at $4.50 per share. As
a result of such placement and the other private placements described above, as
of November 15, 1999, Uni-Invest Holdings (U.S.A.) B.V. owned approximately 16%
of the Common Stock of the Company. CBC's Common Stock ownership was
correspondingly reduced from approximately 35% to approximately 20%. Also in
accordance with the agreement, and pursuant to Board of Directors' approval and
shareholders' approval at a special meeting held on February 24, 2000, the
Company changed its name to "Uni-Invest (U.S.A.), Ltd." effective as of February
29, 2000. The name of the Operating Partnership was correspondingly changed to
Uni-Invest (U.S.A.) Partnership, L.P. as of February 29, 2000.
At a Board meeting held on November 18, 1999 the following persons were elected
to the positions respectively set forth below:
Richard Homburg Chairman of the Board
Louis Ph. Marcus Treasurer
Lawrence W. Freeman, Esq. Assistant Secretary
In addition, Uni-Invest Holdings (U.S.A) B.V. and CBC entered into a
Stockholders' Agreement effective as of the issuance of stock pursuant to the
Subscription Agreement, wherein they agreed, among other things, to hold their
shares for a period of not less than five years and setting forth certain
provisions for the orderly sale or other disposition of shares under certain
circumstances, and also to provide certain other arrangements common to such
stockholders' agreements. The parties further agreed to vote their shares in
favor of a slate of directors pursuant to which each of the respective parties
would designate two persons for election as directors of a board of directors
which would also include not less than three outside directors.
The Stockholders' Agreement also calls for the creation by the Board of
Directors, as reconstituted, of an executive committee of the Board, the members
of which would be Richard Homburg and Leo S. Ullman.
Further, the Subscription Agreement, provides for the transfer of 50% of the
stock of Cedar Bay Realty Advisors, Inc. ("CBRA") to an affiliate of Uni-Invest
Holdings (U.S.A.) B.V. and the participation by such affiliate of Uni-Invest
Holdings (U.S.A.) B.V. generally in any increase in income of CBRA attributable
to growth of advisory fees arising from services rendered to the Company and to
the Operating Partnership.
The Subscription Agreement also provides for an affiliate of Uni-Invest Holdings
(U.S.A.) B.V. to acquire, without additional consideration, a 50% interest in
each of SKR Management Corp. and Brentway Management LLC, which companies shall
be merged, or otherwise acquired by CBRA. Further, the Subscription Agreement
provides for Uni-Invest Holdings (U.S.A.) B.V. to succeed HVB Capital Markets,
Inc. ("HVB") as financial advisor to the Company, after the expiration or other
termination of the then existing agreement with HVB Capital Markets, Inc. HVB
agreed to terminate the HVB Agreement effective as of December 31, 1999.
I-2
Item 1. Business (continued)
Uni-Invest Holdings (U.S.A) B.V. and Leo S. Ullman have entered into a
Stockholders' Agreement with respect to ownership of CBRA. That Agreement, in
general, also provides for a five year holding period and other provisions
common to such stockholder agreements.
The Subscription Agreement also calls for the guarantee by Uni-Invest Holdings
(U.S.A.) B.V. of the funding on or before May 15, 2000 of $7.5 million in
exchange for shares of the Company and/or Units in the Operating Partnership at
$4.50 per share/ Unit. The proceeds of such contribution, together with $7.5
million to be raised by the Company from other private placements of shares of
stock or Units, from refinancing of its existing properties and/or the sale of
its interests in one or more of the existing properties, would be used to
purchase three anchored strip shopping centers aggregating more than 700,000
square feet, substantially fully leased with many creditworthy tenants, in
Harrisburg (The Point Shopping Center), Lancaster (Golden Triangle Shopping
Center) and Philadelphia (Red Lion Shopping Center), Pennsylvania from CBC or
entities affiliated therewith. The aggregate purchase price for the three
properties at $15 million plus closing adjustments, where applicable, above
existing first mortgage liabilities estimated at approximately $37 million at
this time, will be subject to third-party appraisals and "fairness" opinions by
a reputable independent investment banking firm. The purchase agreements to
reflect the foregoing have not yet been concluded or executed by the parties.
It has also been agreed that CBC or its affiliates will contribute to the
Operating Partnership upon sale of the three Pennsylvania Shopping Center
Properties described above, $3 million in cash in exchange for certain Units
with certain priority payments at 8%.
Finally, the Company will receive an option to acquire a majority ownership
interest in a certain shopping center property of approximately 620,000 square
feet and adjacent land in Pleasantville, New Jersey, subject to certain
contingencies.
The sale of the three shopping centers described above is subject to a closing
on or before May 15, 2000 and is subject to execution of final purchase
agreements and agreement on closing adjustments, due diligence reviews, and
consents, where applicable, of lenders and partners.
There can be no assurances that the closing of these transactions will in fact
be concluded. Among other things, there can be no assurances that the Company
will be able to raise its portion of the purchase price, that the due diligence
reviews will be satisfactory or that the necessary consents will in fact be
obtained. In the event that the funding by Uni-Invest Holdings (U.S.A.) B.V.
does not occur, the Company has the right to unwind the entire transaction with
Uni-Invest Holdings (U.S.A.) B.V. , subject to certain conditions.
I-3
Item 1. Business (continued)
The Company has retained a national brokerage company to offer the Jacksonville,
Florida (Southpoint) office facility for sale to a qualified purchaser at a
price exceeding book value. Further, the Company has applied for a $10 million
line of credit from a national commercial bank and has received and signed the
commitment letter for such credit line to be secured by first mortgage liens on
properties of the Operating Partnership. The proceeds of the sale of Southpoint
if concluded on a timely basis on terms acceptable to the Company, and/or the
proceeds of drawdowns under the commercial bank line of credit, as well as
deposits of cash held by the Company and the Operating Partnership would be
available to meet the $7.5 million (plus closing costs, if any) required of the
Company pursuant to the Subscription Agreement.
CBRA has agreed to defer until termination of its services as investment advisor
to the Company, any acquisition fees to which it would otherwise be entitled
with respect to the acquisition by the Company or the Operating Partnership of
interests in the properties described above from CBC or its affiliates.
Uni-Invest Holdings (U.S.A.) B.V. is a private company organized and existing
under the laws of the Netherlands. Its stock is owned primarily by or for the
benefit of Richard Homburg and members of his family.
Mr. Homburg, a Canadian citizen, resident in the Netherlands, is Chairman and
Chief Executive Officer of Uni-Invest N.V., a publicly-traded real estate fund
organized in the Netherlands and listed on the Amsterdam Stock Exchange.
Uni-Invest N.V., which invests virtually exclusively in Netherlands real estate,
has grown since Mr. Homburg's involvement in 1991 from approximately $90 million
in assets to an asset value of approximately $1.7 billion at this time.
Uni-Invest N.V. distributes substantially all of its income and has more than 57
million shares outstanding. Its earnings, share values and the liquidity of its
stock on the Amsterdam Stock Exchange have increased substantially from 1991 to
the present. Uni-Invest N.V.'s real estate investments in the Netherlands
include retail, office, industrial and residential (apartment) properties.
Substantial gains have generally been realized annually by Uni-Invest N.V. from
the sale of properties from its portfolio as part of its investment strategy.
Uni-Invest N.V. generally manages its own properties and generally does not
engage in the development of properties.
Mr. Homburg and his family also control, directly or indirectly, the Homburg
Uni-Corp group of companies which own certain commercial, office, retail,
warehouse and residential properties in certain western states of the U.S. and
Canada. Uni-Invest Canada Ltd, a Canadian real estate investment company
affiliated with Uni-Invest Holdings (U.S.A.) B.V. and Uni-Invest N.V., and in
turn controlled by a Netherlands company, Uni-Invest Canada N.V., owns a number
of properties in Canada. Management of Uni-Invest N.V. has issued a press
release announcing that it intends to take over the interest of Uni-Invest
Canada N.V. in Uni-Invest Canada, Ltd. in 2000 and to distribute the shares to
shareholders of Uni-Invest N.V. in 2001 as a dividend after obtaining a listing
on the Toronto Stock Exchange.
I-4
Item 1. Business (continued)
Currently, a Unit in the Operating Partnership and a share of Common Stock of
the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
The Company operates as a real estate investment trust ("REIT"). To qualify as a
REIT under applicable provisions of the Internal Revenue Code of 1986, as
amended, and Regulations thereto, the Company must have a significant percentage
of its assets invested in, and income derived from, real estate and related
sources. The Company's objectives are to provide to its shareholders 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.
Until February 29, 2000, the Company's shares were traded on NASDAQ under the
symbol "CEDR". Effective as of February 29, 2000 the Company changed its symbol
to "UNII" to reflect the change, also effective as of that date, of the name of
the Company and of the Operating Partnership to Uni-Invest (U.S.A.), Ltd. and
Uni-Invest (U.S.A.) Partnership, L.P., respectively.
The Company, through its Operating Partnership, owns and operates three office
properties aggregating approximately 224,000 square feet, located in
Jacksonville, Florida, Salt Lake City, Utah and Bloomington, Illinois; and a 50%
undivided interest in a 74,000 square foot shopping center property located in
Louisville, Kentucky.
CBRA serves as investment advisor to the Company pursuant to an Administrative
and Advisory Agreement with the Company on terms substantially similar to the
terms of that agreement previously in effect between Old Cedar and AEGON USA
Realty Advisors, Inc. ("AEGON") of Cedar Rapids, Iowa, which served as
investment advisor to the Company from formation until April 3, 1998. Brentway
Management LLC ("Brentway" and/or "Property Manager"), a New York limited
liability company provides property management services for the Company's
properties pursuant to a management agreement with the Company on substantially
the same terms as the agreement previously in effect with AEGON. Brentway and
CBRA are both affiliates of CBC, SKR Management Corp. and Leo S. Ullman. Leo S.
Ullman is President of the Company.
Item 2. Properties
Retail Property
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
I-5
Item 2. Properties (continue)
Insurance Company of America ("Life Investors"), an affiliate of the Company's
former management company and advisor. 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 $2,963,674. Subsequent improvements have increased the Company's
recorded cost to $3,746,616.
Germantown represented 20% of the Company's total assets as of December 31,
1999, and provided 16% of total revenue. At December 31, 1999, Germantown was
98% leased to ten tenants under leases having a minimum term of one year (not
including renewal options). Annual base rents range from $7.94 to $14.73 per
square foot. 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-year
options to renew at the same rent. Winn Dixie provided 14% of the Company's 1999
revenue.
Rental income is expected to be slightly higher in 2000 due to the leasing in
the fourth quarter of 1999 of 1,563 square feet which had been vacant since
1998. Approximately $14,000 in leasing costs are expected as a result of the
potential leasing of 1,600 square feet that is currently vacant.
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 high
occupancy rates experienced in the area, as well as the location attributes of
the Germantown site. Germantown's primary market area is mostly developed,
thereby limiting the possibility of additional retail development.
The Company intends to initiate the "buy-sell" provision in its
tenancy-in-common agreement with Life Investors prior to June 30, 2000.
Accordingly, the Company expects either to purchase Life Investors' 50% interest
in the property or to sell its 50% interest in the property to Life Investors in
2000.
Office Properties
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 in cash. Capital
improvements have increased the property's recorded cost to $ 2,715,317.
Corporate Center East represented 14% of the Company's total assets at December
31, 1999, and provided 14% of 1999 revenue. At December 31, 1999, Corporate
Center East was 100% leased to four tenants under leases having a minimum
remaining term of two months (not including renewal options). Annual base rents
range from $10.00 to $13.00 per square foot. One lease, representing 10% of the
square footage at Corporate Center East, expires in June
I-6
Item 2. Properties (continued)
2000. The space will be vacated. Goshen Fidelity Inc., Corporate Center East's
largest tenant, occupied 12,226 square feet under a lease which expired in
February 2000. The tenant has surrendered 3,917 sf and renewed the lease for the
remaining 8,309 square feet for a term of three years at a slightly higher
average rent. Rental receipts from Goshen Fidelity's lease provided 6% of the
Company's 1999 revenue. Estimated leasing costs for the 6,507 square feet (26%)
of expected vacancy are estimated to be approximately $100,000 in calendar year
2000. The property is subject to competition from several office properties 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 $4,651,335. 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. The outstanding mortgage
balance at December 31, 1999 was $1,346,750.
