SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-12634
CAMBRIDGE + RELATED HOUSING
PROPERTIES LIMITED PARTNERSHIP
------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 13-3161322
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- - ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
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 ___
<PAGE>
PART I
Item 1. Financial Statements
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
======= ============
May 31, February 28,
1997 1997
------- ------------
ASSETS
Property and equipment, net of
accumulated depreciation of
$81,642,525 and $80,183,677,
respectively $ 92,266,668 $93,530,519
Cash and cash equivalents 4,071,962 5,981,506
Certificates of deposit 202,888 201,986
Cash - restricted for tenants'
security deposits 1,096,631 1,082,255
Mortgage escrow deposits 8,641,515 8,098,227
Rents receivable 277,355 303,172
Prepaid expenses and other assets 882,558 1,164,356
------------ ------------
Total assets $107,439,577 $110,362,021
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 63,008,103 $ 63,599,388
Purchase money notes payable
(Note 2) 56,929,115 56,929,115
Due to selling partners (Note 2) 64,776,633 63,552,033
Accounts payable, accrued expenses
and other liabilities 4,193,858 4,448,032
Tenants' security deposits payable 1,096,631 1,082,255
Due to general partners of
subsidiaries and their affiliates 825,087 1,152,253
Due to general partners and
affiliates 1,950,594 1,742,027
Distribution payable 0 1,111,554
------------ ------------
Total liabilities 192,780,021 193,616,657
Minority interest 78,743 80,374
------------ ------------
Commitments and contingencies (Note 5)
Partners' deficit:
Limited partners (84,116,464) (82,053,129)
General partners (1,302,723) (1,281,881)
------------ ------------
Total partners' deficit (85,419,187) (83,335,010)
------------ ------------
Total liabilities and partners' deficit $107,439,577 $110,362,021
============ ============
See Accompanying Notes to Consolidated Financial Statements
2
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
=========================
Three Months Ended
May 31,
-------------------------
1997 1996
-------------------------
Revenues
Rentals, net $ 7,070,304 $ 7,446,678
Other 213,132 198,269
----------- -----------
Total revenues 7,283,436 7,644,947
----------- -----------
Expenses
Selling and renting 119,615 115,377
Administrative and management 1,108,194 1,161,322
Administrative and management-
related parties (Note 3) 687,013 474,408
Operating 1,455,457 1,409,865
Repairs and maintenance 1,749,425 1,725,969
Taxes and insurance 887,682 955,279
Interest 1,901,242 2,114,894
Depreciation 1,458,848 1,637,476
----------- -----------
Total expenses 9,367,476 9,594,590
----------- -----------
(2,084,040) (1,949,643)
Minority interest in (income) loss
of subsidiaries (137) 589
----------- -----------
Net loss $(2,084,177) $(1,949,054)
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
3
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Partners' Deficit
(Unaudited)
=============================================
Limited General
Total Partners Partners
---------------------------------------------
Balance-
March 1, 1997 $(83,335,010) $(82,053,129) $(1,281,881)
Net loss
-three months ended
May 31, 1997 (2,084,177) (2,063,335) (20,842)
------------ ------------ ------------
Balance-
May 31, 1997 $(85,419,187) $(84,116,464) $(1,302,723)
============ ============ ============
See Accompanying Notes to Consolidated Financial Statements
4
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(Unaudited)
===========================
Three Months Ended
May 31,
---------------------------
1997 1996
----------- -----------
Cash flows from operating activities:
Net loss $(2,084,177) $(1,949,054)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation 1,458,848 1,637,476
Minority interest in income (loss)
of subsidiaries 137 (589)
Increase in cash-restricted
for tenants' security deposits (14,376) (16,226)
Increase in mortgage escrow deposits (543,288) (679,157)
Decrease (increase) in rents receivable 25,817 (34,282)
Decrease in prepaid
expenses and other assets 281,798 282,616
Increase in due to selling partners 1,268,483 1,373,155
Decrease in accounts payable,
accrued expenses and other liabilities (254,174) (242,699)
Increase in tenants' security
deposits payable 14,376 16,226
(Decrease) increase in due to general
