SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 22, 2002
CEDAR INCOME FUND, LTD.
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(Exact name of registrant as specified in charter)
Maryland 0-14510 42-1241468
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(State or other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
44 South Bayles Avenue, Port Washington, New York 11050
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 767-6492
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
Purchase of Camp Hill Mall, Camp Hill, PA
As of November 22, 2002, pursuant to an Agreement of Purchase and Sale effective
as of August 14, 2002, as amended, Cedar Income Fund Partnership, L.P. (the
"Operating Partnership") through a newly-created limited liability company
("Cedar-Camp Hill, LLC" or "Borrower"), in which the Operating Partnership is
the sole member, purchased the Camp Hill Mall, an approximate 520,000 square
foot regional shopping mall with several outparcels located on approximately 44
acres in Camp Hill, Pennsylvania ("Camp Hill") for approximately $17.2 million,
plus closing costs of approximately $1 million. Anchor tenants include Boscov's,
a Giant supermarket, Barnes & Noble and Zany Brainy. The Seller is an affiliate
of the Connecticut General Life Insurance Company.
Cedar Bay Realty Advisors, Inc. ("CBRA"), advisor to the Company, is entitled to
receive a 1% ($172,000) acquisition fee. Such acquisition fee shall be paid out
of available cash. CBRA is wholly-owned by Leo S. Ullman. Mr. Ullman is
President and Chairman of the Board of the Company.
Purchase of the property was funded with a first mortgage from Citizens Bank of
Pennsylvania ("Citizens Bank") in the amount of $14 million. The loan is for a
period of 24 months plus an option for an additional 12 month period to be
exercised upon at least 30 days' written notice prior to the maturity of the
initial term.
The interest rate on the loan was determined by a "spread" of 195 basis points
over 30-day LIBOR (London Inter Bank Offered Rate). The Borrower entered into an
interest rate "swap" for the entire amount and term of the loan, swapping 30-day
LIBOR for a fixed rate of 2.79%, so as to result in a fixed rate of 4.74%.
Interest is payable monthly on an interest only basis for the initial term of
the loan. The loan is prepayable at any time without penalty except for any
applicable "breakage fees" under the interest rate protection agreement.
Repayment of the loan is with recourse only to the property, except that Cedar
Income Fund, Ltd. (the "Company") and the Operating Partnership have guaranteed
repayment of 25% of the loan amount, and are also responsible, without
limitation, for liability under the loan resulting from fraud or willful
misrepresentation, environmental matters, retention of funds within the
possession of the Borrower or guarantor after an event of default or
misappropriation of proceeds.
The Borrower paid a commitment fee of 0.75% of the loan amount to the lender and
a 0.75% broker loan fee to a third party. In the event Borrower opts to extend
the term of the loan for an additional year, an extension fee equal to 1/8 of 1%
of the then-outstanding loan balance would be due. Extension of the loan would
also be subject to certain coverage ratios, continued occupancy by certain
anchor tenants, and to the absence of any default or material adverse change in
the financial condition of the Borrower.
At closing, SWH Funding Corp. ("SWH") funded $6 million of which approximately
$4.3 million was used to fund the purchase and closing costs for the Camp Hill
property and to provide approximately $100,000 of working capital. The balance
of the net SWH funding, approximately $1.3 million, was used to pay off the
then-existing loan balance of approximately $880,000, (attributable to financing
provided by SWH with respect to the acquisition, in October 2001, of three
supermarket anchored shopping centers in the Philadelphia, Pennsylvania area),
together with certain "exit fees" of approximately $500,000. The term of the SWH
loan shall be until November 30, 2005. The loan carries an interest rate of
12.5% (14% from December 1, 2004 through maturity) on any outstanding balance
and provides for monthly principal payments of $50,000 each commencing January
1, 2003, a $2 million payment (the first mandatory prepayment) on April 1, 2003,
continued payments of $50,000 on the 5th through 12th months and $60,000 from
the 13th through 17th months, $3 million (the second mandatory prepayment) on
the 18th month, and $60,000 from the 19th month through maturity. In the event
the first mandatory prepayment of $2 million is not made on April 1, 2003, the
monthly principal payments are increased to $150,000 per month commencing on the
5th month through and including the 12th month and $200,000 commencing in the
13th month through the 17th month. If the second mandatory prepayment (of $3
million) is not made on the 18th month, the Borrower will be required to pay
$250,000 per month commencing in the 19th month through maturity.
