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, 1998
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)
<TABLE>
<CAPTION>
May 31, February 28,
1998 1998
------------- -------------
<S> <C> <C>
ASSETS
Property and equipment, net of accumulated
depreciation of $65,135,401
and $67,405,570, respectively $ 62,176,725 $ 66,541,368
Property and equipment-held for sale,
net of accumulated depreciation of
$4,559,198 and $7,466,033 4,789,557 8,372,413
Cash and cash equivalents 5,138,606 6,069,843
Certificates of deposit 206,241 205,509
Cash - restricted for tenants'
security deposits 810,767 843,561
Mortgage escrow deposits 6,547,602 6,784,348
Rents receivable 243,947 304,888
Prepaid expenses and other assets 721,134 955,224
------------- -------------
Total assets $ 80,634,579 $ 90,077,154
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 48,913,374 $ 55,464,577
Purchase money notes payable
(Note 2) 39,514,464 46,352,956
Due to selling partners (Note 2) 47,116,985 54,951,723
Accounts payable, accrued expenses
and other liabilities 2,034,875 4,637,981
Tenants' security deposits payable 810,767 843,561
Due to general partners of
subsidiaries and their affiliates 120,272 502,593
Due to general partners and affiliates 1,376,043 1,308,614
Distribution payable 0 2,030,972
------------- -------------
Total liabilities 139,886,780 166,092,977
------------- -------------
Minority interest 168,113 167,391
------------- -------------
Commitments and contingencies (Note 6)
Partners' deficit:
Limited partners (58,377,580) (74,972,851)
General partners (1,042,734) (1,210,363)
------------- -------------
Total partners' deficit (59,420,314) (76,183,214)
------------- -------------
Total liabilities and partners' deficit $ 80,634,579 $ 90,077,154
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1998 1997*
---------- ---------
<S> <C> <C>
Revenues
Rentals, net $ 5,824,362 $ 7,070,304
Other 196,932 213,132
Gain on sale of properties
(Note 5) 6,141,000 0
---------- ---------
Total revenues 12,162,294 7,283,436
---------- ---------
Expenses
Administrative and management 1,122,970 1,227,809
Administrative and management-
related parties (Note 3) 589,882 687,013
Operating 970,604 1,455,457
Repairs and maintenance 1,316,893 1,749,425
Taxes and insurance 708,747 887,682
Interest 1,399,479 1,901,242
Depreciation 1,091,934 1,458,848
Loss on impairment of assets (Note 4) 3,191,072 0
---------- ---------
Total expenses 10,391,581 9,367,476
---------- ---------
Increase (loss) before minority interest
and extraordinary item 1,770,713 (2,084,040)
Minority interest in income of
subsidiaries (953) (137)
---------- ---------
Income (loss) before extraordinary
item 1,769,760 (2,084,177)
Extraordinary item-forgiveness of
indebtedness income (Note-5) 14,993,140 0
---------- ---------
Net income (loss) $ 16,762,900 $ (2,084,177)
========== =========
</TABLE>
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Partners' Deficit
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Total Partners Partners
<S> <C> <C> <C>
Balance-
March 1, 1998 $(76,183,214) $(74,972,851) $ (1,210,363)
Net income-
three months ended
May 31, 1998 16,762,900 16,595,271 167,629
------------ ------------ ------------
Balance-
May 31, 1998 $(59,420,314) $(58,377,580) $ (1,042,734)
============ ============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $16,762,900 $(2,084,177)
----------- -----------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on sale of properties (Note 5) (6,141,000) 0
Extraordinary item - forgiveness
of indebtedness income (Note 5) (14,993,140) 0
Depreciation 1,091,934 1,458,848
Loss on impairment of assets (Note 4) 3,191,072 0
Minority interest in income
of subsidiaries 953 137
Decrease (increase) in cash-restricted
for tenants' security deposits 10,330 (14,376)
Decrease (increase) in mortgage
escrow deposits 238,795 (543,288)
Decrease in rents receivable 56,312 25,817
Decrease in prepaid
expenses and other assets 225,608 281,798
Increase in due to selling partners 901,905 1,268,483
Decrease in accounts
payable, accrued expenses and
other liabilities (880,795) (254,174)
Decrease in tenants' security
deposits payable (12,594) 14,376
Increase in due to
general partners of subsidiaries
and their affiliates 18,579 (327,166)
Decrease in due to general partners of
subsidiaries and their affiliates (372,400) (79,912)
Increase in due to
general partners and affiliates 59,929 288,479
----------- -----------
Total adjustments (16,604,512) 2,119,022
----------- -----------
Net cash provided by
operating activities 158,388 34,845
------------ -----------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from investing activities:
(Increase) in certificates
of deposit (732) (902)
Proceeds from sale of properties 5,015,411 0
Acquisitions of property and
equipment (18,363) (194,997)
Increase in mortgage escrow deposits (48,837) 0
----------- -----------