partners of subsidiaries and their
affiliates (327,166) 45,582
Increase in due to
general partners and affiliates 208,567 44,832
----------- -----------
Total adjustments 2,119,022 2,426,934
----------- -----------
Net cash provided by
operating activities 34,845 477,880
----------- -----------
Cash flows from investing activities:
Increase in certificates of deposit (902) 0
Acquisitions of property and
equipment (194,997) (99,962)
----------- -----------
Net cash used in
investing activities (195,899) (99,962)
----------- -----------
See Accompanying Notes to Consolidated Financial Statements
5
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(continued)
(Unaudited)
==========================
Three Months Ended
May 31,
--------------------------
1997 1996
---------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (591,285) (465,755)
Payments to selling partners (43,883) (180,264)
Decrease in minority interest (1,768) (3,887)
Decrease in distribution payable (1,111,554) 0
----------- -----------
Net cash used in financing activities (1,748,490) (649,906)
----------- -----------
Net decrease in cash and
cash equivalents (1,909,544) (271,988)
Cash and cash equivalents at
beginning of period 5,981,506 4,277,246
----------- -----------
Cash and cash equivalents at
end of period $ 4,071,962 $4,005,258
=========== ==========
See Accompanying Notes to Consolidated Financial Statements
6
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1997
(Unaudited)
Note 1 - General
The consolidated financial statements for the three months ended May 31, 1997
and 1996 include the accounts of Cambridge + Related Housing Properties Limited
Partnership, a Massachusetts limited partnership (the "Partnership") and 41 and
44 subsidiary partnerships ("subsidiary partnerships" or "Local Partnerships"),
respectively. The Partnership is a limited partner, with an ownership interest
of 98.99% in each of the subsidiary partnerships. Through the rights of the
Partnership and/or a General Partner, which General Partner has a contractual
obligation to act on behalf of the Partnership, to remove the general partner of
the subsidiary local partnerships and to approve certain major operating and
financial decisions, the Partnership has a controlling financial interest in the
subsidiary local partnerships.
The Partnership's fiscal quarter ends May 31. All subsidiaries have fiscal
quarters ending March 31. Accounts of the subsidiary partnerships have been
adjusted for intercompany transactions from April 1 through May 31.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $5,000 and $4,200 for the three months ended May 31,
1997 and 1996, respectively. The Partnership's investment in each subsidiary is
equal to the respective subsidiary's partners' equity less minority interest
capital, if any.
These unaudited financial statements have been prepared on the same basis as the
audited financial statements included in the Partnership's Form 10-K/A-1 for the
year ended February 28, 1997. In the opinion of the General Partners, the
accompanying unaudited financial statements contain all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position of the Partnership as of May 31, 1997 and the results of operations and
cash flows for the three months ended May 31, 1997 and 1996. However, the
operating results for the
7
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1997
(Unaudited)
Note 1 - General (continued)
three months ended May 31, 1997 may not be indicative of the results for the
year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's February 28, 1997 Annual Report on Form 10-K/A-1.
Note 2 - Purchase Money Notes Payable
Nonrecourse Purchase Money Notes in the original amount of $61,029,115 were
issued to the selling partners of the subsidiary partnerships as part of the
purchase price, and are secured only by the Partnership's interest in the
subsidiary partnership to which the note relates. On June 3, 1996 and September
17, 1996, the properties and the related assets and liabilities owned by two
subsidiary partnerships were sold to third parties and on August 15, 1996 and on
April 25, 1997 the Partnership's Local Partnership Interest in two other Local
Partnership's were sold to a third party and the Local Partnership's general
partners, respectively. A portion of the net proceeds were used to settle the
associated purchase money notes and accrued interest thereon.