Broadbent consists of eight single-story buildings totaling 119,500 square feet,
approximately half of which is office use and the other half of which is
service/warehouse, on a 12.5 acre site which includes parking for approximately
320 vehicles. Broadbent represented 24% of the Company's total assets at
December 31, 1999, and provided 29% of 1999 revenue. At December 31, 1999,
Broadbent was 81% occupied by 46 tenants under leases having a minimum term of
one month (not including renewal options) with annual base rents ranging from
$3.64 to $9.00 per square foot. Leases representing 18% of the square footage of
Broadbent expire during 2000.
Cyclopss Corporation ("Cyclopss"), Broadbent's largest tenant representing 2% of
the Company's 1999 revenue, occupied 13,350 square feet under a lease which
originally expired in April 2000. Due to financial constraints, Cyclopss reduced
its leased space to 9,150 square feet effective January 1, 1999 and extended its
lease to December 2001. In the event the tenant's financial uncertainties are
not satisfactorily resolved, the revenues at this property will in all
likelihood be adversely affected, as Cyclopss represents 7% of projected 2000
revenue for Broadbent. In addition to the potential lost rent, the Company would
expect to incur tenant improvement and leasing commission costs in order to
secure a replacement tenant. Broadbent's second largest tenant is Purser
Associates with 7,500 square feet.
Other national tenants in Broadbent include: IBM, Pitney Bowes, USA Today
(Gannett), Mosler Alarm Systems, and Midwest Industrial Tools.
I-7
Item 2. Properties (continued)
Mergers and consolidations among larger and national companies serving the
greater Salt Lake market have contributed to increased turnover in the small
tenant category at Broadbent. The competition for smaller (under 5,000 square
feet) tenants increased dramatically in 1999 as a result of new development.
Further, many new, larger developments unable to lease large space began
dividing buildings into smaller increments and offering attractive build-outs
and competitive rates in brand new facilities.
Demand for low-cost office space in the Broadbent sub-market has prompted the
Company to pursue warehouse to office conversions where feasible. A proposal to
convert one of the eight buildings to 100% office space to secure a national
tenant is currently under consideration. Higher lease rates and long-term
stability are overwhelming factors in pursuing this office conversion strategy.
According to Colliers Commerce CRG, The Salt Lake City industrial market
vacancy was 7.38% for the year ended 1999 as compared to 7.72% for the year
ended 1998. Vacancy remains highest for smaller requirements (less than 5,000
square feet). A stable industrial market is expected in 2000. Less speculative
construction is predicted.
Southpoint Parkway Center
Jacksonville, Florida
Southpoint Parkway Center in Jacksonville, Florida ("Southpoint") was acquired
on May 6, 1986 for $6,505,495 in cash. Capital expenditures made since the
purchase date have increased the property's recorded cost to $8,072,754.
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 42% of the Company's total assets at
December 31, 1999, and provided 40% of its revenue.
At December 31, 1999, the property was 99% leased to nine tenants with remaining
terms ranging from three months to six years (not including renewal options) and
annual base rents ranging from $10.50 to $13.71 per square foot.
The General Services Administration ("GSA"), a United States government agency,
occupies 40,447 square feet in Southpoint under a ten-year lease which expires
in December 2001, which lease grants to the tenant a right to terminate at any
time after 90 days' prior written notice. The Company is aware that the same
government agency that occupies 97% of the GSA premises at Southpoint has taken
100,000 square feet of space in the downtown Jacksonville market area to be
occupied as of April 2000. After due inquiry, the Company has been advised that
the Southpoint location will not be affected. However, there can be no
assurances with respect thereto. 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 $8,072,723). Rental receipts from the
GSA provided 21% of the Company's 1999 revenue.
I-8
Item 2. Properties (continued)
A lease for 3,317 square feet (4%) expires in September 2000. The Company
anticipates that such tenant will exercise its option to renew for two years. A
medical tenant in 2,516 square feet has vacated the premises but continues to
pay rent; the lease term expires as of July 2000. The Company is actively
marketing such premises.
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 had resulted in improved office
occupancies and stabilized rents in the Southpoint market area during 1997 and
the first two quarters of 1998. However, during the latter part of 1998,
Southpoint had experienced a further softening of the rental market. Late in the
third quarter of 1998, a major healthcare firm relocated from the Southpoint
market area to the downtown area, resulting in approximately 200,000 vacant
square feet. In addition, new construction, resulting in approximately 500,000
square feet of new office space, was available late in the third quarter of
1999.
In order to meet the Company's obligation to raise $7.5 million pursuant to the
Subscription Agreement, Southpoint is actively being marketed for sale by a
national brokerage firm on behalf of the Company.
The Company's properties are summarized in the table below.
Occupancy 1999 Revenue
Size at Lease --------------------
Name and Location (Sq. Ft.) December 31, 1999 Expirations Amount Percent
- - ------------------------------------------------------------------------------------------------------
Germantown Square 74,267 98% 2000-2008 $399,218 16%
Louisville, Kentucky
Corporate Center East 25,200 100% 2000-2009 352,177 14
Bloomington, Illinois
Broadbent Business Center 119,500 81% 2000-2004 719,317 29
Salt Lake City, Utah
Southpoint Parkway Center 79,010 99% 2000-2006 1,018,246 41
-------- ---------- ---
Jacksonville, Florida
297,977 $2,488,958 100%
======= ========== ====
I-9
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceeding which, in the opinion
of management, is material to the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of stockholders was held on February 24, 2000 for the purpose
of authorizing and approving an amendment to the Articles of Incorporation of
the Company to change the Company's name to Uni-Invest (U.S.A.), Ltd. and to
approve the issuance of capital stock of the Company pursuant to the
Subscription Agreement dated as of November 5, 1999 by and between the Company
and Uni-Invest Holdings (U.S.A.) B.V., a Netherlands closed company.
Of the 942,651 shares of common stock outstanding and entitled to vote at the
meeting, 721,270.536 shares of common stock were represented in person or by
valid proxy, thus constituting a quorum. The following votes were duly cast
resulting in the approval of the proposals:
For: 682,411.385
Against: 33,577.023
Abstentions: 5,282.128
Broker/Non Votes: 221,770.360
I-10
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 "REIT taxable income",
as defined in the Internal Revenue Code, to continue qualification as a real
estate investment trust. In 1999, the Company paid dividends of $0.10 per share
in March, June, September and December, totaling $0.40 per share. While the
Company expects to continue to pay dividends to shareholders, there can be no
assurance of future dividends, as they are dependent upon earnings, cash flow,
the financial condition of the Company and other factors. It should be noted
that 1999 dividend payments were substantially greater than both the Company's
net income and the amounts required to be distributed to continue qualification
as a real estate investment trust.
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.
Dividend Character
1999 1998 1997
------------------------------------------------------------------
Ordinary
income 43.57% 57.34% 66.23%
Nontaxable
return of
capital 56.43% 42.66% 33.77%
Total 100.00% 100.00% 100.00%
Dividends
paid, per share $.40 $.40 $.40
Market Information
As of June 26, 1998, CBC, which had owned from April 2, 1998, 1,893,038 of the
2,245,411 shares of common stock, exchanged 1,703,300 of such shares for
Operating Partnership units of equal number. The shares were cancelled, and,
accordingly, there were 542,111 shares outstanding to 522 shareholders of record
at December 31, 1998. During November 1999, 400,000 shares of New Common Stock
were issued through private placements to eight shareholders. There were 942,651
shares of common stock outstanding to 488 shareholders of record at December 31,
1999. The Company's shares began trading on NASDAQ under the symbol CEDR on
December 17, 1986. As of February 29, 2000 the Company's symbol was changed to
UNII. As of March 28, 2000 the Company's last reported sale of common stock was
$6.1875 as reported by Wedbush/Morgan Securities, Inc, Newport Beach,
II-1
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(continued)
California and Herzog, Heine, Geduld, Inc., New York, New York, the principal
market makers for shares of the Company. No shares were in fact traded on that
date. Price for shares of the Company reflect quotations between dealers without
adjustment for retail mark-ups, mark-downs or commissions and do not necessarily
represent actual transactions.
Market Price Range
Quarter Over-the-Counter Sales Prices
Ended High Low Close
--------------------------------------------------------
1999
March 31 $6.25 $5 $4-7/8
June 30 5 4 4.5
September 30 4-3/4 4-1/4 4-9/32
December 31 5-3/4 3-1/4 5-3/4
1998
March 31 $7 $6-9/16 $6-13/16
June 30 7-3/8 2-1/2 5-1/8
September 30 5-3/4 4-3/4 4-3/4
December 31 7-1/16 4-3/4 6
II-2
Item 6. Selected Financial Data
Years ended December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating Data
REVENUE
Rents $2,413,958 $2,505,372 $2,386,549 $2,121,866 $2,400,273
Other 75,000 - - - -
Interest 26,329 59,653 81,309 95,160 86,884
---------- ---------- ---------- ---------- ----------
Total revenue 2,515,287 2,565,025 2,467,858 2,217,026 2,487,157
---------- ---------- ---------- ---------- ----------
EXPENSES
Property expenses:
Real estate taxes 258,597 262,761 233,160 239,324 228,006
Repairs and maintenance 273,253 252,320 385,806 255,621 318,633
Utilities 167,886 163,279 159,762 146,772 134,362
Management fee 124,358 126,520 130,084 128,053 139,924
Insurance 21,764 18,336 19,270 18,817 16,521
Other 124,883 73,737 92,396 95,517 94,985
---------- ---------- ---------- ---------- ----------
Property expenses, excluding
depreciation 970,741 896,953 1,020,388 884,104 932,431
Depreciation 492,716 480,410 462,687 436,739 436,276
---------- ---------- ---------- ---------- ----------
Total property expenses 1,463,457 1,377,363 1,483,075 1,320,843 1,368,707
Interest 127,700 130,197 136,137 138,209 140,096
Administrative fees 102,397 99,180 101,192 100,363 99,359
Directors' fees and expenses 97,872 100,703 49,417 42,382 44,228
Other administrative 343,901 587,684 197,851 53,613 65,146
---------- ---------- ---------- ---------- ----------
Total expenses 2,135,327 2,295,127 1,967,672 1,655,410 1,717,536
---------- ---------- ---------- ---------- ----------
Net income before limited partner's
interest in Operating Partnership 379,960 269,898 500,186 561,616 769,621
Limited partner's interest (315,490) (89,950) - - -
Net income $ 64,470 $ 179,948 $ 500,186 $ 561,616 $ 769,621
========== ========== ========== ========== ==========
Net income per share $ 0.11 $ 0.13 $ 0.22 $ 0.25 $ 0.34
========== ========== ========== ========== ==========
Dividends to shareholders $ 256,990 $ 557,504 $ 898,164 $ 898,164 $ 898,164
========== ========== ========== ========== ==========
Dividends to shareholders per share $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40
========== ========== ========== ========== ==========
Average number of shares outstanding 593,618 1,393,761 2,245,411 2,245,411 2,245,411
========== ========== ========== ========== ==========
Balance Sheet Data
Real estate before accumulated
depreciation $19,186,022 $18,903,767 $18,762,887 $18,462,902 $18,326,583
Real estate after accumulated
depreciation $13,995,197 $14,205,658 $14,545,188 $14,707,890 $15,008,310
Total assets $16,692,560 $15,323,315 $15,941,683 $16,270,149 $16,610,105
----------- ----------- ----------- ----------- -----------
Mortgage loan payable $ 1,346,750 $ 1,374,751 $ 1,400,259 $ 1,423,492 $ 1,444,654
Limited partner's interest in
consolidated Operating
Partnership $ 9,560,913 $10,309,316 $ - $ - $ -
Shareholders' equity $ 5,242,935 $ 3,289,520 $14,227,102 $14,625,080 $14,961,628
Other Data
Funds from operations
for the Operating Partnership(1) $ 872,676 $ 750,308 $ - $ - $ -
Funds from operations
for the Company (1) $ 196,276 $ 477,324 $ 962,873 $ 998,355 $ 1,205,897
Total properties square feet 297,977 297,977 297,977 297,977 297,977
Total properties percent leased 92% 95% 98% 89% 91%
(1) See "Management Discussion and Analysis" for discussion of funds from
operations.