Net cash provided by (used in)
investing activities 4,947,479 (195,899)
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (3,431,406) (591,285)
Decrease in minority interest (231) (1,768)
Distributions paid to partners (2,030,972) (1,111,554)
Payments to selling partners (85,784) (43,883)
Principal payments of purchase
notes payable (488,711) 0
----------- -----------
Net cash used in financing activities (6,037,104) (1,748,490)
----------- -----------
Net decrease in cash and
cash equivalents (931,237) (1,909,544)
Cash and cash equivalents at
beginning of period 6,069,843 5,981,506
----------- -----------
Cash and cash equivalents at
end of period $ 5,138,606 $ 4,071,962
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Supplemental disclosures of noncash activities:
Forgiveness of indebtedness
Decrease in purchase money
notes payable $ 6,349,781 $ 0
Decrease in due to selling
partners 8,650,859 0
Increase in due to general
partners and affiliates (7,500) 0
Summarized below are the
components of the gain
on sale of properties:
Decrease in property and
equipment, net of accumulated
depreciation 3,682,856 0
Decrease in cash-restricted for
tenants' security deposits 22,464 0
Decrease in mortgage escrow
deposits 46,788 0
Decrease in rents receivable 4,629 0
Decrease in prepaid expenses and
other assets 8,482 0
Decrease in mortgage notes
payable (3,119,797) 0
Decrease in accounts payable,
accrued expenses and other
liabilities (1,722,311) 0
Decrease in tenants' security
deposits payable (28,500) 0
Decrease in due to general
partners of subsidiaries and
their affiliates (20,200) 0
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
Note 1 - General
The consolidated financial statements for the three months ended May 31, 1998,
include the accounts of Cambridge + Related Housing Properties Limited
Partnership, a Massachusetts limited partnership (the "Partnership") and thirty-
three subsidiary partnerships ("subsidiary partnerships" or "Local
Partnerships"), one of which only has activity through the effective date of
sale of the Partnership's interest and two of which only have activity through
the date of sale of their properties and the related assets and liabilities (see
Note 5). The consolidated financial statements for the three months ended May
31, 1997, include the accounts of the Partnership and forty-one subsidiary
partnerships. 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, the right to remove the local
general partner of the subsidiary partnerships and to approve certain major
operating and financial decisions, the Partnership has a controlling financial
interest in the subsidiary local partnerships.
For financial reporting purposes, the Partnership's fiscal quarter ends on May
31. All subsidiaries have fiscal years ending March 31. Accounts of subsidiaries
have been adjusted for intercompany transactions from April 1 through May 31.
The Partnership's fiscal year ends on May 31 in order to allow adequate time for
the subsidiaries financial statements to be prepared and consolidated. The books
and records of the Partnership are maintained on the accrual basis of
accounting, in accordance with generally accepted accounting principles
("GAAP").
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.
8
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $0 and $5,000 for the three months ended May 31, 1998
and 1997, 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 for the
year ended February 28, 1998. 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, 1998 and the results of operations and
cash flows for the three months ended May 31, 1998 and 1997. However, the
operating results for the three months ended May 31, 1998 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, 1998 Annual Report on Form 10-K.
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.
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
9
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
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 $47,007,937 and $54,826,676 at May 31, 1998 and February 28,
1998, 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 is permitted to extend the term of the Purchase Money Note for
up to five additional years. In connection with such extensions, the Partnership
will incur an extension fee of 1/2% per annum of the outstanding principal
balance of the assets. The Partnership may also defer payment of any accrued and
unpaid interest until the due date of the notes. 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. No assurance can be given that
management's efforts will be successful. 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. Subsequent to May
31, 1998, extension agreements were sent to the
10
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
Purchase Money Note holders to extend the notes for five years and to obtain
consent to defer payment of the extension fees.