The Purchase Money Notes, which provide for simple interest at the rate of 9%
per annum through maturity, which will occur during the period July 1998 to
December 1999, will not be in default during the basic term (generally fifteen
years) if not less than 60% of the cash flow actually distributed to the
Partnership by the corresponding subsidiary partnership (generated by the
operations, as defined) is applied first to accrued interest and then to current
interest thereon. Any interest not paid currently accrues, without further
interest thereon, through the due date of the note. All accrued and unpaid
interest must be paid on the due date of the note, unless the Partnership
exercises an extension right. Continued accrual of such interest without payment
would impact the effective rate of the notes, specifically by reducing the
current effective interest rate of 9%. The exact effect is not determinable
inasmuch as it is dependent on the actual future interest payments and ultimate
repayment dates of the notes. Unpaid interest of $64,651,584 and $63,426,985 at
May 31, 1997 and February 28, 1997, respectively, has been accrued and is
included in the caption due to selling partners. In general, the interest on and
8
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1997
(Unaudited)
Note 2 - Purchase Money Notes Payable (continued)
the principal of each Purchase Money Note is also payable to the extent of the
Partnership's actual receipt of proceeds from the sale or refinancing of the
Apartment Complex, or in some cases the Local Partnership Interest to which the
Purchase Money Note relates.
The Partnership may elect, upon the payment of an extension fee of 1 1/2% per
annum of the outstanding principal amount, to extend the term of the Purchase
Money Note for up to five additional years. The Partnership may also defer
payment of any accrued and unpaid interest until the due date of the note. The
Partnership expects that upon maturity it will be required to refinance or sell
its investments in the Local Partnerships in order to pay the Purchase Money
Notes and accrued interest thereon. Based on the historical operating results of
the Local Partnerships and the current economic conditions including changes in
tax laws, it is uncertain as to whether the proceeds from such sales will be
sufficient to meet the outstanding balances. Management is working with the
selling partners to restructure and/or refinance the notes. The Purchase Money
Notes are without personal recourse to either the Partnership or any of its
partners and the sellers' recourse, in the event of non-payment, would be to
foreclose on the Partnership's interests in the respective Local Partnerships.
Cash flow distributions aggregating $172,351 and $380,986 (which includes
$80,546 held in escrow for expenses relating to refinancings or sales) were made
to the Partnership for the three months ended May 31, 1997 and 1996, of which
$103,410 and $180,264, respectively, was used to pay interest on the purchase
money notes. Of the $103,410 interest on the purchase money notes, $59,526 was
actually paid in the subsequent quarter. Distribution of proceeds from a sale
aggregating $100,000 was made to the Partnership during the three months ended
May 31, 1997, none of which was used to pay principal and interest on the
Purchase Money Notes.
9
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1997
(Unaudited)
Note 3 - Related Party Transactions
The costs incurred to related parties for the three months ended May 31, 1997
and 1996 were as follows:
Three Months Ended
May 31,
---------------------
1997 1996
----------------------
Partnership management fees (a) $ 241,500 $ 30,413
Expense reimbursement (b) 58,000 59,423
Property management fees (c) 380,513 377,572
Local administrative fee (d) 7,000 7,000
--------- ---------
$ 687,013 $ 474,408
========= =========
(a) After all other expenses of the Partnership are paid, an annual partnership
management fee of up to .5% of invested assets is payable to the Partnership's
general partners and affiliates. Partnership management fees owed to the General
Partners amounting to approximately $1,082,000 and $936,000 were accrued and
unpaid as of May 31, 1997 and February 28, 1997.
(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partners performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnership's performance.
(c) Property management fees incurred by Local Partnerships to affiliates of the
Local Partnerships amounted to $380,513 and $377,572 for the three months ended
May 31, 1997 and 1996, respectively. Of such fees $67,592 and $77,894 were
incurred to a company which is also an affiliate of the Related General Partner.
(d) Cambridge/Related Housing Associates Limited Partnership, the special
limited partner of each of the subsidiary partnerships, owning .01%, is entitled
to receive a local administrative fee of up to $2,500 per year from each
subsidiary partnership.