II-3
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the historical
financial statements of Cedar Income Fund, Ltd. (the "Company") and related
notes.
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, projected
costs, projected savings, and plans and objectives of management. Such
forward-looking statements are identified by the use of forward-looking words or
phrases such as "anticipates," "intends," "expects," "plans," "believes,"
"estimates," or words or phrases of similar import. These forward-looking
statements are subject to numerous assumptions, risks, and uncertainties, and
the statements looking forward beyond 2000 are subject to greater uncertainty
because of the increased likelihood of changes in underlying factors and
assumptions. Actual results could differ materially from those anticipated by
the forward-looking statements.
In addition to factors previously disclosed and factors identified elsewhere
herein, certain other factors could cause actual results to differ materially
from such forward-looking statements. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by reference to
such factors.
The Company's forward-looking statements represent its judgement only on the
dates such statements are made. By making any forward-looking statements,
the Company assumes no duty to update them to reflect new, changed, or
unanticipated events or circumstances.
Results of Operations
The Company owns office, office/warehouse, and retail properties in four U.S.
cities. The Company's properties continue to compete with centers and office
buildings of similar size, tenant mix and location. As of December 31, 1999, the
combined lease occupancy of the Company's four properties was 92%. Operating
results in the forthcoming year will be influenced by the ability of current
tenants to continue paying rent, and the Company's ability to renew expiring
tenant leases and obtain new leases at competitive rental rates.
1999 Compared to 1998
The Company's net income for the year ended December 31, 1999 was $64,470 ($.11
per share) compared to $179,948 ($.13 per share) for the year ended December 31,
1998 (all per share amounts are on a basic and diluted basis). The decrease in
net income from 1998 to 1999 was primarily due to the issuance of Units in 1998.
Rental income was $2,413,958 in 1999 compared to $2,505,372 in 1998, a decrease
of $91,414 or 4%. Rental income at Broadbent Business Center decreased by
approximately $66,000 due to a 9% increase in vacancy with an average market
rent of $5.90 per square foot. Rental income at Corporate Center East decreased
by approximately $46,000. This was attributable to the establishment of the
Merrill Lynch tenancy in November 1999 and the resulting temporary loss of
rental income from the former tenant. This decline is offset, in part, by the
increase in rental income at the Southpoint Parkway Center.
II-4
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Other income increased by $75,000 due to termination fees received by a vacating
tenant at Corporate Center East.
Interest income decreased by approximately $33,000 due to the lower cash balance
available for investment and the liquidation in March 1998 of the mortgage
receivable formerly with Life Investors.
Property expenses, excluding depreciation, increased from $896,953 in 1998 to
$970,741 in 1999, an increase of 8%. This is due to an increase in property
administrative expenses resulting from increased legal expense at Broadbent
Business Center because of short term lease preparations and renewals. Repairs
and maintenance increased at Southpoint and Germantown.
Other administrative expenses decreased from $587,684 in 1998 to $343,901 in
1999. This decrease is attributable to legal and consulting fees in 1998, which
were not present in 1999. These 1998 expenses relate to the April 1998 tender
offer, the Company's subsequent reorganization, and the creation of the
Operating Partnership structure. Administrative costs of $343,901 consisted of
approximately $100,000 in legal, $100,000 in financial advisory fees, $67,000 in
accounting and $77,000 in printing, mailing and other corporate expenses.
1998 Compared to 1997
The Company's net income for the year ended December 31, 1998 was $179,948 ($.13
per share) compared to $500,186 ($.22 per share) for the year ended December 31,
1997. (All per share amounts are on a basic and diluted basis). The decrease in
net income from 1997 to 1998 was primarily due to legal and consulting expenses
incurred in connection with the tender offer which was completed in March 1998,
the Company's reorganization in June 1998, the payment of financial advisory
fees and other professional expenses, including those incurred in connection
with due diligence reviews for the proposed purchase of additional properties,
none of which were concluded. In addition, the decline in net income also
reflects the accounting treatment of the limited partner's interest not
applicable in prior years.
Rental income was $2,505,372 in 1998 compared to $2,386,549 in 1997, an increase
of $118,833 or 5%. Rental income at Corporate Center East in Bloomington,
Illinois increased by approximately $75,000 due to the full year impact of
revenue (i.e. no vacancy and no rent concessions) from certain space vacant
since 1995. Corporate Center East was 100% occupied in 1998. Rental income
increased at Southpoint Parkway Center in Jacksonville, Florida by $44,000 (8%)
due to an increase in tenant expense recoveries and increased base rent from a
large tenant. Rental income at Broadbent Business Center in Salt Lake City, Utah
was relatively unchanged from the prior year. Germantown Square in Louisville,
Kentucky experienced a decrease in rental income due to decreased expense
recoveries.
Interest income decreased by approximately $22,000 due to the liquidation in
March 1998 of the mortgage receivable formerly with Life Investors. Interest was
earned for one quarter in 1998 as compared to the full year in 1997.
Property expenses, excluding depreciation, decreased from $1,020,388 in 1997 to
$896,953 in 1998, a decrease of 12%. The decrease in property expenses was
primarily due to substantial
II-5
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
repair and maintenance costs resulting from tenant remodeling and parking lot
repairs incurred in 1997, but not required in 1998.
Directors' fees and expenses increased by approximately $7,000 primarily due to
directors' liability runoff coverage, travel and meetings associated with the
change of directors and the Company reorganization. Other administrative
expenses increased by approximately $434,000 due to legal and consulting
expenses incurred in connection with the tender offer, the Company's subsequent
reorganization, the creation of the Operating Partnership structure, as well as
the proposed purchase of new properties. Total administrative costs of $632,199
consisted of approximately $300,000 in legal, $130,000 in accounting, $60,000 in
financial advisory fees, $45,000 in director's insurance, $40,000 in printing
and mailing of shareholder-related materials, and other administrative items
such as office expenses, state taxes and other corporate expenses.
Funds from Operations
Management believes that Funds From Operations ("FFO") is an appropriate measure
of performance of an equity REIT. FFO is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as net income or loss, excluding gains
or losses from debt restructurings and sales of properties, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures. FFO does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and is not
indicative of cash available to fund cash needs. FFO should not be considered as
an alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity. (See
Selected Financial Data). In March 1995, NAREIT issued a "White Paper" analysis
to address certain interpretive issues under its definition of FFO. The White
Paper provides that amortization of deferred financing costs and depreciation of
non-rental real estate assets are no longer to be added back to net income to
arrive at FFO.
As all companies and analysts do not calculate FFO in the same manner, the
Company's calculation of FFO presented herein may not be comparable to similarly
titled measures as reported by other companies.
II-6
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The following table presents the Operating Partnership's FFO calculation for the
years ended December 31,
1999 1998
---- ----
Net earnings before limited partner's
interest in Operating Partnership $379,960 $269,898
Less:
Limited partner's interest in the
Operating Partnership 315,490 89,950
-------- --------
Net income available to common shareholders 64,470 179,948
Adjustment for funds from operations
Add:
Limited partner's interest in the
Operating Partnership 315,490 89,950
Depreciation 492,716 480,410
-------- --------
Basic and diluted funds from operations $872,676 $750,308
======== ========
Weighted average shares/units outstanding (1) 2,296,918 2,245,411
========= =========
(1) Assumes conversion of Units of the Operating Partnership. Reflects the
issuance of 400,000 new shares of Common Stock on November 15, 1999.
Note: The Operating Partnership was formed during 1998.
The following table presents the Company's FFO calculation for the years ended
December 31,
1999 1998 1997
---- ---- ----
Net earnings before limited partner's
interest in Operating Partnership $379,960 $269,898 $500,186
Less:
Limited partner's interest in the
Operating Partnership 315,490 89,950 -
-------- -------- ---------
Net income available to common shareholders 64,470 179,948 500,186
Adjustment for funds from operations
Add:
Depreciation 131,806 297,376 462,687
-------- -------- ---------
Basic and diluted funds from operations $196,276 $477,324 $962,873
======== ======== =========
Weighted average shares/units outstanding (1) 593,618 1,393,761 2,245,411
======== ========= =========
II-7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liquidity and Capital Resources
The Company's capital resources consist of its current equity in real estate
investments (carrying value less mortgage indebtedness). The Company maintains
the real estate in good condition and provides adequate insurance coverage. The
Company's rental revenues for 1999 were $2,413,958. The rental revenues for 2000
are expected to increase by approximately $85,000 to $2,499,526 reflecting
fairly conservative estimates for leasing current and expected vacancies during
the year. As a result, vacancy at the end of 2000 is expected to decrease from
approximately 24,980 square feet to 16,500 square feet. The leasing time-table,
between getting a lease signed, building-out the space and the tenant taking
possession, varies from 6 months to 12 months depending on the market in the
geographic location of the property. Management estimates that the Company will
incur approximately $285,000 in tenant improvement costs to lease-up these
vacancies during 2000. Despite the increase in tenant improvement costs,
liquidity is considered sufficient to meet current obligations, which include
capital expenditures, and is represented by cash and cash equivalents of
$2,298,334 as of December 31, 1999.
Net cash provided by operating activities, as shown in the Statements of Cash
Flows, was $1,105,342 for the year ended December 31, 1999. The major uses of
cash in 1999 were dividends to shareholders and distributions to the limited
partner of the Operating Partnership totaling $938,671, and capital expenditures
of $282,255 ($155,880 at Corporate Center East, $66,403 at Broadbent, $53,683 at
Southpoint and $6,289 at Germantown). A fourth quarter dividend was declared on
February 18, 2000 to shareholders of record on February 28, 2000, payable March
8, 2000. The Board of Directors continues to closely monitor occupancies,
leasing activity, overall Company operations, and liquidity in determining
quarterly dividends.
The Company's debt service commitments for the mortgage loan payable are
described in Note 5 to the Financial Statements. There were no other material
commitments at December 31, 1999.
Inflation
Low to moderate levels of inflation during the past several 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.
Year 2000 Issue
The Company has received no reports of incidents of system or facilities
malfunctions related to the inability of computers and/or computer software to
process and calculate date-related information from and after January 1, 2000.
II-8
Item 7(a). Quantitative and Qualitative Disclosures about Market Risk
The primary market risk facing the Company is the interest rate risk on its
mortgage loan payable. The Company does not hedge interest rate risks using
financial instruments nor is the Company subject to foreign currency risks.
The following table sets forth the Company's long-term debt obligations,
principal cash flows by scheduled maturity, weighted average interest rates and
estimated fair market value ("FMV") at December 31, 1999:
For the Year ended December 31,
------------------------------------------
2000 2001 2002 Total FMV
--------------------------------------------------------------------
Long term debt:
Fixed rate $30,745 $33,755 $1,282,250 $1,346,750 $1,414,160
Average interest rate 9.38% 9.38% 9.38% 9.38%
The fair value of the Company's mortgage loan payable is estimated based on the
discounting of future cash flows at interest rates that management believes
reflect the risks associated with mortgage loans payable with similar risk and
duration.
II-9
Item 8. Financial Statements and Supplemental Data
Page
----
Report of Independent Auditors..........................................II-11
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998..............................................II-12
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997...............................II-13
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1999, 1998 and 1997.........................II-14
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997...............................II-15
Notes to Financial Statements...........................................II-16
II-10
Report of Independent Auditors
The Board of Directors and Shareholders
Uni-Invest (U.S.A.), Ltd.
We have audited the accompanying consolidated balance sheets of Uni-Invest
(U.S.A.) Ltd. (formerly, Cedar Income Fund, Ltd.) as of December 31, 1999 and
1998, and the related statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 consolidated financial position of Uni-Invest
(U.S.A.), Ltd. (formerly, Cedar Income Fund, Ltd.) at December 31, 1999 and
1998, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
New York, NY
February 22, 2000
II-11
Uni-Invest (U.S.A.), Ltd. (Formerly, Cedar Income Fund, Ltd.)