During the three months ended May 31, 1998 and 1997, the Partnership received
cash flow distributions aggregating $142,973 and $172,351, respectively, of
which $85,784 and $103,410 was used to pay interest on the purchase money notes.
In addition, the Partnership received the distribution of proceeds from the sale
of two properties aggregating $1,568,161 and $100,000, respectively, of which
$488,712 and $0 was used to pay principal on the Purchase Money Notes during the
three months ended May 31, 1998 and 1997, respectively.
Note 3 - Related Party Transactions
The costs incurred to related parties for the three months ended May 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
May 31,
--------------------------
1998 1997
--------------------------
<S> <C> <C>
Partnership management fees (a) $ 241,500 $ 241,500
Expense reimbursement (b) 24,500 58,000
Property management fees (c) 316,882 380,513
Local administrative fee (d) 7,000 7,000
----------- -----------
$ 589,882 $ 687,013
========= =========
</TABLE>
(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 $667,000 and $426,000 were accrued and
unpaid as of May 31, 1998 and February 28, 1998.
(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
11
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
the provisions of the Partnership Agreement. Another affiliate of the Related
General Partner performs asset monitoring for the Partnership. These services
include site visits and evaluations of the subsidiary partnerships' performance.
(c) Property management fees incurred by Local Partnerships to affiliates of the
Local Partnerships amounted to $316,882 and $380,513 for the three months ended
May 31, 1998 and 1997, respectively. Of such fees $60,212 and $67,592,
respectively, 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.
Note 4 - Property and Equipment
Caddo Parish-Villas South, Ltd. ("Villas South") continues to be in default of
its original mortgage agreement. There is substantial doubt about Villas South's
ability to continue as a going concern. Villas South is in the process of trying
to renegotiate the terms of the notes with the new mortgage holders, but there
can be no assurance that the renegotiation will be successful. Villas South
filed for protection under Chapter 11 of the United States Bankruptcy Code on
November 12, 1996 and the equivalent of a receiver has been appointed.
Accordingly, for the three months ended May 31, 1998, an impairment loss in the
amount of $3,191,072 has been recognized. As of May 31, 1998, the building was
written down to zero.
Note 5 - Sale of Properties
On June 24, 1998, the Pacific Palm Limited Partnership entered into a contract
to sell the property to an unaffiliated third party for a price of $4,500,000.
The contract is conditioned upon several factors; accordingly, no assurances can
be given that the sale will actually occur.
12
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
On April 27, 1998, the property and the related assets and liabilities of
Riverside Gardens Limited Partnership ("Riverside") and Cudahy Gardens Limited
Partnership ("Cudahy") were sold to a third party for approximately $1,900,000
and $340,000, respectively, plus the assumption of the related mortgage notes.
The Partnership used approximately $442,000 and $47,000, respectively, of the
net proceeds to settle the associated Purchase Money Note and accrued interest
thereon which had total outstanding balances of approximately $5,402,000 and
$2,672,000, respectively, resulting in forgiveness of indebtedness income of
approximately $4,961,000 and $2,625,000, respectively. For tax purposes, the
entire gain to be realized by the Partnership is anticipated to be approximately
$6,500,000 and $3,600,000, respectively.
On April 21, 1998, the Partnership's limited partnership interest in Oklahoma
City - Town and Country Village Apartments, Ltd. ("Town and Country") was
assigned to the local general partner effective January 15, 1998, resulting in a
gain of approximately $4,634,000. The related purchase money note and interest
thereon were canceled resulting in forgiveness of indebtedness income of
approximately $7,407,000. For tax purposes, the entire gain to be realized by
the Partnership is anticipated to be approximately $11,500,000.
On January 16, 1998, the property and related assets and liabilities of Country
Ltd. ("Country") and Northbrook III, Ltd. ("Northbrook") were sold to a third
party for approximately $3,247,000 and $1,998,000, respectively, resulting in
gains of approximately $937,000 and $570,000, respectively. The Partnership used
approximately $860,000 and $90,000, respectively, of the net proceeds to settle
the associated Purchase Money Note and accrued interest thereon which had total
outstanding balances of $2,517,000 and $77,000, respectively, resulting in
forgiveness of indebtedness income (loss) of $1,656,000 and $(13,000),
respectively. For tax purposes, the entire gain to be realized by the
Partnership is anticipated to be approximately $4,200,000 and $1,600,000,
respectively.