10
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1997
(Unaudited)
Note 4 - Sale of Property
On April 25, 1997, the Partnership's Local Partnership Interest in Los
Caballeros Apartments ("Los Caballeros") was sold to the general partners of Los
Caballeros for $100,000, resulting in a gain in the amount of approximately
$600,000. No proceeds were used to settle the associated Purchase Money Note and
accrued interest which had a total outstanding balance of $3,187,950, resulting
in forgiveness of indebtedness income. For financial reporting purposes, this
transaction will be reflected in the financial statements in the second quarter
coinciding with Los Caballeros' fiscal quarter which includes the date of sale.
For tax purposes, the entire gain to be realized by the Partnership is
anticipated to be approximately $5,000,000.
Note 5 - Commitments and Contingencies
There were no changes and/or additions to disclosures regarding the subsidiary
partnerships which were included in the Partnership's Annual Report on Form
10-K/A-1 for the period ended February 28, 1997.
a) Certificate of Deposit
The Partnership has a Certificate of Deposit in the amount of $72,888 at May 31,
1997 to secure an overdraft in Town and Country's bank account. The amount of
the overdraft was approximately $43,000 at March 31, 1997.
b) Other Restricted Cash
In addition, the Partnership and/or its subsidiary partnerships may from time to
time use a portion of their cash or property to secure operating credit lines.
As of May 31, 1997, $130,000 of the Partnership's funds have been so pledged to
secure operating credit lines at seven subsidiary partnerships.
11
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- - -------------------------------
The Partnership's capital has been invested primarily in forty-four subsidiary
partnerships (the "Local Partnerships" or "subsidiary partnerships"). As of
December 1984, the Partnership had completed its cash investment of
approximately $36,638,000 (including expenses) in the Local Partnerships (the
"Local Partnership Interests"). On June 3, 1996 and September 17, 1996 the
properties and the related assets and liabilities owned by two Local
Partnerships were sold to third parties and on August 15, 1996 and on April 25,
1997 the Partnership's Local Partnership Interest in two other Local
Partnerships were sold to a third party and the Local Partnership's general
partners (see below), respectively.
During the three months ended May 31, 1997, cash and cash equivalents of the
Partnership and its 41 consolidated Local Partnerships decreased approximately
$1,910,000. This decrease was primarily due to acquisitions of property and
equipment ($195,000), principal payments of mortgage notes payable ($591,000),
payments to selling partners ($44,000) and a decrease in distribution payable
($1,112,000) which exceeded cash provided by operating activities ($35,000).
Included in the adjustments to reconcile the net loss to cash provided by
operating activities is depreciation in the amount of approximately $1,459,000.
The Partnership's primary sources of funds are (i) cash distributions from
operations of the Local Partnerships in which the Partnership has invested, (ii)
interest earned on funds and (iii) cash in working capital reserves. All of
these sources of funds are available to meet the obligations of the Partnership.
During the three months ended May 31, 1997 and 1996, the Partnership received
cash flow distributions from operations of the Local Partnerships of
approximately $172,000 and $381,000 (which includes approximately $0 and $81,000
held in escrow for expenses relating to refinancings or sales), respectively, of
which approximately $103,000 (not including approximately $60,000 which was paid
in the second quarter) and $180,000, respectively, was used to pay interest on
the related Local Partnership purchase money notes. In addition, a distribution
of proceeds from the sale of Los Cabelleros aggregating $100,000 was made to the
Partnership during the three months ended May 31, 1997, none of which was used
to pay principal and interest on the Purchase Money Notes.
The Partnership had a working capital reserve of approximately $1,310,000 and
$1,211,000 (which does not include approximately
12
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$1,112,000 of net proceeds from sale of properties which was distributed to
limited partners and General Partners in March 1997) at May 31, 1997 and
February 28, 1997, respectively, of which approximately $203,000 and $202,000,
respectively, was restricted to secure an overdraft in Town and Country's bank
account and to secure operating credit lines at seven other Local Partnerships.