Consolidated Balance Sheets
- - --------------------------------------------------------------------------------
December 31, December 31,
1999 1998
Assets
Real estate
Land $ 4,144,705 $ 4,144,705
Buildings and improvements 15,041,317 14,759,062
------------ ------------
19,186,022 18,903,767
Less accumulated depreciation (5,190,825) (4,698,109)
------------ ------------
Real estate 13,995,197 14,205,658
Cash and cash equivalents 2,298,334 678,196
Rents and other receivables 98,629 108,196
Prepaid expenses 101,892 107,283
Deferred lease commissions 122,944 131,350
Due from co-tenancy partner 56,993 61,323
Deferred rental income 12,312 21,500
Taxes held in escrow 6,259 9,809
------------ ------------
Total Assets $ 16,692,560 $ 15,323,315
============ ============
Liabilities and Shareholders' Equity
Liabilities
Mortgage loan payable $ 1,346,750 $ 1,374,751
Accounts payable and accrued expenses 365,790 172,358
Due to co-tenancy partner 46,158 46,570
Security deposits 87,919 84,466
Advance rents 42,095 46,334
------------ ------------
Total Liabilities 1,888,712 1,724,479
Limited partner's interest in consolidated
Operating Partnership 9,560,913 10,309,316
Shareholders' Equity
Common stock ($.01 par value
50,000,000 shares authorized, 942,651 -
and 542,111 shares outstanding, respectively 9,421 5,421
Additional paid-in-capital 5,233,514 3,284,099
------------ ------------
Total shareholders' equity 5,242,935 3,289,520
------------ ------------
Total liabilities and shareholders' equity $ 16,692,560 $15,323,315
============ ============
See the accompanying notes to financial statements
II-12
Uni-Invest (U.S.A.), Ltd. (Formerly, Cedar Income Fund, Ltd.)
Consolidated Statements of Operations
Years ended December 31,
1999 1998 1997
- - --------------------------------------------------------------------------------------------------------------
Revenue
Rents $2,413,958 $2,505,372 $2,386,549
Other 75,000 - -
Interest 26,329 59,653 81,309
---------- ---------- ----------
2,515,287 2,565,025 2,467,858
Expenses
Property expenses
Real estate taxes 258,597 262,761 233,160
Repairs and maintenance 273,253 252,320 385,806
Utilities 167,886 163,279 159,672
Management fees 124,358 126,520 130,084
Insurance 21,764 18,336 19,270
Other 124,883 73,737 92,396
---------- ---------- ----------
Property expenses, excluding depreciation 970,741 896,953 1,020,388
Depreciation 492,716 480,410 462,687
---------- ---------- ----------
Total property expenses 1,463,457 1,377,363 1,483,075
Interest 127,700 130,197 136,137
Administrative fees 102,397 99,180 101,192
Directors' fees and expenses 97,872 100,703 49,417
Other administrative 343,901 587,684 197,851
---------- ---------- ----------
2,135,327 2,295,127 1,967,672
---------- ---------- ----------
Net income before limited partner's
interest in Operating Partnership 379,960 269,898 500,186
Limited partner's interest (315,490) (89,950) -
---------- ---------- ----------
Net income $ 64,470 $ 179,948 $ 500,186
========== ========== ==========
Basic and diluted net income per share $ .11 $ .13 $ .22
========== ========== ==========
Dividends to shareholders $ 256,990 $ 557,504 $ 898,164
========== ========== ==========
Dividends to shareholders per share $ .40 $ .40 $ .40
========== ========== ==========
Average number of shares outstanding $ 593,618 1,393,761 2,245,411
========== ========== ==========
See the accompanying notes to financial statements.
II-13
Uni-Invest (U.S.A.), Ltd. (Formerly, Cedar Income Fund, Ltd.)
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1999, 1998 and 1997
- - ----------------------------------------------------------------------------------------------------------
Additional Undistributed Total
Common Paid-In Net Shareholders'
Stock Capital Earnings Equity
- - -----------------------------------------------------------------------------------------------------------
Balance at January 1, 1997 $2,245,411 $12,379,669 $ - $14,625,080
Net earnings - - 500,186 500,186
Dividends to shareholders - (397,978) (500,186) (898,164)
---------- ----------- --------- -----------
Balance at December 31, 1997 2,245,411 11,981,691 - 14,227,102
Net earnings - - 179,948 179,948
Dividends to shareholders - (377,556) (179,948) (557,504)
Change in par value (536,690) 536,690 - -
Cancelled shares (1,703,300) 1,703,300 - -
Limited partner's interest in
Operating Partnership - (10,560,026) - (10,560,026)
---------- ----------- --------- -----------
Balance at December 31, 1998 5,421 3,284,099 - 3,289,520
Net Earnings 64,470 64,470
Dividends to shareholders (192,520) (64,470) (256,990)
Sale of additional shares 4,000 2,141,935 - 2,145,935
---------- ----------- --------- -----------
Balance at December 31, 1999 $ 9,421 $5,233,514 $ - $5,242,935
========== ============ ========= ===========
See the accompanying notes to financial statements.
II-14
Uni-Invest (U.S.A.), Ltd. (Formerly, Cedar Income Fund, Ltd.)
Consolidated Statements of Cash Flows
Years ended December 31,
1999 1998 1997
- - ----------------------------------------------------------------------------------------------------------
Operating Activities
Net Income $ 64,470 $ 179,948 $500,186
Adjustments to reconcile net income to net cash
provided by operating activities:
Limited partner's interest in Operating Partnership 315,490 89,950 -
Depreciation and amortization 496,992 483,161 466,353
Decrease (increase) in deferred rental receivable 9,188 (21,500) -
Changes in operating assets and liabilities:
Decrease (increase) in rent and other receivable 9,567 22,419 (35,202)
Decrease in interest receivable - 3,881 65
Decrease (increase) in prepaid expenses 1,115 (410) (28,532)
Decrease (increase) in deferred lease commissions 8,406 33,477 (48,678)
Decrease in tax held in escrow 3,550 6,087 1,801
Increase in accounts payable and accrued expenses 193,432 10,038 58,983
Decrease (increase) in amounts
due from co-tenancy partner 4,330 (61,323) -
(Decrease) increase in due to co-tenancy partner (412) (16,000) 26,032
Security deposits collected, net 3,453 4,381 13,430
Decrease (increase) in advance rents (4,239) 36,986 (5,700)
---------- ------------ ----------
Net cash provided by operating activities 1,105,342 771,095 948,738
Cash Flow from Investing Activities
Capital expenditures (282,255) (140,880) (299,985)
Sale and collection of mortgage loan receivable - 564,437 9,554
---------- ------------ ----------
Net cash (used in) provided by in investing activities (282,255) 423,557 (290,431)
Cash Flow from Financing Activities
Principal portion of scheduled mortgage payments (28,001) (25,508) (23,233)
Dividends paid (256,990) (557,504) (898,164)
Distributions to limited partner (681,681) (340,660) -
Gross Proceeds from sale of stock 1,800,000 - -
Costs associated with sale of stock (36,277) - -
---------- ------------ ----------
Net cash provided by (used in)financing activities 797,051 (923,672) (921,397)
---------- ------------ ----------
Net increase (decrease) in cash and cash equivalents 1,620,138 270,980 (263,090)
Cash and cash equivalents at beginning of the period 678,196 407,216 670,306
---------- ------------ ----------
Cash and cash equivalents at end of the period $2,298,334 $ 678,196 $ 407,216
========== ============ ==========
Supplemental Disclosure of Cash Activities
Interest paid $ 127,700 $ 130,197 $ 136,137
========== ============ ==========
Supplemental Disclosure of Non-Cash Financing
Activities
Reallocation of Limited Partner Interest for Sale of
Shares below book value $ 382,211 $ - $ -
========== ============ ==========
Cancelled shares $ - $ (1,703,300) $ -
========== ============ ==========
Decrease in par value from $1 to $.01 $ - $ (506,690) $ -
========== ============ ==========
Recordation of initial limited
partner's interest $ - $(10,560,026) $ -
========== ============ ==========
See the accompanying notes to financial statements.
II-15
UNI-INVEST (U.S.A.), Ltd (Formerly, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements
December 31, 1999
1. Description of Business and Significant Accounting Policies
Background, Organization and Reorganization of the Company
Cedar Income Fund, Ltd. ("Old Cedar") was incorporated in Iowa on December 10,
1984. Old Cedar's public offerings of Common Stock, completed in 1986 and 1988,
raised approximately $19 million. Old Cedar 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. The
mortgage loan participation has since been liquidated.
On April 2, 1998, Cedar Bay Company, ("CBC") a New York general partnership,
pursuant to a tender offer to purchase all of the outstanding shares of Common
Stock of Old Cedar for $7.00 per share in cash (the "Offer"), acquired
1,893,038.335 shares of Old Cedar's outstanding Common Stock, $1.00 par value
per share ("Old Common Stock"), representing approximately 85% of the
then-outstanding shares.
On June 26, 1998, Old Cedar merged with and into Uni-Invest (U.S.A.), Ltd.
(formerly Cedar Income Fund, Ltd.), a Maryland corporation (the "Company") newly
formed as a wholly-owned subsidiary of Old Cedar. Immediately thereafter, the
Company assigned substantially all of its assets and liabilities to a
newly-formed Delaware limited partnership, Cedar Income Fund Partnership, L.P.
(the "Operating Partnership"), in exchange for an aggregate of 2,245,411
operating partnership units of the Operating Partnership ("Units"), which
constituted the sole general partnership interest and all of the limited
partnership interests in the Operating Partnership. After such assignment, CBC
exchanged 1,703,300 shares of the Company's Common Stock, $0.01 par value per
share ("New Common Stock"), for 1,703,300 limited partnership units in the
Operating Partnership owned by the Company. The shares of New Common Stock were
cancelled by the Company upon their exchange by CBC. Following these
transations, CBC owned 189,737 shares of New Common Stock, aggregating
approximately 35% of the then issued and outstanding shares of New Common Stock.
The Company, in the spring of 1999, received notice from The NASDAQ Stock Market
("NASDAQ") stating that the "public float" of common stock of the Company was
less than the minimum requirements of NASDAQ, and that, accordingly, the
Company's shares would be delisted if the company failed to satisfy such
requirements and to demonstrate its ability to continue to comply with such
requirements. A hearing was subsequently held before a NASDAQ Listing
Qualifications Panel (the "Panel") in September 1999 and the Company made
certain filings required by the Panel.
On or about November 15, 1999, as a result of the private placement of 250,000
shares of newly issued Common Stock of the Company with a number of private
investors at $4.50 per share (which price as of the date of issue was higher
than the quoted price for such shares on NASDAQ) as set forth in such filings,
the "public float" of shares of Common
II-16
UNI-INVEST (U.S.A.) LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements
1. Description of Business and Significant Accounting Policies (continued)
Stock of the Company became, to the best of its knowledge, approximately 600,000
shares. Accordingly, the Company has now fully complied with the NASDAQ minimum
"public float" requirements. None of the new shareholders, all of whom are
resident outside the United States, owns, directly or indirectly, more than 10%
of the shares of Common Stock of the Company.
As of November 5, 1999, a Subscription Agreement was entered into by and between
the Company and Uni-Invest Holdings (U.S.A.) B.V., pursuant to which Uni-Invest
Holding (U.S.A.) B.V. acquired on or about November 15, 1999, through a private
placement, 150,000 shares of Common Stock of the Company at $4.50 per share. As
a result of such placement and the other private placements described above, as
of November 15, 1999, Uni-Invest Holdings (U.S.A.) B.V. owned approximately 16%
of the Common Stock of the Company. CBC's Common Stock ownership was
correspondingly reduced from approximately 35% to approximately 20%. Also in
accordance, with the agreement, and pursuant to Board of Directors' approval and
shareholders' approval at a special meeting held on February 24, 2000, the
Company changed its name to "Uni-Invest (U.S.A.), Ltd." effective as of February
29, 2000. The name of the Operating Partnership was correspondingly changed to
Uni-Invest (U.S.A.) Partnership, L.P. as of February 29, 2000
At a Board meeting held on November 18, 1999 the following persons were elected
to the positions respectively set forth below:
Richard Homburg Chairman of the Board
Louis Ph. Marcus Treasurer
Lawrence W. Freeman, Esq. Assistant Secretary
In addition, Uni-Invest Holdings (U.S.A) B.V. and CBC entered into a
Stockholders' Agreement effective as of the issuance of stock pursuant to the
Subscription Agreement, wherein they agreed, among other things, to hold their
shares for a period of not less than five years and setting forth certain
provisions for the orderly sale or other disposition of shares under certain
circumstances, and also to provide certain other arrangements common to such
stockholders' agreements. The parties further agreed to vote their shares in
favor of a slate of directors pursuant to which each of the respective parties
would designate two persons for election as directors of a board of directors
which would also include not less than three outside directors.