On April 25, 1997, the Partnership's Local Partnership Interest in Los
Caballeros Apartments ("Los Caballeros") was sold to the
13
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 1998
(Unaudited)
general partners of Los Caballeros for $100,000, resulting in a gain in the
amount of $483,618. No proceeds were used to settle the associated Purchase
Money Note and accrued interest thereon which had a total outstanding balance of
$3,187,950, resulting in forgiveness of indebtedness income.
Note 6 - Commitments and Contingencies
There were no changes, except for set forth in note 5, and/or additions to
disclosures regarding the subsidiary partnerships which were included in the
Partnership's Annual Report on Form 10-K for the period ended February 28, 1998.
a) Certificate of Deposit
The Partnership has a Certificate of Deposit in the amount of $76,241 at May 31,
1998 to secure an overdraft in Town and Country's bank account. Upon
finalization of sale the funds will be used to pay off the overdraft.
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, 1998, $130,000 of the Partnership's funds have been so pledged to
secure operating credit lines at five subsidiary partnerships.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are (i) cash distributions from
operations and sales 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, 1998 and 1997, the Partnership received
cash flow distributions aggregating $142,973 and $172,351, respectively, of
which $85,784 and $103,410 was used to pay interest on the purchase money notes.
In addition, the Partnership received the distribution of proceeds from the sale
of two properties aggregating $1,568,161, of which $488,712 was used to pay
principal on the Purchase Money Notes during the three months ended May 31,
1998.
During the three months ended May 31, 1998, cash and cash equivalents of the
Partnership and its thirty-three consolidated Local Partnerships decreased
approximately $931,000. This decrease was due to principal payments of mortgage
notes payable ($3,431,000), principal payments of purchase money notes payable
($489,000), payments to selling partners ($86,000), an increase in mortgage
escrow deposits ($49,000), distributions paid to partners (2,031,000) and
acquisitions of property and equipment ($18,000), which exceeded cash provided
by operating activities ($158,000) and proceeds from sale of properties
($5,015,000). Included in the adjustments to reconcile the net income to cash
provided by operating activities is gain on sale of properties ($6,141,000),
forgiveness of indebtedness income ($14,993,000), a loss on impairment of assets
($3,191,000) and depreciation ($1,092,000).
The Partnership had a working capital reserve of approximately $2,140,000 and
$2,339,000 (which does not include approximately $2,031,000 of net proceeds from
sale of properties which was distributed to limited partners and General
Partners in March 1998) at May 31, 1998 and February 28, 1998, respectively, of
which approximately $206,000 was restricted at both dates to secure an overdraft
in Town and Country's bank account and to secure operating credit lines at five
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
15
<PAGE>
future cash flow distributions will be adequate for its operating needs, and
plans to continue investing available reserves in short term investments. In
March 1998 and 1997, a distribution of approximately $2,011,000 and $1,100,000,
and $21,000 and $11,000 was paid to the limited partners and General Partners,
respectively, from net proceeds from the sale of properties. Of the total
distributions of approximately $2,031,000 and $1,111,000 for the three months
ended May 31, 1998 and 1997, $0 and $1,111,000 ($110.68 per unit or 100%)
represents a return of capital determined in accordance with generally accepted
accounting principles.
Partnership management fees owed to the General Partners amounting to
approximately $667,000 and $426,000 were accrued and unpaid as of May 31, 1998
and February 28, 1998.
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.
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 $47,007,937 and $54,826,676 at
May 31, 1998 and February 28, 1998, 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.
16
<PAGE>
The Partnership is permitted to extend the term of the Purchase Money Note for
up to five additional years. In connection with such extensions, the Partnership
will incur an extension fee of 1/2% per annum of the outstanding principal
balance of the assets. The Partnership may also defer payment of any accrued and
unpaid interest until the due date of the notes. 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. No assurance can be given that
management's efforts will be successful. 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. Subsequent to May
31, 1998, extension agreements were sent to the Purchase Money Note holders to
extend the notes for five years and to obtain consent to defer payment of the
extension fees.
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") 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 and the Riverside Gardens property were sold on
17
<PAGE>
September 9, 1997 and April 27, 1998, respectively. 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 had funded approximately $325 million for preservation for 1997 fiscal
year. Congress did not allocate any funds for preservation for the 1998 fiscal
year, effectively ending the preservation effort for the time being. Management
is working with the local general partners in an effort to find alternative exit
strategies.
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 $827,000 at May 31, 1998. Westgate's assets constituted
approximately 3% of the consolidated total assets at May 31, 1998.