The working capital reserve is temporarily invested in bank certificates of
deposits or money market accounts which can be easily liquidated to meet
obligations as they arise. The General Partners believe that the Partnership's
reserves, net proceeds from future sales and future cash flow distributions will
be adequate for its operating needs, and plans to continue investing available
reserves in short term investments. In March 1997, a distribution of
approximately $1,100,000 and $11,000 was paid to the limited partners and
General Partners, respectively, from net proceeds from the sale of properties.
Partnership management fees owed to the General Partners amounting to
approximately $1,082,000 and $936,000 were accrued and unpaid as of May 31, 1997
and February 28, 1997.
Nonrecourse Purchase Money Notes in the original amount of $61,029,115 were
issued to the selling partners of the subsidiary partnerships as part of the
purchase price, and are secured only by the Partnership's interest in the
subsidiary partnership to which the note relates. On June 3, 1996 and September
17, 1996, the properties and the related assets and liabilities owned by two
subsidiary partnerships were sold to third parties and on August 15, 1996 and on
April 25, 1997 the Partnership's Local Partnership Interest in two other Local
Partnerships were sold to a third party and the Local Partnership' s general
partners, respectively. A portion of the net proceeds were used to settle the
associated purchase money notes and accrued interest thereon (see below).
The Purchase Money Notes, which provide for simple interest at the rate of 9%
per annum through maturity, which will occur during the period July 1998 to
December 1999, will not be in default during the basic term (generally fifteen
years) if not less than 60% of the cash flow actually distributed to the
Partnership by the corresponding subsidiary partnership (generated by the
operations, as defined) is applied first to accrued interest and then to current
interest thereon. Any interest not paid currently accrues, without further
interest thereon, through the due date of the note. All accrued and unpaid
interest must be paid on the due date of the note, unless the Partnership
exercises an extension right. Continued accrual of such interest without payment
would impact the effective rate of the notes, specifically by reducing the
current effective interest rate of 9%. The exact effect is not deter-
13
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minable inasmuch as it is dependent on the actual future interest payments and
ultimate repayment dates of the notes. Unpaid interest of $64,651,584 and
$63,426,985 at May 31, 1997 and February 28, 1997, respectively, has been
accrued and is included in the caption due to selling partners. In general, the
interest on and the principal of each Purchase Money Note is also payable to the
extent of the Partnership's actual receipt of proceeds from the sale or
refinancing of the Apartment Complex, or in some cases the Local Partnership
Interest to which the Purchase Money Note relates.
The Partnership may elect, upon the payment of an extension fee of 1 1/2% per
annum of the outstanding principal amount, to extend the term of the Purchase
Money Note for up to five additional years. The Partnership may also defer
payment of any accrued and unpaid interest until the due date of the note. The
Partnership expects that upon maturity it will be required to refinance or sell
its investments in the Local Partnerships in order to pay the Purchase Money
Notes and accrued interest thereon. Based on the historical operating results of
the Local Partnerships and the current economic conditions including changes in
tax laws, it is uncertain as to whether the proceeds from such sales will be
sufficient to meet the outstanding balances. Management is working with the
selling partners to restructure and/or refinance the notes. The Purchase Money
Notes are without personal recourse to either the Partnership or any of its
partners and the sellers' recourse, in the event of non-payment, would be to
foreclose on the Partnership's interests in the respective local partnerships.
Cash flow distributions aggregating $172,351 and $380,986 (which includes
$80,546 held in escrow for expenses relating to refinancings or sales) were made
to the Partnership for the three months ended May 31, 1997 and 1996, of which
$103,410 and $180,264, respectively, was used to pay interest on the purchase
money notes. Of the $103,410 interest on the purchase money notes, $59,526 was
actually paid in the subsequent quarter. Distribution of proceeds from a sale
aggregating $100,000 was made to the Partnership during the three months ended
May 31, 1997, none of which was used to pay principal and interest on the
Purchase Money Notes.
