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 August 31, 1999
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 Securi-
ties 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>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
August 31, February 28,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment, net of
accumulated depreciation of
$26,810,345 and $55,795,706
respectively $ 22,285,527 $ 48,351,071
Property and equipment-held for
sale, net of accumulated
depreciation of $20,175,786
and $12,148,758 19,417,058 11,272,289
Cash and cash equivalents 3,141,794 6,906,857
Cash - restricted for tenants'
security deposits 455,064 752,732
Mortgage escrow deposits 5,420,834 5,874,507
Rents receivable 201,035 336,017
Prepaid expenses and
other assets 666,020 1,297,086
Total assets $ 51,587,332 $ 74,790,559
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 31,563,547 $ 44,713,166
Purchase money notes payable
(Note 2) 27,427,134 39,902,759
Due to selling partners (Note 2) 37,129,751 49,776,218
Accounts payable, accrued expenses
and other liabilities 1,592,539 2,435,855
Tenants' security deposits payable 455,064 752,732
Due to general partners of
subsidiaries and their affiliates 292,622 81,652
Due to general partners
and affiliates 1,799,887 1,331,349
Distribution payable 0 2,020,374
Total liabilities 100,260,544 141,014,105
Minority interest 29,650 30,399
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (47,767,303) (65,142,875)
General partners (935,559) (1,111,070)
Total partners' deficit (48,702,862) (66,253,945)
Total liabilities and
partners' deficit $ 51,587,332 $ 74,790,559
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1999 1998* 1999 1998*
<S> <C> <C> <C> <C>
Revenues:
Rentals,
net $ 5,210,910 $ 5,453,124 $10,493,257 $11,277,486
Other 205,092 192,014 340,418 388,946
(Loss) gain
on sale of
properties
(Note 4) (6,050,854) (713,244) (6,050,854) 12,835,171
Total
revenues (634,852) 4,931,894 4,782,821 24,501,603
Expenses
Administrative
and
management 1,431,377 941,561 2,527,240 2,064,531
Administrative
and
management-
related
parties
(Note 3) 535,581 575,086 1,095,329 1,164,968
Operating 780,307 800,176 1,655,417 1,770,780
Repairs and
maintenance 1,506,099 1,544,317 2,806,100 2,861,210
Taxes and
insurance 699,351 756,368 1,368,499 1,465,115
Interest 1,080,237 1,378,949 2,376,372 2,778,428
Depreciation 836,118 1,088,337 1,733,109 2,180,271
Loss on
impairment
of assets 0 0 0 3,191,072
Total
expenses 6,869,070 7,084,794 13,562,066 17,476,375
(Loss) income
before
minority
interest
and
extraordinary
item (7,503,922) (2,152,900) (8,779,245) 7,025,228
Minority
interest in
loss (income)
of
subsidiaries 327 (620,341) 15 (621,294)
(Loss) income
before
extraordinary
item (7,503,595) (2,773,241) (8,779,230) 6,403,934
Extraordinary
item-
forgiveness
of
indebtedness
income
(Note 4) 26,330,313 15,762 26,330,313 7,601,487
Net income
(loss) $18,826,718 $(2,757,479) $17,551,083 $14,005,421
(Loss) income
before
extraordinary
item -
limited
partners $(7,428,559) $(2,745,509) $(8,691,438) $ 6,339,895
Extraordinary
item -
limited
partners 26,067,010 15,604 26,067,010 7,525,472
Net income
(loss) -
limited
partners $18,638,451 $(2,729,905) $17,375,572 $13,865,367
Number of
limited
partnership
units
outstanding 10,038 10,038 10,038 10,038
(Loss) income
before
extraordinary
item per
limited
partnership
unit $ (740.04) $ (273.51) $ (865.85) $ 631.59
Extraordinary
item
per limited
partnership
unit 2,596.83 1.55 2,596.83 749.70
Net income
(loss)
per limited
partnership
unit $ 1,856.79 $ (271.96) $ 1,730.98 $ 1,381.29