In addition to the interest and principal payments, SWH received a funding fee
equal to 5% of the loan amount ($300,000) at closing and will receive an exit
fee of $120,000 if the loan is paid on or prior to February 28, 2004; if repaid
subsequent to February 28, 2004, SWH will receive the sum of $120,000 plus the
product of (i) $30,000 and (ii) the number of months between February 2004 and
the date the loan is paid in full. The loan may be repaid at any time after six
months in whole or in part without penalty. In the event of default, in addition
to a default interest rate of 17.5%, Borrower will also be required to pay a
late charge equal to 5% of the amount overdue.
The security for repayment of the SWH financing remains the Company's equity
interests (owned through certain single purpose LLC's) in those three
supermarket-anchored properties, together with a pledge of the Operating
Partnership's interest in the LLC which now owns the Camp Hill property, which
is subordinate to Citizens Bank's mortgage. Citizens Bank and SWH have entered
into certain inter-creditor agreements which provide, among other things, for
notice and other procedures in the event of a default under either of the loan
agreements.
The Camp Hill Mall presently generates net operating income of approximately
$1.2 million. Such level of net operating income includes annualized income from
short-term leases, income (based upon historic results) from specialty leasing
activity and percentage rent income from one of the center's anchors. In the
event that either the short-term leases are not renewed or replaced, or the
specialty leasing activity and/or percentage rent income is less than expected,
then future net operating income may be substantially less than $1.2 million.
Annualized debt service on the first mortgage and the SWH financing in the
aggregate, excluding any mandatory prepayments, will be approximately $502,000
for the first three months and $1,100,000 for the fourth through 12th months.
Management believes that it will be able to make the first mandatory prepayment
and any operating deficit from proceeds of refinancings in connection with
proposed redevelopment of the Camp Hill property either by the Company alone or
with one or more joint venture partner(s), corporate financings through the
issuance of additional common stock and new preferred stock, and/or the sale of
(interests in) one or more of its properties, including, without limitation, the
Camp Hill property itself and/or the three supermarket-anchored properties in
the Philadelphia, Pennsylvania area mentioned above. However, there can be no
assurances with respect to the Company's ability to raise such funds.
The materials herein include summaries prepared by management of written
agreements with respect to the transactions described. Such summaries are
intended to reflect and describe the terms and provisions of various agreements
with respect to such transactions and are subject in each case to the terms and
provisions of the underlying agreements, where applicable, filed together with
this report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of the property acquired will be filed
separately.
(b) Pro Forma financial information relative to the acquired property
will be filed separately.