For a discussion of contingencies affecting certain Local Partnerships, see Note
6 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.
For a discussion of the Partnership's sale of properties see Note 5 to the
financial statements.
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.
18
<PAGE>
Results of Operations
The results of operations of the Partnership, as well as the Local Partnerships,
excluding South Munjoy, Country and Northbrook III which sold their properties
and Los Cabelleros, Clinton Plaza, Clinton Plaza #2, Grosvenor Plaza, Grosvenor
Plaza #2 and Town and Country in which the Partnership's interest was sold,
operating and loss on impairment of assets remained fairly consistent during the
three months ended May 31, 1998 and 1997. 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 18% for the three months ended May 31,
1998 as compared to 1997. Excluding South Munjoy, Country Northbrook III, Los
Caballeros, Clinton Plaza, Clinton Plaza #2, Grosvenor Plaza, Grosvenor Plaza #2
and Town & Country, rental income increased approximately 2% for the three
months ended May 31, 1998 as compared to 1997 primarily due to rental rate
increases.
Total expenses excluding South Munjoy, Country Northbrook III, Los Caballeros,
Clinton Plaza, Clinton Plaza #2, Grosvenor Plaza, Grosvenor Plaza #2, Town &
Country, operating and loss on impairment of assets expenses remained fairly
consistent with a decrease of approximately 7% for the three months ended May
31, 1998 as compared to 1997.
Operating expense decreased approximately $485,000, for the three months ended
May 31, 1998 as compared to 1997 primarily due to decreases relating to South
Munjoy, Country Northbrook III, Los Caballeros, Clinton Plaza, Clinton Plaza #2,
Grosvenor Plaza, Grosvenor Plaza #2 and Town & Country. Excluding these
properties, such expense decreased approximately $142,000 primarily due to
decreases in utilities at nine local partnerships and
19
<PAGE>
supplies at two local partnerships for the three months ended May 31, 1998 as
compared to 1997.
Administrative and management-related parties, repairs and maintenance, taxes
and insurance, interest and depreciation expense decreased approximately
$97,000, $433,000, $179,000, $502,000 and $367,000, respectively, for the three
months ended May 31, 1998 as compared to 1997 primarily due to decreases
relating to South Munjoy, Country Northbrook III, Los Caballeros, Clinton Plaza,
Clinton Plaza #2, Grosvenor Plaza, Grosvenor Plaza #2 and Town & Country.
Excluding these properties, and Riverside and Cudahy for depreciation only such
expenses remained fairly consistent with (decreases) increases of approximately
($21,000), ($53,000), $35,000, ($103,000) and ($46,000), respectively, for the
three months ended May 31, 1998 as compared to 1997. Riverside and Cudahy are
not depreciated during the quarter because they are classified as assets held
for sale.
20
<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 was 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.
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
21
<PAGE>
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.
22
<PAGE>
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.
CAMBRIDGE + RELATED HOUSING
PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: GOVERNMENT ASSISTED PROPERTIES,
INC., a General Partner
Date: July 14, 1998
By: /s/ Alan P. Hirmes
-------------------------------
Alan P. Hirmes,
Vice President and
Principal Financial Officer
Date: July 14, 1998
By: /s/ Glenn F. Hopps
-------------------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: July 14, 1998
By: /s/ Alan P. Hirmes
-------------------------------
Alan P. Hirmes,
Vice President and
Principal Financial Officer
Date: July 14, 1998
By: /s/ Glenn F. Hopps
-------------------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
<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-1-1998
<PERIOD-END> MAY-31-1998
<CASH> 12,496,975
<SECURITIES> 206,241
<RECEIVABLES> 243,947
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 721,134
<PP&E> 136,660,881
<DEPRECIATION> 69,694,599
<TOTAL-ASSETS> 80,634,579
<CURRENT-LIABILITIES> 4,341,957
<BONDS> 135,544,823
0
0
<COMMON> 0
<OTHER-SE> (59,252,201)
<TOTAL-LIABILITY-AND-EQUITY> 80,634,579
<SALES> 0
<TOTAL-REVENUES> 12,162,294
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,992,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,399,479
<INCOME-PRETAX> 1,770,713
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 14,993,140
<CHANGES> 0
<NET-INCOME> 16,762,900
<EPS-PRIMARY> 1670
<EPS-DILUTED> 0
</TABLE>