The Stockholders' Agreement also calls for the creation by the Board of
Directors, as reconstituted, of an executive committee of the Board, the members
of which would be Richard Homburg and Leo S. Ullman.
II-17
UNI-INVEST (U.S.A.), LTD (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements
1. Description of Business and Significant Accounting Policies (continued)
Further, the Subscription Agreement, provides for the transfer of 50% of the
stock of Cedar Bay Realty Advisors, Inc. ("CBRA") to an affiliate of Uni-Invest
Holdings (U.S.A.) B.V. and the participation by such affiliate of Uni-Invest
Holdings (U.S.A.) B.V. generally in any increase in income of CBRA attributable
to growth of advisory fees arising from services rendered to the Company and to
the Operating Partnership.
The Subscription Agreement also provides for an affiliate of Uni-Invest Holdings
(U.S.A.) B.V. to acquire, without additional consideration, a 50% interest in
each of SKR Management Corp. and Brentway Management LLC which companies shall
be merged, or otherwise acquired by CBRA. Further, the subscription agreement
provides for Uni-Ivest Holdings (U.S.A.) B.V. to succeed HVB Capital Markets,
Inc. ("HVB") as financial advisor to the Company, after the expiration or other
termination of the then existing agreement with HVB Capital Markets, Inc. HVB
agreed to terminate the HVB Agreement effective as of December 31, 1999.
Uni-Invest Holdings (U.S.A) B.V. and Leo S. Ullman have entered into a
Stockholders' Agreement with respect to ownership of CBRA. That Agreement, in
general, also provides for a five year holding period and other provisions
common to such stockholder agreements.
The Subscription Agreement also calls for the guarantee by Uni-Invest Holdings
(U.S.A.) B.V. or the funding on or before May 15, 2000 of $7.5 million in
exchange for shares of the Company and/or Units in the Operating Partnership at
$4.50 per share Unit. The proceeds of such contribution, together with $7.5
million to be raised by the Company from other private placements of shares of
stock or Units, from refinancing of its existing properties and/or the sale of
its interests in one or more of the existing properties, would be used to
purchase three anchored strip shopping centers aggregating more than 700,000
square feet, substantially fully leased with many creditworthy tenants, in
Harrisburg (The Point Shopping Center), Lancaster (Golden Triangle Shopping
Center) and Philadelphia (Red Lion Shopping Center), Pennsylvania from CBC or
entities affiliated therewith. The aggregate purchase price for the three
properties at $15 million plus closing adjustments, where applicable, above
existing first mortgage liabilities estimated at approximately $37 million at
this time, will be subject to third-party appraisals and "fairness" opinions by
a reputable independent investment banking firm. The purchase agreements to
reflect the foregoing have not yet been concluded or executed by the parties.
It has also been agreed that CBC or its affiliates will contribute to the
Operating Partnership upon sale of the three Pennsylvania Shopping Center
Properties described above, $3 million in cash in exchange for certain Units
with certain priority payments at 8%.
II-18
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements
1. Description of Business and Significant Accounting Policies (continued)
Finally, the Company will receive an option to acquire a majority ownership
interest in a certain shopping center property of approximately 620,000 square
feet and adjacent land in Pleasantville, New Jersey, subject to certain
contingencies.
The sale of the three shopping centers described above is subject to a closing
on or before May 15, 2000 and is subject to execution of final purchase
agreements and agreement on closing adjustments, due diligence reviews, and
consents, where applicable, of lenders and partners.
There can be no assurances that the closing of these transactions will in fact
be concluded. Among other things, there can be no assurances that the Company
will be able to raise its portion of the purchase price, that the due diligence
reviews will be satisfactory or that the necessary consents will in fact be
obtained. In the event that the funding by Uni-Invest Holdings (U.S.A.) B.V.
does not occur, the Company has the right to unwind the entire transaction with
Uni-Invest Holdings (U.S.A.) B.V., subject to certain conditions.
The Company has retained a national brokerage company to offer the Jacksonville,
Florida (Southpoint) office facility for sale to a qualified purchaser at a
price exceeding book value. Further, the Company has applied for a $10 million
line of credit from a national commercial bank and has received and signed the
commitment letter for such credit line to be secured by first mortgage liens on
properties of the Operating Partnership. The proceeds of the sale of Southpoint
if concluded on a timely basis on terms acceptable to the Company, and/or the
proceeds of drawdowns under the commercial bank line of credit, as well as
deposits of cash held by the Company and the Operating Partnership would be
available to meet the $7.5 million (plus closing costs, if any) required of the
Company pursuant to the Subscription Agreement.
CBRA has agreed to defer until termination of its services as investment advisor
to the Company, any acquisition fees to which it would otherwise be entitled
with respect to the acquisition by the Company or the Operating Partnership of
interests in the properties described above from CBC or its affiliates.
Uni-Invest Holdings (U.S.A) B.V. is a private company organized and existing
under the laws of the Netherlands. Its stock is owned primarily by or for the
benefit of Richard Homburg and members of his family.
Mr. Homburg, a Canadian citizen, resident in the Netherlands, is Chairman and
Chief Executive Officer of Uni-Invest N.V., a publicly-traded real estate fund
organized in the Netherlands and listed on the Amsterdam Stock Exchange.
Uni-Invest N.V., which invests virtually exclusively in Netherlands real estate,
has grown since Mr. Homburg's involvement in 1991 from approximately $90 million
in assets to an asset value of approximately $1.7 billion at this time.
Uni-Invest N.V. distributes substantially all of its income and has more than 57
million shares outstanding. Its earnings, share values and the liquidity of its
stock on the Amsterdam Stock Exchange have increased substantially from 1991 to
the present. Uni-Invest N.V.'s real estate
II-19
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements
1. Description of Business and Significant Accounting Policies (continued)
investments in the Netherlands include retail, office, industrial and
residential (apartment) properties. Substantial gains have generally been
realized annually by Uni-Invest N.V. from the sale of properties from its
portfolio as part of its investment strategy. Uni-Invest N.V. generally manages
its own properties and generally does not engage in development of properties.
Mr. Homburg and his family also control, directly or indirectly, the Homburg
Uni-Corp group of companies which own certain commercial, office, retail,
warehouse and residential properties in certain western states of the U.S. and
Canada. Uni-Invest Canada Ltd, a Canadian real estate investment company
affiliated with Uni-Invest Holdings (U.S.A.) B.V. and Uni-Invest N.V., and in
turn controlled by a Netherlands company, Uni-Invest Canada N.V., owns a number
of properties in Canada. Management of Uni-Invest N.V. has issued a press
release announcing that it intends to take over the interest of Uni-Invest
Canada N.V. in Uni-Invest Canada, Ltd. in 2000 and to distribute the shares to
shareholders of Uni-Invest N.V. in 2001 as a dividend after obtaining a listing
on the Toronto Stock Exchange.
Currently, a Unit in the Operating Partnership and a share of Common Stock of
the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
The Company operates as a real estate investment trust ("REIT"). To qualify as a
REIT under applicable provisions of the Internal Revenue Code of 1986, as
amended, and Regulations thereto, the Company must have a significant percentage
of its assets invested in, and income derived from, real estate and related
sources. 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.
Until February 29, 2000, the Company's shares were traded on NASDAQ under the
symbol "CEDR". Effective as of February 29, 2000 the Company changed its symbol
to "UNII" to reflect the change, also effective as of that date, of the name of
the Company and the Operating Partnership to Uni-Invest (U.S.A.), Ltd. and
Uni-Invest (U.S.A.) Partnership, L.P., respectively.
The Company, through its Operating Partnership, owns and operates three office
properties aggregating approximately 224,000 square feet, located in
Jacksonville, Florida, Salt Lake City, Utah and Bloomington, Illinois; and a 50%
undivided interest in a 74,000 square foot shopping center property located in
Louisville, Kentucky.
II-20
UNI-INVEST (U.S.A), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements
1. Description of Business and Significant Accounting Policies (continued)
CBRA serves as investment advisor to the Company pursuant to an Administrative
and Advisory Agreement with the Company on terms substantially similar to the
terms of that agreement previously in effect between Old Cedar and AEGON USA
Realty Advisors, Inc. ("AEGON") of Cedar Rapids, Iowa, which served as
investment advisor to the Company from formation until April 3, 1998. Brentway
Management LLC ("Brentway" and/or "Property Manager"), a New York limited
liability company provides property management services for the Company's
properties pursuant to a management agreement with the Company on substantially
the same terms as the agreement previously in effect with AEGON. Brentway and
CBRA are both affiliates of CBC, SKR Management Corp. and Leo S. Ullman. Leo S.
Ullman is President of the Company.
Basis of Presentation and Summary of Significant Accounting Policies
Consolidation Policy and Related Matters
The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership as of December
31, 1999. All significant intercompany balances and transactions have been
eliminated in consolidation.
The limited partner's interest as of December 31, 1999 (currently owned entirely
by CBC) represents approximately a 64% limited partnership interest in the
equity of the Operating Partnership.
Currently, a Unit in the Operating Partnership and a share of Common Stock of
the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
The accompanying financial statements include the Company's 50% co-tenancy
interest in the assets, liabilities and operations of the retail property.
Use of Estimates
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.
Actual results could differ from those estimates.
II-21
UNI-INVEST (U.S.A.), LTD (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the term of
the lease. The excess of rents recognized over amounts contractually due is
included in deferred rents receivable on the accompanying balance sheets.
Contractually due but unpaid rents are included in tenant receivables on the
accompanying balance sheets. Certain lease agreements provide for reimbursement
of real estate taxes, insurance, common area maintenance costs and certain other
costs which are recorded on an accrual basis.
Real Estate
Depreciation is computed utilizing the straight-line method over the estimated
useful lives of ten to forty years for buildings and improvements. Tenant
improvements, which are included in buildings and improvements, are amortized on
a straight-line basis over the term of the related lease.
Cash Equivalents
The Company considers highly liquid investments with a maturity of three months
or less, when purchased, to be cash equivalents.
Deferred Costs
Leasing fees and loan costs are capitalized and amortized over the life of the
related lease or loan.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because, the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123) requires use of option valuation
models that were not developed for use in valuing employee stock options.
The Company established a stock option plan (the "Plan") for the purpose of
attracting and retaining executive officers, directors and other key employees.
500,000 of the Company's authorized shares of Common Stock have been reserved
for issuance under the Plan. The Plan is administered by a committee of the
Board of Directors, which committee will, among other things, select the number
of shares subject to each grant, the vesting period for each grant and the
exercise price (subject to applicable regulations with respect to incentive
stock options) for the options.
II-22
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Earnings Per Share
Statement of Financial Accounting Standard Board ("FASB") No. 128, Earnings per
Share, was issued and adopted by the Company during 1997. Statement No. 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Since the Company has no potentially
dilutive securities outstanding, basic and diluted net income per share in
accordance with Statement No. 128 are the same and do not differ from amounts
previously reported as net income per share (primary earnings per share).
Accordingly, basic and diluted net income per share are computed using the
weighted average number of shares outstanding during the year.
Basic and diluted net income per share are based on the weighted average number
of shares outstanding (593,618 in 1999, 1,393,761 in 1998, and 2,245,411 for
1997). Dividends to shareholders per share are based on the actual number of
shares outstanding on the respective dates.
Comprehensive Income
In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income"
("Statement 130") which is effective for fiscal years beginning after December
15, 1997. Statement 130 established standards for reporting comprehensive income
and its components in a full set of general-purpose financial statements.
Statement 130 requires that all components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. The adoption of this standard had no impact on the
Company's financial position or results of operations.
