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) December 24, 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 5. Other Events
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Homburg Invest USA Inc. Invests Aggregate of $3 Million in Cedar Income Fund,
Ltd. and Cedar Income Fund Partnership, L.P.
Homburg Invest USA Inc. ("Homburg USA"), a wholly-owned U.S. subsidiary of
Homburg Invest Inc., a real estate company listed on the Toronto (Canada) Stock
Exchange, has purchased on December 24, 2002 for $3 million, 3,300 preferred
units at $909.09 with a liquidation value of $1,000 each and a preferred
distribution rate of 9%, from Cedar Income Fund Partnership, L.P. (the
"Operating Partnership") of which Cedar Income Fund, Ltd. (the "Company"), is
the sole managing general partner. On or shortly after January 1, 2003, 552 of
such preferred units will be converted to 138,000 shares of common stock of the
Company at $3.6363 per share. At the next annual meeting of shareholders, the
Company will seek shareholder approval to issue 137,000 shares of additional
common stock also at $3.6363 per share, at which time 548 preferred units would
be converted by Homburg USA in exchange for the newly-approved common stock.
Also at that meeting, the Company will seek shareholder approval to have the
remaining 2,200 preferred units owned by Homburg USA become ultimately
convertible into common stock of the Company (upon thirty days' notice at
$4.0909 per share). The Operating Partnership may at any time redeem the
preferred units upon sixty days' notice at 120% of liquidation value.
Upon completion of these transactions, if approved by shareholders (it is
expected that affiliates of Homburg USA and Cedar Bay Company will vote their
shares in favor of the arrangements), Homburg USA will own 275,000 shares of new
common stock in addition to the 150,000 shares already owned by Homburg Invest
Inc. (which are expected to be transferred to Homburg USA), or an aggregate of
approximately 43% of the common shares outstanding, assuming no additional
shares are sold, no additional units of the Operating Partnership are converted
and no options or warrants are exercised. If all conversion rights available to
option, warrant and unit holders were exercised, Homburg Invest would own
approximately 26% of all shares outstanding.
In accordance with a certain "standstill" agreement entered into by the Company
and affiliates of Homburg USA, Homburg USA will have a continuing right to
purchase and hold up to 29.9% of the Company's voting stock in the event that
dilution from any source reduces its ownership interest below 29.9%.
Proceeds of the new equity funding from Homburg USA are expected to be used in
part to pay a $2 million payment due in connection with a certain second
mortgage financing incurred by the Company for the purchase of the Camp Hill
Mall (Camp Hill, PA) acquired by the Company in November 2002. That payment is
due on or before April 1, 2003. The remainder of the proceeds is expected to be
used to complete the pending purchase of three Giant supermarket-anchored
shopping center properties located in Newport, Halifax and New Cumberland, PA
and to fund the Company's share of equity in connection with the
previously-announced purchase of land and development of an L.A. Fitness
facility at Fort Washington, PA.
It should be noted that the issue of common stock as well as OP units, and
redeemable convertible preferred OP units of the Operating Partnership, to
Homburg Invest USA Inc., as and when completed, may result in potential
disqualification of the Company as a real estate investment trust ("REIT") in
2003, insofar as Mr. Richard Homburg, directly or indirectly, together with the
four other largest shareholders of the Company, may be deemed to own more than
50% of the value of the stock of the Company. If more than 50% of the stock of
the Company is owned, directly or indirectly, by five or fewer individual
shareholders, at any time during the last six months of the Company's fiscal
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Item 5. Other Events
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Homburg Invest USA Inc. Invests Aggregate of $3 Million in Cedar Income Fund,
Ltd. and Cedar Income Fund Partnership, L.P. (continued)
year, the Company would fail to meet the relevant shareholding test for
continued REIT status. The loss of REIT status while creating no immediate
income taxes for the Company and its shareholders, would mean, among other
things, that the Company itself would be subject to tax on any net taxable
income (including, upon sale, any built-in gain interest in any asset of the
Company as of the date of such disqualification) and the Company would no longer
be able to designate any (portion of) dividends distributed to shareholders as a
capital gain dividend (generally taxed to shareholders as long-term capital
gain). The Company does not presently expect to have any taxable income during
the taxable year-ended December 31, 2003, and does not contemplate distribution
of any dividends during the year with respect to its common stock. Dividends on
preferred stock are contemplated in accordance with the descriptions above and
perhaps with respect to other preferred stock or units which may be issued from
time to time.