The local partnerships which receive government assistance are subject to
low-income use restrictions which limit the owners ability to sell or refinance
the properties. In order to maintain the existing inventory of affordable
housing, Congress passed a series of related acts including the Emergency Low
Income Preservation Act of 1987, the Low-Income Housing Preservation and
Resident Homeownership Act of 1990 (together the "Preservation Acts")
14
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and the Housing Opportunity Program Extension Act of 1996 (the "1996 Act"). In
exchange for maintaining the aforementioned use restrictions, the Preservation
Acts provide financial incentives for owners of government assisted properties.
The 1996 Act provides financial assistance by funding the sale of such
properties to not-for-profit owners and also restores the owners ability to
prepay their HUD mortgage and convert the property to condominiums or
market-rate rental housing. Local general partners have filed for incentives
under the Preservation Acts or the 1996 Act for the following local
partnerships: San Diego - Logan Square Gardens Company, Albuquerque - Lafayette
Square Apts. Ltd., Westgate Associates Limited, Riverside Gardens, a Limited
Partnership, Pacific Palms, a Limited Partnership, Canton Commons Associates,
Rosewood Manor Associates, Bethany Glen Associates and South Munjoy Associates,
Ltd. The South Munjoy Associates, Ltd. property is under contract for sale to a
private owner. The local general partners of the other properties are either
negotiating purchase and sale contracts or exploring their alternatives under
the 1996 Act.
Funding for the 1996 Act is subject to appropriations by Congress. Congress
funded $624 million in fiscal year 1996 for the preservation of housing.
Congress has funded approximately $325 million for preservation for 1997 fiscal
year. Moreover only $175 million of the 1997 allocation is available to fund
preservation, while the balance is set aside for rental assistance payments and
for special projects. There is a backlog of properties having a preservation
value in excess of $900 million. Accordingly, no assurance can be given that any
of the local partnerships will obtain such incentives.
HUD previously released the American Community Partnerships Act (the "ACPA").
The ACPA is HUD's blueprint for providing for the nation's housing needs in an
era of static or decreasing budget authority. Two key proposals in the ACPA that
could affect the Local Partnerships are: a discontinuation of project-based
Section 8 subsidy payments, and an attendant reduction in debt on properties
that were supported by the Section 8 payments. The ACPA calls for a transition
during which the project-based Section 8 payments would be converted to a
tenant-based voucher system. Any FHA insured debt would then be
"marked-to-market" that is revalued in light of the reduced income stream.
Several industry sources have commented to HUD and Congress that in the event
the ACPA were fully enacted in its present form, the reduction in mortgage
indebtedness would be considered taxable income to owners such as the limited
partners in the Partnership. Legislative relief has been proposed to exempt
"marked-to-
15
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market" debt from cancellation of indebtedness income treatment. At present,
there are several bills pending in Congress to address this tax relief issue.
Additionally, in the interim, HUD has agreed to annual extensions of any
expiring project-based Section 8 contracts, but there is no guarantee that such
extensions will be available in the future.
The general partners of one subsidiary partnership, Westgate Associates, Limited
("Westgate"), have signed an option agreement to sell the project to the Vermont
Housing Finance Agency, subject to HUD approval and other contingencies, on or
before December 31, 1998. The Partnership's investment in Westgate was
approximately $796,000 at May 31, 1997. Westgate's assets constituted
approximately 2% of the consolidated total assets at May 31, 1997.
On March 14, 1996, South Munjoy Associates, Limited ("South Munjoy") entered
into a purchase and sale of real estate agreement with Mainland Development
Company of Portland, Maine to sell the project for a sales price of
approximately $3,000,000, subject to HUD approval and other contingencies. The
net proceeds will be used to satisfy the existing mortgage debt of approximately
$771,000. The balance of the proceeds will be used to settle the purchase money
notes and accrued interest, with the balance, if any, available for general
partnership purposes. The Partnership's investment in South Munjoy was
approximately $2,391,000 at May 31, 1997. South Munjoy's assets constituted
approximately 3% of the consolidated total assets at May 31, 1997.