(c) Exhibits
The following exhibits are included herein:
(10.1) Agreement of Purchase and Sale between Connecticut General Life
Insurance Company and Cedar Income Fund Partnership, L.P., dated
August 12, 2002;
(10.2) First Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated September 12, 2002;
(10.3) Second Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated as of October 31, 2002;
(10.4) Third Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated as of November 15, 2002;
(10.5) Assignment and Assumption of Contract of sale between Cedar Income
Fund Partnership, L.P. and Cedar-Camp Hill, LLC dated as of
November __, 2002;
(10.6) Limited Liability Company Agreement of Cedar-Camp Hill, LLC by
Cedar Income Fund Partnership, L.P., effective as of November 1,
2002;
(10.7) Property Management Agreement by and between Cedar-Camp Hill, LLC
and Brentway Management LLC dated as of November __, 2002;
(10.8) Promissory Note to Cedar Income Fund Partnership, L.P. by SWH
Funding Corp. in the amount of $6,000,000, dated as of November __,
2002;
(10.9) Loan Agreement by and between SWH Funding Corp. and Cedar Income
Fund Partnership, L.P., dated as of November __, 2002;
(10.10) Loan Agreement by and between Cedar-Camp Hill, LLC and Citizens
Bank of Pennsylvania, executed on November 14, 2002;
(10.11) Open-End Mortgage and Security Agreement between Cedar Camp Hill,
LLC, Cedar Bay Realty Advisors, Inc. and Citizens Bank of
Pennsylvania, executed on November 14, 2002;
(10.12) Promissory Note to Cedar-Camp Hill, LLC by Citizens Bank of
Pennsylvania in the amount of $14,000,000, executed on November 14,
2002 for November 15, 2002;
(10.13) Guaranty and Suretyship Agreement by Cedar Income Fund, Ltd. and
Cedar Income Fund Partnership, L.P. in favor of Citizens Bank of
Pennsylvania, executed on November 14, 2002 for delivery on
November 15, 2002;
(10.14) Environmental Indemnity Agreement by Cedar-Camp Hill, LLC as
Borrower and Citizens Bank of Pennsylvania as Lender on that
certain parcel of land identified as Camp Hill Mall, executed on
November 14, 2002 for delivery on November 15, 2002;
(10.15) General Collateral Assignment and Security Agreement by and between
Cedar-Camp Hill, LLC and Citizens Bank of Pennsylvania, executed on
November 14, 2002 for delivery on November 15, 2002;
(10.16) Assignment of Leases and Rents by Cedar-Camp Hill, LLC and Citizens
Bank of Pennsylvania, executed on November 14, 2002 for November
15, 2002;
(10.17) Assignment and Assumption Agreement of Agreement for Completion and
Guarantee between Connecticut General Life Insurance Company and
Cedar-Camp Hill, LLC, executed as of November ___, 2002;
(10.18) Assignment and Assumption of Leases and Security Deposits by and
between Connecticut General Life Insurance Company and Cedar-Camp
Hill, LLC, executed as of November ___, 2002;
(10.19) Bill of Sale and General Assignment by Connecticut General Life
Insurance Company conveying to Cedar-Camp Hill, LLC, dated as of
November ___, 2002;
(10.20) Indenture (Deed) between Connecticut General Life Insurance Company
and Cedar-Camp Hill, LLC; dated as of November __, 2002;
(10.21) Side Letter from Connecticut General Life Insurance Company to
Cedar-Camp Hill, LLC regarding receivables, dated November 15,
2002;
(10.22) Pledge and Security Agreement by Cedar Income Fund Partnership,
L.P. and SWH Funding Corp. regarding that certain Loan Agreement;
dated as of November 22, 2002;
(10.23) Agreement and Acknowledgement of Pledge and Security Agreement to
SWH Funding Corp. by Cedar Income Fund Partnership, L.P. and Cedar
Center Holdings L.L.C.3, dated as of November 22, 2002;
(10.24) Agreement and Acknowledgement of Pledge and Security Agreement to
SWH Funding Corp. by Cedar Income Fund Partnership, L.P. and
Cedar-Camp Hill, LLC, dated as of November 22, 2002;
(10.25) Guaranty made by Cedar Income Fund, Ltd. to SWH Funding Corp.
regarding that certain Loan Agreement, dated as of November 22,
2002;
(10.26) Intercreditor Recognition Agreement among Citizens Bank of
Pennsylvania, SWH Funding Corp., Cedar-Camp Hill, LLC and Cedar
Income Fund Partnership, L.P., dated as of November 22, 2002;
(10.27) Citizens Bank of Pennsylvania Interest Rate Swap Agreement for
Cedar-Camp Hill, LLC, dated as of November 22, 2002;
(99.1) Press Release issued by Cedar Income Fund, Ltd., regarding purchase
of Camp Hill Mall, Camp Hill, Pennsylvania, dated November 25,
2002.
SIGNATURES
Pursuant to the requirements 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.
By: /s/ Leo S. Ullman
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Leo S. Ullman
Chairman
Dated: December 9, 2002