Previous Homburg Transaction
In November 5, 1999, the Company and affiliates of Mr. Homburg entered into a
Subscription Agreement pursuant to which an affiliate of Mr. Homburg acquired
through a private placement, 150,000 shares of common stock of the Company at
$4.50 per share. Also in accordance with that Agreement, Mr. Homburg at that
time was elected Chairman of the Board of Directors of the Company. Mr. Homburg
and his affiliates also at that time entered into a Stockholders' Agreement with
Cedar Bay Company agreeing 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 and other arrangements common to such Stockholders'
Agreements. As certain funding by affiliates of Mr. Homburg did not occur, the
Company, pursuant to the terms of the Subscription Agreement, upon notice given
in August 2000, exercised its right to unwind the entire transaction. Mr.
Homburg, at that time, submitted his resignation as Chairman of the Board and
the Company bought back 150,000 shares of the Company's common stock from Mr.
Homburg's affiliate at $4.50 per share.
Also at or about that time, the Company bought back 100,000 shares in the
aggregate from seven shareholders introduced by Mr. Homburg to the Company at a
price of $4.60 per share.
The 150,000 shares of the Company's common stock originally held by Uni-Invest
Holdings (USA) B.V., a Netherlands affiliate of Mr. Homburg, were subsequently
transferred to Uni-Invest Holdings Canada Ltd., a Canadian company affiliated
with Mr. Homburg, by the Netherlands company. That Canadian company, in turn,
through a merger and change of name became Homburg Invest Inc., a real estate
company now listed on the Toronto Stock Exchange. Mr. Homburg presently owns
approximately 62% of Homburg Invest Inc.
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Item 5. Other Events
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Richard Homburg Elected Director
Richard Homburg (53), who is Chairman and CEO of Homburg Invest Inc. and of
Homburg USA Inc., was elected to the Board of Directors of the Company, to hold
such position until the next Annual Meeting of Shareholders, at which time he
will stand for election by the shareholders for a full term. He joins Frank
Matheson, who is CEO of Homburg Canada Incorporated, as members of the Board
representing Homburg Invest Inc. and Homburg USA. Mr. Homburg is a Canadian
citizen, resident in the Netherlands and Canada, and until November 2002, was
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., of which Mr. Homburg acquired control in 1991, grew
from approximately $90 million in assets in 1991 to an asset value of
approximately $2 billion in 2002. Mr. Homburg sold his shares in Uni-Invest,
N.V., including his "control" shares, to a group headed by affiliates of Lehman
Brothers in November of 2002.
Mr. Homburg and his family also control the Homburg Uni-Corp Group of Companies
which owns certain commercial, office, retail, warehouse and residential
properties in certain western states of the U.S. and Canada.
Mr. Homburg also recently acquired in 2002, control of another publicly-traded
company listed on the Amsterdam Stock Exchange (Nederlandse Elevator
Maatschappij, N.V.).
The materials contained 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 the 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.
The foregoing discussions prepared by management of the Company may contain
certain forward-looking statements within the meaning of the Securities Acts
with respect to the Company's expectations for future periods. Although the
Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, the actual results may differ
materially from those set forth in such forward-looking statements; the Company
can give no assurances that its expectations will in fact be achieved.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
The following exhibits are included herein:
(10.1) Subscription Agreement dated as of December 18, 2002, by and between
Cedar Income Fund, Ltd. and Homburg Invest USA Inc.;
(10.2) Cedar Income Fund Partnership, L.P. Designation of the Voting
Powers, Designations, Preferences and Relative, Participating,
Optional or other Special Rights and Qualifications, Limitations or
Restrictions of the Series 'A' Preferred Partnership Units; and
(99.1) Press Release issued by Cedar Income Fund, Ltd., regarding Homburg
Transaction and Related Matters, dated December 27, 2002.
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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: January 7, 2003
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