On April 25, 1997, the Partnership's Local Partnership Interest in Los
Caballeros Apartments ("Los Caballeros") was sold to the general partners of Los
Caballeros for $100,000, resulting in a gain in the amount of approximately
$600,000. No proceeds were used to settle the associated Purchase Money Note and
accrued interest which had a total outstanding balance of $3,187,950, resulting
in forgiveness of indebtedness income. For financial reporting purposes, this
transaction will be reflected in the financial statements in the second quarter
coinciding with Los Caballeros' fiscal quarter which includes the date of sale.
For tax purposes, the entire gain to be realized by the Partnership is
anticipated to be approximately $5,000,000.
For a discussion of contingencies affecting certain Local Partnerships, see Note
5 to the financial statements. Since the maximum loss the Partnership would be
liable for is its net investment in the respective Local Partnerships, the
resolution of the existing contingencies is not anticipated to impact future
results of operations, liquidity or financial condition in a material way.
16
<PAGE>
Except as described above, management is not aware of any trends or events,
commitments or uncertainties which have not otherwise been disclosed that will
or are likely to impact liquidity in a material way. Management believes the
only impact would be from laws that have not yet been adopted. The portfolio is
diversified by the location of the properties around the United States so that
if one area of the country is experiencing downturns in the economy, the
remaining properties in the portfolio may be experiencing upswings. However, the
geographic diversifications of the portfolio may not protect against a general
downturn in the national economy.
Results of Operations
- - ---------------------
The results of operations of the Partnership, as well as the Local Partnerships,
excluding Roper Mountain and Keller Plaza, which sold their properties on June
3, 1996 and September 17, 1996, Chickasha in which the Partnership's interest
was sold on August 15, 1996 and administrative and management-related parties
remained fairly consistent during the three months ended May 31, 1997 and 1996.
Contributing to the relatively stable operations at the Local Partnerships is
the fact that a large portion of the Local Partnerships are operating under
Government Assistance Programs which provide for rental subsidies and/or
reductions of mortgage interest payments under HUD Section 8 and Section 236
Programs.
The Partnership's primary source of income continues to be its portion of the
local partnerships' operating results. The majority of local partnership income
continues to be in the form of rental income with the corresponding expenses
being divided among operations, depreciation, and mortgage interest. In
addition, the Partnership incurred interest expense relating to the Purchase
Money Notes issued when the Local Partnership Interests were acquired.
Rental income decreased approximately 5% during the three months ended May 31,
1997 as compared to 1996. Excluding Roper Mountain, Keller Plaza and Chickasha,
rental income increased approximately 2% during the three months ended May 31,
1997 as compared to 1996 primarily due to rental rate increases.
Other income increased approximately $15,000 during the three months ended May
31, 1997 as compared to 1996. Excluding Roper Mountain, Keller Plaza and
Chickasha, other income increased approximately $26,000 for the three months
ended May 31, 1997 as compared to 1996 primarily due to increases in interest
income resulting from the investment of the proceeds from the
17
<PAGE>
sales of properties as well as small increases in interest income at two Local
Partnerships.
Total expenses excluding Roper Mountain, Keller Plaza, Chickasha, administrative
and management-related parties and operating expenses remained fairly consistent
with an increase of approximately 2% for the three months ended May 31, 1997 as
compared to 1996.
Administrative and management-related parties increased approximately $213,000
for the three months ended May 31, 1997 as compared to 1996 primarily due to an
increase in partnership management fees payable to the General Partners.
Operating expenses increased approximately $46,000 for the three months ended
May 31, 1997 as compared to 1996. Excluding Roper Mountain, Keller Plaza and
Chickasha, such expenses increased approximately $136,000 primarily due to
increases in utilities at three Local Partnerships as well as small increases at
eight other Local Partnerships.