Segment Reporting
In 1997, the FASB issued Statement No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") which is effective for fiscal
years beginning after December 15, 1997. SFAS 131 establishes standards for
reporting information about operating segments in annual financial statements
and in interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of this standard had no impact on the Company's financial position
or results of operations but did affect the disclosure of segment information.
See Note 9.
II-23
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
Description of Business and Significant Accounting Policies (continued)
Recent Pronouncements
In June 1999, the FASB issued Statement No. 137, amending Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which extended
the required date of adoption to the years beginning after June 15, 2000. The
Statement permits early adoption as of the beginning of any fiscal quarter after
its issuance. The Company expects to adopt the new Statement effective January
1, 2001. The Company does not anticipate that the adoption of this Statement
will have any effect on its results of operations or financial position.
Income Taxes
The Company generally will not be subject to federal income taxes as long as it
qualifies as a real estate investment trust ("REIT") under Section 856-869 of
The Internal Revenue Code of 1986, as amended (the "Code"). A REIT will
generally not be subject to federal income taxation on that portion of income
that qualifies as REIT taxable income and to the extent that it distributes such
taxable income to its stockholders and complies with certain requirements of the
Code relating to income and assets. As a REIT, the Company is allowed to reduce
taxable income by all or a portion of distributions to stockholders and must
distribute at least 95% of its taxable income to qualify as a REIT. As
distributions, for federal income tax purposes, have exceeded taxable income, no
federal income tax provision has been reflected in the accompanying consolidated
financial statements. State income taxes are not significant.
Impairment of Long-Lived Assets
The Company reviews its real estate assets if indicators of impairment are
present to determine whether the carrying amount of the asset will be recovered.
Recognition of impairment is required if the undiscounted cash flows estimated
to be generated by the asset are less than the asset's carrying amount.
Measurement is based upon the fair value of the asset. As of December 31, 1999,
management determined that no recognition of impairment is required.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.
II-24
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR NCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Cash and cash equivalents: The carrying amounts of cash and cash equivalents
approximate their fair values.
Mortgage loan payable: The fair value of the mortgage loan payable is estimated
utilizing discounted cash flow analysis, using interest rates reflective of
current market conditions and the risk characteristics of the loans.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standard No. 107:
1999 1998
---------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
Assets
Cash and cash equivalents $2,298,334 $2,298,334 $ 678,196 $ 678,196
========== ========== ========== ==========
Liabilities
Mortgage loan payable $1,346,750 $1,414,160 $1,374,751 $1,466,113
========== ========== ========== ==========
3. Real Estate and Accumulated Depreciation
The Company's properties are leased to various tenants, whereby the Company
incurs normal real estate operating expenses associated with ownership. In 1999,
the Company incurred capital expenditures of $282,255. Improvements for new and
existing tenants totaled $228,572. In 1998 the Company incurred capital
expenditures of $140,880 of which $47,531 were improvements for new and existing
tenants. Information regarding the Company's investment in each property is
presented in the Schedule of Real Estate and Accumulated Depreciation that
follows.
Information on Real Estate and Accumulated Depreciation
Gross Amount at Which Carried
Initial Cost to Company December 31, 1999
----------------------- -------------------------------------
Property Description
- - -------------------- Subsequent
Name and Location Amount of Buildings & Cost Buildings &
of Property Encumbrance Land Improvements Capitalized Land Improvements Total
- - ------------------------------------------------------------------------------------------------------------------------------------
Germantown Square $ --- $ 678,675 $ 2,284,999 $ 782,946 $ 683,365 $ 3,063,251 $ 3,746,616
Louisville, Kentucky
(Shopping Center)
Corporate Center East --- 475,000 1,746,783 493,535 479,600 2,235,717 2,715,317
Bloomington, Illinois
(Office Building)
Broadbent Business Center 1,346,750 595,000 3,462,950 593,380 599,681 4,051,654 4,651,335
Salt Lake City, Utah
(Office/Service Facility)
Southpoint Parkway Center --- 2,005,495 4,500,000 1,567,259 2,382,059 5,690,695 8,072,754
Jacksonville, Florida
(Office/Service Facility)
- - ------------------------------------------------------------------------------------------------------------------------------------
$1,346,750 $3,754,170 $11,994,732 $3,437,120 $4,144,705 $15,041,317 $19,186,022
========== ========== =========== ========== ========== =========== ===========
Life on Which
Depreciation
Accumulated Date Date is Computed
Depreciation Built Acquired (in years)
- - --------------------------------------------------------------------------------------------------
Germantown Square $ 843,710 1988 9/88 10-40
Louisville, Kentucky
(Shopping Center)
Corporate Center East 626,569 1987 3/88 10-40
Bloomington, Illinois
(Office Building)
Broadbent Business Center 1,372,169 1978 3/87 10-40
Salt Lake City, Utah
(Office/Service Facility)
Southpoint Parkway Center 2,348,377 1984 5/86 10-40
Jacksonville, Florida
(Office/Service Facility)
- - --------------------------------------------------------------------------------------------------
$5,190,825
==========
II-25
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
3. Real Estate and Accumulated Depreciation (continued)
The activity in real estate and related accumulated depreciation for the
three-year period ended December 31, 1999 are summarized in the table below.
Years ended December 31,
1999 1998 1997
- - ---------------------------------------------------------------------------------------------------------------
Cost
Beginning of year improvements $18,903,767 $18,762,887 $18,462,902
Additions during year 282,255 140,880 299,985
----------- ----------- -----------
End of year $19,186,022 $18,903,767 $18,762,887
=========== =========== ===========
Accumulated Depreciation
Beginning of year $ 4,698,109 $ 4,217,699 $3,755,012
Additions during year 492,716 480,410 462,687
----------- ----------- -----------
End of year $ 5,190,825 $ 4,698,109 $4,217,699
=========== =========== ===========
4. Mortgage Loan Receivable
On September 20, 1993, Old Cedar purchased a 30% participation in a promissory
note from Life Investors, an affiliate of AEGON, the Company's former advisor.
The participation was acquired for an investment of $600,000 with a yield of
8.25% to Old Cedar. The promissory note which was to mature in August 2000, and
was secured by a deed of trust on the Woodbury Office Plaza in Woodbury,
Minnesota, was repurchased by Life Investors, as permitted under the note, for
cash in the amount of $561,920 on March 30, 1998.
Information on Mortgage Loan Receivable
Periodic Payment
Terms
----------------
Carrying
Face Amount of Amount of
Stated Final Annual Balloon Mortgage Mortgage
Property Description Date of Interest Maturity Principal Payment at Receivable at December 31,
Name and Property Location Mortgage Rate Date and Interest March 1998 Acquisition 1998
- - -----------------------------------------------------------------------------------------------------------------------------------
Woodbury Plaza
Woodbury, Minnesota 8-1-93 8.25% 8-1-00 $56,577 $561,920 $600,000 ---
II-26
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
4. Mortgage Loan Receivable (continued)
The activity for the mortgage loan receivable for the three-year period ended
December 31, 1999, is summarized as follows:
Years ended December 31,
Mortgage Loan Receivable 1999 1998 1997
- - --------------------------------------------------------------------------------
Principal
Beginning of year $ - $ 564,437 $573,991
Deductions during year
scheduled payments - (2,517) (9,554)
Purchase - (561,920) -
---------- --------- --------
End of year $ - $ - $564,437
========== ========= ========
5. Leased Assets
The Company's properties are leased to tenants under short-term, non-cancelable
operating lease agreements. Future minimum lease rentals to be received under
the terms of these lease agreements are approximately as follows:
Year Amount
----------------------------------------------
2000 $1,331,993
2001 1,033,463
2002 617,913
2003 380,487
2004 292,885
Thereafter 898,120
----------
$4,554,861
==========
Contingent rentals (expense recoveries) provided by various leases were included
in rental income for 1999, 1998 and 1997 in the amounts of $253,755, $281,874
and $284,219 respectively.
The Company derived 10% or more of its revenue from two major tenants in 1999.
Revenues from GSA, a tenant at Southpoint, were $535,198 in 1999. Revenues from
Winn Dixie, a tenant at Germantown, were $349,466 in 1999.
II-27
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
6. Mortgage Loan Payable
On October 30, 1992 the Company borrowed $1,500,000 to finance an existing
property. As of December 31, 1999, the mortgage outstanding principal balance
was $1,346,750. This loan is collateralized by Broadbent, with a carrying amount
of $3,279,166. The mortgage requires the repayment of principal based on a
thirty-year amortization schedule at an interest rate of 9.375% and matures
November 1, 2002. At maturity there will be a balloon payment of $1,254,779.
There is a prepayment provision which permitted repayment beginning October
1997. From October 1997 to October 1998, prepayment was subject to a
prepayment penalty of 5%. Such prepayment penalty is reduced by 1% per year
thereafter.
Principal payments on the outstanding balance are summarized as follows:
Principal
Year Payments
----------------------------------
2000 $ 30,745
2001 33,755
2002 1,282,250
----------
$1,346,750
==========
7. Related Party Transactions
The Company has entered into an agreement with CBRA 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. This agreement is substantially the same as the previous
agreement entered into with AEGON, which expired on April 3, 1998. CBRA 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 cancelable on 60 days' prior written notice
by either party.
Fees of $28,350 were paid to Stuart H. Widowski, Esq., SKR Management Corp.'s
in-house counsel and Secretary of the Company, through SKR Mangement Corp., an
affiliate of CBRA, Brentway, CBC and Leo S. Ullman, for legal services provided.
With the exception of Germantown Square Shopping Center in Louisville, Kentucky
("Germantown"), Brentway provides property management services to the Company's
real property for a monthly fee equal to 5% of the gross income from properties
managed. Brentway 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 cancelable on 60 days' prior written notice by either party. This agreement
is essentially the same as the previous agreement with AEGON. Due to continuing
ownership by Life Investors Insurance Company of
II-28
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
7. Related Party Transactions (continued)
America ("Life Investors") of the other 50% co-tenancy interest therein, AEGON
continues to manage Germantown upon terms similar to those described above.
In 1998 the Company, entered into a Financial Advisory Agreement (the "HVB
Agreement") with BV Capital Markets, Inc., since renamed HVB Capital Markets,
Inc. ("HVB"), a wholly-owned subsidiary of Hypo Vereinsbank of Germany, of which
Jean-Bernard Wurm, formerly a Director of the Company, serves as Director. Under
that agreement HVB was performing the following services as financial advisor to
the Company: (a) advise on acquisition financing and/or lines of credit for
future acquisitions; (b) advise on acquisitions of United States real property
interests and the consideration to be paid therefor; (c) advise on private
placements of the shares of the Company; (d) assist the Board of Directors in
developing suitable investment parameters for the Company; (e) develop and
maintain contacts on behalf of the Company with institutions with substantial
interests in real estate and capital markets; (f) advise the Board with respect
to additional private or public offerings of equity securities of the Company;
(g) review certain financial policy matters with consultants, accountants,
lenders, attorneys and other agents of the Company; and (h) prepare periodic
reports of its performance of the foregoing services. As compensation for the
foregoing services, the Company was required to pay HVB, (i) .25% of the
Company's net asset value, less any indebtedness affecting such net value, but
in any event, not less than $100,000 per year; (ii) a one-time payment of 1.5%
of 90% of the agreed value of properties contributed to the Company or its
affiliates by persons introduced to the Company by HVB; and (iii) upon the
Company becoming self-administered, a one-time payment equal to five times the
annual fee income attributable to fee receipts from clients or contacts of HVB
that have contributed property to the Company. The HVB Agreement, dated as of
June 1, 1998, according to its terms, was to have remained in effect, for
successive one-year periods unless terminated by either party upon 60 days'
prior written notice. HVB agreed to terminate the HVB Agreement effective
December 31, 1999. Further, Jean-Bernard Wurm resigned as a Director of the
Company effective December 31, 1999. Under the Subscription Agreement entered
into by the Company with Uni-Invest Holdings (U.S.A) Ltd., Uni-Invest Holdings
(U.S.A.) Ltd. will succeed to HVB's position as "financial advisor" to the
Company, upon substantially the same terms as the HVB Agreement.
II-29
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
7. Related Party Transactions (continued)
The following schedule represents amounts paid to related parties:
Cedar Income Fund, Ltd.
Schedule of Management, Administrative and Advisory and Leasing Fees
Years ended December 31,
Jan 1 - Apr 1 -
1999 Mar 31, 1998 Dec 31, 1998 1997
---------------------------------------------------
Management Fees
AEGON $ 18,705 $31,952 $16,440 $119,328
======== ======= ======= ========
Brentway $ 50,683 $ - $44,587 $ -
======== ======= ======= ========
Leasing Fees
AEGON $ - $23,561 $ - $ 44,906
======== ======= ======= ========
Administrative and Advisory
Cedar Bay Realty Advisors, Inc. $ 97,872 $ - $73,404 $ -
======== ======= ======= ========
AEGON $ - $25,770 $ - $101,192
======== ======= ======= ========
HVB $100,000 $ - $58,808 $ -
======== ======= ======= ========
Legal
Stuart H. Widowski, Esq./SKR Management Corp. $ 28,350 $ - $ - $ -
======== ======= ======= ========
8. Co-tenancy Interest
On September 28, 1988, the Company purchased a 50% co-tenancy interest in
Germantown Square Shopping Center in Louisville, Kentucky. The remaining 50%
co-tenancy interest is owned by Life Investors, an affiliate of AEGON.
Germantown is managed solely by AEGON. The Company paid management fees of
$18,705 for 1999, $16,440 for the period April 1, 1998 to December 31,1998. As
of December 31, 1999 and 1998, amounts due to co-tenancy partner were $46,158
and $46,570, respectively, and amounts due from co-tenancy partner were $56,993
and $61,323, respectively.
9. Segment Disclosures
The Company owns all of the interests in real estate properties through the
Operating Partnership. The Company's portfolio consists of three commercial
properties and one retail property, located respectively in Illinois, Utah,
Florida and Kentucky. Each of the properties is evaluated on an individual
basis by the President and Vice President who have been identified as the Chief
Operating Decision Makers because of their final authority over resource
allocation.
II-30
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
9. Segment Disclosures (continued)
The accounting policies of the reportable segments are the same as described in
the summary of significant accounting policies.
The following table sets forth the components of the Company's revenue and
expenses and other related disclosures as required by SFAS Statement No.131 for
the years ended December 31, 1999 and 1998 respectively:
Cedar Income Fund, Ltd.
Combined Statement of Operations
Year ended December 31, 1999
Southpoint Corporate Broadbent Germantown Financial Consolidated
Parkway Center East Business Center Square And Other Totals
REVENUES
Base rents $ 996,824 $ 252,636 $ 557,996 $ 370,166 $ - $ 2,177,622
Expense recoveries 21,422 24,541 161,321 29,052 - 236,336
Other 75,000 - - 75,000
Interest - - - - 26,329 26,329
------------------------------------------------------------------------- -----------
Total revenues 1,018,246 352,177 719,317 399,218 26,329 2,515,287
EXPENSES
Real estate tax 110,321 49,868 61,091 37,317 - 258,597
Repairs and maintenance 133,131 24,504 80,008 35,610 - 273,253
Utilities 92,389 32,688 33,897 8,912 - 167,886
Management fee 51,463 18,290 35,900 18,705 - 124,358
Insurance 7,179 2,196 9,783 2,606 - 21,764
Other 2,116 14,860 27,179 472 - 44,627
Depreciation 207,749 102,116 105,716 77,135 - 492,716
Interest - - 127,700 - - 127,700
Directors' fees and - - - - 102,397 102,397
Administrative fee - - - - 97,872 97,872
Other administrative - - - - 343,901 343,901
Leasing commissions 30,415 22,365 20,695 6,781 - 80,256
------------------------------------------------------------------------- -----------
Total expenses 634,763 266,887 501,969 187,538 544,170 2,135,327
Net income (loss)
from operations before
limited partner's
interest $ 383,483 $ 85,290 $ 217,348 $ 211,680 ($517,841) $ 379,960
Total assets $5,832,506 $2,159,930 $3,353,712 $3,012,205 $2,234,207 $16,692,560
========== ========== ========== ========== ========== ===========
II-31
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Combined Statement of Operations
Year ended December 31, 1998
Southpoint Corporate Broadbent Germantown Financial Consolidated
Parkway Center East Business Center Square And Other Totals
REVENUES
Base rents $ 967,978 $ 298,586 $ 619,127 $ 337,807 $ - $ 2,223,498
Expense recoveries 11,437 24,841 166,566 79,030 - 281,874
Interest - - - - 59,653 59,653
---------- ---------- ---------- ---------- --------- -----------
Total revenues 979,415 323,427 785,693 416,837 59,653 2,565,025
---------- ---------- ---------- ---------- --------- -----------
EXPENSES
Real estate tax 113,633 50,710 60,669 37,749 262,761
Repairs and maintenance 122,763 22,388 83,384 23,785 252,320
Utilities 92,043 35,696 27,404 8,136 163,279
Management fee 48,981 16,303 39,249 21,987 126,520
Insurance 7,271 1,385 6,787 2,893 18,336
Other 5,949 796 6,056 1,428 14,229
Depreciation 216,171 73,556 112,326 78,357 480,410
Interest - - 130,197 - 130,197
Directors' fees and expenses - - - - 56,188 56,188
Administrative fee - - - - 9,180 99,180
Other administrative expenses - - - - 632,199 632,199
Leasing commissions 24,067 13,044 17,602 4,795 59,508
---------- ---------- ---------- ---------- --------- -----------
Total expenses 630,878 213,878 483,674 179,130 787,567 2,295,127
---------- ---------- ---------- ---------- --------- -----------
Net income (loss)
from operations before
limited partner's interest $ 348,537 $ 109,549 $ 302,019 $ 237,707 $(727,914) $ 269,898
========== ========== ========== ========== ========= ===========
Total assets $6,061,972 $2,119,423 $3,393,240 $3,102,363 $ 646,317 $15,323,315
========== ========== ========== ========== ========= ===========
II-32
UNI-INVEST (U.S.A.), LTD. (FORMERLY, CEDAR INCOME FUND, LTD.)
Notes to Consolidated Financial Statements (continued)
10. Selected Quarterly Financial Data (Unaudited)
Quarter Ended
--------------------------------------------------------- Year Ended
Year 3/31 6/30 9/30 12/31 12/31
- - ------------------------------------------------------------------------------------------------------------------------------
1999
Revenue $660,226 $675,946 $605,307 $573,808 $2,515,287
Net income (loss) 37,356 19,522 7,733 (141) 64,470
Basic and diluted net income per share .07 .04 .01 (-.01) .11
- - ------------------------------------------------------------------------------------------------------------------------------
1998
Revenue $670,324 $644,278 $635,612 $614,811 $2,565,025
Net income (loss) 175,726 20,686 (8,581) (7,883) 179,948
Basic and diluted net income per share .08 .01 (-.02) (-.01) .13
- - ------------------------------------------------------------------------------------------------------------------------------
1997
Revenue $560,915 $623,622 $626,237 $657,084 $2,467,858
Net income 124,207 182,421 181,052 12,506 500,186
Basic and diluted net income per share .06 .08 .08 .00 .22
Item 9. Changes in, and Disagreements with Accountants on, Accounting and
Financial Disclosure
None.
II-33
Part III.
Item 10. Directors and Executive Officers of the Registrant
RICHARD HOMBURG, age 50 is the Founder, President and Chairman of the Homburg
Uni-Corp Group, a real estate enterprise with offices in the U.S. (Colorado) and
Canada (Nova Scotia, New Brunswick and Alberta). Since 1991, he has been the
Chief Executive Officer of Uni-Invest N.V. a publicly-traded real estate fund
organized in the Netherlands and listed on the Amsterdam Stock Exchange. Mr.
Homburg is experienced in real estate development, sales, leasing, management,
financing, insurance, venture capital, joint ventures, asset management,
merchant banking and retail merchandising and manufacturing throughout Europe,
North America and Asia.
LEO S. ULLMAN, age 60, is President of the Company and has been Chairman and
President of SKR Management Corp. from 1994 through the current date; Mr. Ullman
served as Chairman of the Company from April 1998 until November 1999, when he
was replaced by Richard Homburg; Chairman of Brentway Management LLC from 1994
through the current date; President of Cedar Bay Realty Advisors, Inc. since its
formation in January 1998. Mr. Ullman has also been the President and sole
director of Selbridge Corp. and Buttzville Corp. (the two partners of CBC) from
1994 through the current date. From 1992 through 1995, Mr. Ullman was President
of API Management Services Corp. and API Asset Management, Inc. Mr. Ullman has
been involved in real estate property and asset management for approximately
twenty years. Mr. Ullman has been a member of the New York Bar since 1966. From
1993 until the end of 1998, Mr. Ullman served as "of counsel" to the New York
office of the law firm Schnader Harrison Segal & Lewis, LLP.
J.A.M.H. DER KINDEREN, age 59, was the Director of Investments from 1984 through
1994 for Rabobank Pension Fund, and has been or is Chairman of the Board of the
following entities: Noro America Real Estate B.V. (1995-present); Noro Amerika
Vast Goed B.V. (1985-present); Mass Mutual Pierson (M.M.P.) (1988-present); and,
from 1996 to the present, a director of Warner Building Corporation. Mr. der
Kinderen became a Director of the Company in 1998.
EVERETT B. MILLER, III, age 52, is currently the Senior Vice President and Chief
Executive Officer of CommonFund Realty, Inc. a regulated investment advisor.
Prior to that, starting in March 1997, Mr. Miller was the Senior Vice President
and Chief Executive Officer of two finite REITs, Endowment Realty Investors and
Endowment Realty Investors II. From January 1995 through March 1997, Mr. Miller
was the Principal Investment Officer for Real Estate and Alternative Investment
at the Office of the Treasurer of the State of Connecticut. Prior to that, Mr.
Miller was employed for twenty years at Travelers Realty Investment Co., at
which his last position was Senior Vice President. Mr. Miller became a Director
of the Company in 1998.
BRENDA J. WALKER, age 47, is Vice President of the Company and has been Vice
President of SKR Management Corp. from 1994 through the current date; Treasurer
of the Company from April 1998 until November 1999, when she was replaced by
Louis Marcus; President of Brentway Management LLC from 1994 through the current
date; Vice President of API Management Services Corp. and API Asset Management,
Inc. from 1992 through 1995. Ms.
III-1
Item 10. Directors and Executive Officers of the Registrant (continued)
Walker has been involved in real estate property and asset management for
approximately twenty years. Ms. Walker became Vice President and Director of the
Company in 1998.
JEAN-BERNARD WURM, age 50, has been a Director of HVB Capital Markets, Inc. and
its predecessor, B.V. Capital Markets, Inc. since January 1, 1993. Mr. Wurm
began his career with J.P. Morgan in Paris in the International Money Management
Group in Frankfurt as a corporate lending officer before moving to the U.S. in
1979. In 1986, Mr. Wurm started advising European investors in the U.S. real
estate market. From 1989 to 1992, Mr. Wurm was the President of U.S. Land which
provided European lenders with expertise and support in the workout or
disposition of their U.S. real estate assets. Mr. Wurm has been a member of the
finance committee of the GMHC since 1986 and has also been Treasurer of the
Sciences-Po Alumni Association for the last two years and a member of the Board
since 1988. Mr. Wurm became a Director of the Company in 1998. Mr. Wurm resigned
as Director of the Company effective December 31, 1999.
THEODORE FICHTENHOLZ, age 53, has been a private practicing attorney since 1993.
His offices are located in central Connecticut. He was first admitted to the Bar
in 1974 in New York. Mr. Fichtenholz's practice specializes in real estate and
financing matters. From 1985 until 1993, Mr. Fichtenholz was Managing Attorney
for Chase Enterprises, a privately held real estate company. From 1977 until
1985, Mr. Fichtenholz was a partner in a New York City law firm. Prior to 1977,
Mr. Fichtenholz held various positions with the City of New York. Mr.
Fichtenholz became a Director of the Company in 1998. Mr Fichtenholz resigned as
Director of the Company effective December 31, 1999.