Interest expense and depreciation expense decreased approximately $214,000 and
$179,000, respectively, for the three months ended May 31, 1997 as compared to
1996 primarily due to decreases relating to Roper Mountain, Keller Plaza and
Chickasha. Excluding Roper Mountain, Keller Plaza and Chickasha, such expenses
remained fairly consistent with decreases of approximately 2% and 3%,
respectively, for the three months ended May 31, 1997 as compared to 1996.
18
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is a Plaintiff in the Oklahoma County District Court in
Oklahoma against Jerry L. Womack and Womack Property Management, Inc., an
Oklahoma corporation. In this action entitled Shearson + Related Housing
Properties Limited Partnership and Shearson/Related Housing Associates Limited
Partnership v. Jerry L. Womack and Womack Property Management, Inc., the
Partnership seeks judgment for damages caused by the individual defendant's
resignation as general partner of Rolling Meadows of Chickasha, Ltd. (Rolling
Meadows), of which the Partnership is a limited partner, and by the corporate
defendant's mismanagement of the apartment project owned by Rolling Meadows. The
individual defendant has counterclaimed against the Plaintiffs, alleging that
they breached an agreement to advance funds to Rolling Meadows sufficient to pay
operating losses on the property, thereby damaging such defendant in an amount
exceeding $10,000. The corporate defendant has counterclaimed against the
Plaintiffs for unpaid management fees and expenses approximating $6,000. Both
counterclaims seek costs and attorneys' fees.
Discovery is continuing in the action. The Plaintiffs are responding
vigorously to the counterclaims and intend to continue doing so. While it is
impossible to predict with certainty, counsel believes the counter claims have
no substantial merit and that an outcome unfavorable to the Partnership is
unlikely.
The U.S. Department of Housing and Urban Development ("HUD"), the holder
of the mortgage on the Project, notified Rolling Meadows that such mortgage was
in default and that HUD intended to commence foreclosure proceedings. On August
15, 1996, the Partnership's limited partnership interest in Chickasha was sold
to a third party for $75,000, resulting in no net proceeds to the Partnership
after expenses of the sale.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
19
<PAGE>
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.
CAMBRIDGE + RELATED HOUSING
PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: GOVERNMENT ASSISTED PROPERTIES,
INC., a General Partner
Date: By:/s/ Paul L. Abbott
------------------
July 14, 1997 Paul L. Abbott,
President
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: By:/s/ Alan P. Hirmes
------------------
July 14, 1997 Alan P. Hirmes,
Vice President
22
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf by the registrant and
in the capacities and on the dates indicated:
Signature Title Date
- - -------------------- --------------------- -------------
Vice President
(principal financial
officer) of
/s/ Alan P. Hirmes Related Housing
- - ------------------------ Programs
Alan P. Hirmes Corporation July 14, 1997
Treasurer (principal
accounting officer) of
/s/ Richard A. Palermo Related Housing
- - ------------------------ Programs
Richard A. Palermo Corporation July 14, 1997
President, Chief
Executive Officer
(principal executive
officer) and Chief
/s/ Paul L. Abbott Financial Officer of
- - ------------------------ Government Assisted
Paul L. Abbott Properties, Inc. July 14, 1997
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for Cambridge + Related Housing Properties L.P. and is qualified in
its entirety by reference to such financial statements
</LEGEND>
<CIK> 0000718915
<NAME> Cambridge + Related Housing Properties L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 13,810,108
<SECURITIES> 202,888
<RECEIVABLES> 277,355
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 882,558
<PP&E> 173,909,193
<DEPRECIATION> 81,642,525
<TOTAL-ASSETS> 107,439,577
<CURRENT-LIABILITIES> 8,066,171
<BONDS> 184,713,851
0
0
<COMMON> 0
<OTHER-SE> (85,340,444)
<TOTAL-LIABILITY-AND-EQUITY> 107,439,577
<SALES> 0
<TOTAL-REVENUES> 7,283,436
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,466,234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,901,242
<INCOME-PRETAX> (2,084,177)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,084,177)
<EPS-PRIMARY> (208)
<EPS-DILUTED> 0
</TABLE>