LOUIS PH. MARCUS, age 53 received business and engineering degrees from
Rijksuniversiteit Groningen, the Netherlands. Mr. Marcus has 24 years of
management/experience at (publicly traded) companies in Europe. He is a former
Co-President of Metabouw, the Netherlands a real estate construction company and
President/Board Member of several entities within the Homburg Uni-Corp Group,
including Uni-Invest (U.S.A.) B.V.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The Company believes that during 1999 all of its officers, directors and holders
of more than 10% of its Common Stock complied with all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934.
Item 11. Executive Compensation
The officers and directors of the Company who are also affiliated with CBC and
the officers and directors of the Company who are affiliated with Uni-Invest
Holdings, B.V. (U.S.A) do not receive any remuneration for their services to the
Company other than reimbursement of travel and other expenses incurred in
connection with their duties. During 1999, directors not affiliated with CBC,
Mr. Miller, Mr. Wurm, Mr. der Kinderen, and Mr. Fichtenholz
III-2
Item 11. Executive Compensation (continued)
received an annual fee of $5,000 plus $750 for each board meeting attended.
The Company established a stock option plan (the "Plan") for the purpose of
attracting and retaining executive officers, directors and other key employees.
As of December 31, 1999, 500,000 of the Company's authorized shares of Common
Stock have been reserved for issuance under the Plan. The Plan is administered
by a committee of the Board of Directors, which committee will, among other
things, select the number of shares subject to each grant, the vesting period
for each grant and the exercise price (subject to applicable regulations with
respect to incentive stock options) for the options. As of December 31, 1999, no
options have been granted under the Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial 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, 2000. Each such
owner has sole voting and investment powers with respect to the Shares owned by
it.
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
Cedar Bay Company (1) 1,893,037 72%
c/o Brentway Management LLC
44 South Bayles Avenue, #304
Port Washington, New York 11050
Uni-Invest Holdings (U.S.A.) B.V. (2) 150,000 6%
Stadhouderskade 1
1054 ES Amsterdam
The Netherlands
Security Ownership of Management
The following table sets forth the number of shares of the Company beneficially
owned as of March 1, 2000 by each director, nominee, and officer and by all
Directors, nominees and officers as a group (6 persons).
III-3
Item 12. Security Ownership of Certain Beneficial Owners and Management
(continued)
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
Leo S. Ullman (1) (3) 1,893,237 72%
Brenda J. Walker 200 *
J.A.M. H. der Kinderen 200 *
Everett B. Miller, III 200 *
Jean-Bernard Wurm 0
Theodore Fichtenholz 0
Richard Homburg (2) (4) 150,000 6%
*Such holdings represent less than one percent of the outstanding shares.
(1) Represent 189,937 shares of New Common Stock and 1,703,300 units in the
Operating Partnership.
(2) Such shares are owned equally by Richard Homburg and three family members
(3) Mr. Ullman may be deemed to be the beneficial owner of 1,893,037 shares
owned by CBC. Mr. Ullman disclaims beneficial ownership of such shares.
(4) Mr. Homburg may be deemed to be the beneficial owner of 150,000 shares owned
by Uni-Invest Holdings (U.S.A.) B.V. Mr Homburg disclaims beneficial ownership
of more than 37,500 shares
Item 13. Certain Relationships and Related Transactions
The Company has no employees and has contracted with CBRA to provide the Company
with administrative, advisory, acquisition, divestiture, property management,
leasing and stockholder services. A description of the agreements between CBRA
and certain of its affiliates and the Company follows. The description of the
agreements is qualified in its entirety by reference to the terms and provisions
of such agreements.
CBC is a New York general partnership. The Point Associates, L.P. a Pennsylvania
limited partnership, and Triangle Center Associates, L.P. a Pennsylvania limited
partnership, were the sole partners of CBC during 1998. The general partner of
The Point Associates, L.P. is Selbridge Corp., a Delaware corporation. The
general partner of Triangle Center Associates is Buttzville Corp., a Delaware
corporation. Leo S. Ullman is the sole limited partner in each of The Point
Associates, L.P. and Triangle Center Associates, L.P. and is an executive
officer and a Director of each of Selbridge Corp. and Buttzville Corp. During
March and April 1999 The Point Associates, L.P. and Triangle Center Associates,
L.P., respectively transferred their interests in CBC to TPA Ownership L.L.C.
("TPA") resulting in TPA temporarily being sole partner of CBC. Hicks Management
Corp. ("Hicks"), Ledford Corp. ("Ledford"), and Thomsville Corp. ("Thomsville")
were equal members in TPA. Leo S. Ullman is an executive officer and a Director
of each of the aforementioned members of TPA. Effective December 31, 1999 TPA
was dissolved and all of the member interests were assigned to Hicks, Ledford,
and Thomsville, as general partnership interests, in equal one-third portions.
Immediately following and also effective December 31, 1999, each of the
aforementioned general partners transferred its one-third general partnership
interests to Duncomb Corp., Lindsay Management Corp., and Hicks Corp. The
transfer resulted in Duncomb Corp. having a 55% interest, Lindsay Management
Corp. a 40% interest, and Hicks Corp., a 5% interest. Mr. Ullman is an executive
officer and a director in Duncomb Corp., Lindsay Management Corp., and Hicks
Corp.
CBRA is wholly-owned by Mr. Ullman. Mr. Ullman is President and a Director of,
and Brenda J. Walker is Vice President of CBC.
Brentway is owned by Mr. Ullman and Ms. Walker. Mr. Ullman is Chairman and Ms.
Walker is President of Brentway.
III-4
Administrative and Advisory Services
CBRA provides administrative, advisory, acquisition and divestiture services to
the Company pursuant to the 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' prior written notice.
Under the Advisory Agreement, CBRA 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 stockholders of the Company and to
regulatory agencies, including the Internal Revenue Service, the Securities and
Exchange Commission, and similar state agencies.
CBRA receives fees for its administrative and advisory services as follows: (a)
a monthly administrative and advisory fee equal to 1/12 of 3/4 of 1% of the
estimated current value of real estate assets of the Company, plus 1/12 of 1/4
of 1% of the estimated current value of all other assets of the Company; (b) an
acquisition fee equal to 5% of the gross purchase price (before expenses and
without deducting indebtedness assumed) of any real property acquired during the
term of the Advisory Agreement; provided that the total of all such acquisition
fees plus
III-5
Item 13. Certain Relationships and Related Transactions (continued)
acquisition expenses in connection with the purchase of any real property shall
be reasonable and shall not exceed 6% of the amount paid or allocated to the
purchase, development, construction or improvement of a property, exclusive of
acquisition fees and acquisition expenses; and (c) a disposition fee equal to 3%
of the gross sales price (before expenses but without deducting any indebtedness
against the property) of any real property disposed of during the term of the
Advisory Agreement; provided that no disposition fee shall be paid unless and
until the stockholders have received certain distributions from the Company. In
addition, CBRA may receive one-half of the brokerage commission on such a
disposition but only up to 3% of the price actually paid for the property,
subject to certain limitations. Furthermore, if the Advisory Agreement is
terminated prior to the liquidation of the Company, CBRA will be entitled to
payment of disposition fees based on the ratio of the number of years the
Advisory Agreement was operative to the number of years from the date the
Advisory Agreement was entered into that such fee became payable. The Company
paid its former advisor approximately $101,000 in administrative fees for 1997.
The Company paid $99,180 to Cedar Bay in 1998 and 97,872 in 1999. No incentive,
acquisition or disposition fees were paid in 1998 or 1999.
Management Services
With the exception of Germantown Square, Brentway provides property management
and leasing services to the Company's real properties pursuant to the management
agreement. The term of the agreement is for one (1) year and is automatically
renewed annually for an additional year subject to the right of either party to
cancel upon 60 days' written notice. Under the agreement, Brentway 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 Brentway are to be fulfilled at the Company's
expense; provided, however, that the Company is not required to reimburse
Brentway for personnel expenses other than for on-site personnel at the
properties managed. Brentway 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 up to 6% of the aggregate rent to be paid
during the term of the lease procured. Due to Life Investors' ownership of the
other 50% undivided interest therein, AEGON continues to manage the retail
property, Germantown Square on terms similar to the above. As did the former
manager from inception through March 1998, Brentway has subcontracted with
various local management companies for site management and leasing services.
Brentway was paid $50,683 in property management fees in 1999. (See Note 7).
Financial Advisory Agreement
In 1998 the Company entered into a Financial Advisory Agreement (the "HVB
Agreement") with HVB Capital Markets Inc., as successor to B.V. Capital Markets,
Inc. ("HVB") pursuant to which HVB agreed to perform the following services as
financial advisor to the Company: (a) advise on acquisition financing and/or
lines of credit for future acquisitions; (b) advise on
III-6
Item 13. Certain Relationships and Related Transactions (continued)
acquisitions of United States real property interests and the consideration to
be paid therefor; (c) advise on private placements of the shares of the Company;
(d) assist the Board of Directors in developing suitable investment parameters
for the Company; (e) develop and maintain contacts on behalf of the Company with
institutions with substantial interests in real estate and capital markets; (f)
advise the Board with respect to additional private or public offerings of
equity securities of the Company; (g) review certain financial policy matters
with consultants, accountants, lenders, attorneys and other agents of the
Company; and (h) prepare periodic reports of its performance of the foregoing
services. As compensation for the foregoing services, the Company was required
to pay HVB, (i) .25% of the Company's net asset value, less any indebtedness
affecting such net value, but in any event, not less than $100,000 per year;
(ii) a one-time payment of 1.5% of 90% of the agreed value of properties
contributed to the Company or its affiliates by persons introduced to the
Company by HVB; and (iii) upon the Company becoming self-administered, a
one-time payment equal to five times the annual fee income attributable to fee
receipts from clients or contacts of HVB that have contributed property to the
Company. The term of the HVB Agreement was for a period of one (1) year and was
automatically renewed for additional one year periods subject to the right of
either party to cancel at the end of any year upon 60 days' written notice. HVB
was paid $100,000 for financial advisory services in 1999. The HVB agreement was
terminated effective December 31, 1999.
III-7
Part IV
Item 14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K
(a) List of Documents
1. Financial Statements.
The following financial statements are included in Item 8:
Consolidated Balance Sheets, December 31, 1999 and 1998.
Consolidated Statements of Operations, Years ended December 31, 1999, 1998 and
1997.
Consolidated Statements of Shareholders' Equity, Years ended December 31, 1999,
1998 and 1997.
Consolidated Statements of Cash Flows, Years ended December 31, 1999, 1998 and
1997.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
All 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.
IV-1
Item 14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K
(continued)
3. Exhibits
(3.1) Articles of Incorporation.
(3.2) By-laws.
(3.3) Agreement of Limited Partnership for the Operating Partnership.
(10.1) Administrative and Advisory Agreement dated April 2, 1998
between Cedar Bay Realty Advisors, Inc. and the Company.
(10.2) Management Agreement dated April 2, 1998 between Brentway
Management LLC and the Company.
(10.3) Financial Advisory Agreement dated June 1, 1998 between BV
Capital Markets, Inc. and the Company.
(b) Reports on Form 8-K.
None
(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.
IV-2
Item 15.
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.
- - ------------------------------- ---------------------------------
Leo S. Ullman Brenda J. Walker
President Vice President and Director
(principal executive officer) (principal financial officer)
---------------------------------
Ann Maneri
Controller
(principal accounting officer)
March 30, 2000
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.
- - ------------------------------- ---------------------------------
Richard Homburg J.A.M.H. der Kinderen
Director Director
/s/ Louis Ph. Marcus
- - -------------------------------
Louis Ph. Marcus
Director
/s/ Everett B. Miller, III
- - -------------------------------
Everett B. Miller, III
Director
March 30, 2000
IV-3
EXHIBIT INDEX
Exhibit
Item Title or Description
------- --------------------
(3.1) Articles of Incorporation.
(3.2) By-laws.
(3.3) Agreement of Limited Partnership for the Operating Partnership.
(10.1) Administrative and Advisory Agreement dated April 2, 1998
between Cedar Bay Realty Advisors, Inc. and the Company.
(10.2) Management Agreement dated April 2, 1998 between Brentway
Management LLC and the Company.
(10.3) Financial Advisory Agreement dated June 1, 1998 between BV
Capital Markets, Inc. and the Company.
(b) Reports on Form 8-K.
None
(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.
IV-4