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Partners' Deficit
(Unaudited)
<CAPTION>
Limited General
Total Partners Partners
<S> <C> <C> <C>
Balance-
March 1,
1999 $(66,253,945) $(65,142,875) $(1,111,070)
Net income-
six months
ended
August 31,
1999 17,551,083 17,375,572 175,511
Balance-
August 31,
1999 $(48,702,862) $(47,767,303) $ (935,559)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Six Months Ended
August 31,
1999 1998*
<S> <C> <C>
Cash flows from operating activities:
Net income $17,551,083 $14,005,421
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Loss (gain) on sale of properties
(Note 4) 6,050,854 (12,835,171)
Extraordinary item - forgiveness
of indebtedness
income (Note 4) (26,330,313) (7,601,487)
Depreciation 1,733,109 2,180,271
Loss on impairment of assets 0 3,191,072
Minority interest in (loss) income
of subsidiaries (15) 621,294
Decrease in cash-restricted
for tenants' security deposits 162,088 3,484
Decrease in mortgage escrow deposits 191,127 468,071
Decrease in rents receivable 11,240 59,744
Decrease (increase) in prepaid expenses
and other assets 241,928 (299,155)
Increase in due to selling partners 1,569,169 1,790,981
Payments to selling partners 0 (85,784)
Decrease in accounts payable,
accrued expenses and
other liabilities (3,213,438) (665,584)
Increase (decrease) in tenants'
security deposits payable 16,759 (5,748)
Increase in due to general
partners of subsidiaries and their
affiliates 235,333 152,331
Decrease in due to general partners of
subsidiaries and their affiliates (1,317,225) (144,191)
Increase in due to general
partners and affiliates 468,538 5,373
Total adjustments (20,180,846) (13,164,499)
Net cash (used in) provided by
operating activities (2,629,763) 840,922
Cash flows from investing activities:
Decrease in certificates of deposit 0 128,283
Proceeds from sale of properties 2,828,103 7,082,059
Acquisitions of property and
equipment (236,996) (262,766)
Increase in mortgage escrow
deposits (496,637) (44,574)
Net cash provided by
investing activities 2,094,470 6,903,002
Cash flows from financing activities:
Principal payments of mortgage
notes payable (847,714) (3,837,510)
Decrease in minority interest (734) (500,175)
Distributions paid to partners (2,020,374) (2,030,972)
Principal payments of purchase
notes payable (233,498) (79,626)
Payments to selling partners (127,450) 0
Net cash used in financing
activities (3,229,770) (6,448,283)
Net (decrease) increase in cash and
cash equivalents (3,765,063) 1,295,641
Cash and cash equivalents at
beginning of period 6,906,857 6,069,843
Cash and cash equivalents at
end of period $ 3,141,794 $ 7,365,484
Supplemental disclosures of
noncash activities:
Forgiveness of indebtedness
Decrease in purchase money
notes payable $(12,242,127) $(3,099,781)
Decrease in due to selling
partners (14,088,186) (4,485,944)
Decrease in due to general
partners of subsidiaries
and their affiliates 0 (15,762)
Summarized below are the
components of the gain
on sale of properties:
Decrease in property and
equipment, net of accumulated
depreciation 16,424,662 8,472,345
Decrease in cash-restricted for
tenants' security deposits 135,580 22,464
Decrease in mortgage escrow
deposits 759,183 894,467
Decrease in rents receivable 123,742 4,629
Decrease in prepaid expenses and
other assets 389,138 8,482
Decrease in purchase
money notes payable 0 (3,250,000)
Increase in due to general partners
of subsidiaries and their affiliates 1,292,862 7,500
Decrease in due to
selling partners 0 (4,164,915)
Decrease in mortgage notes
payable (12,301,905) (6,024,054)
Increase (decrease) in accounts
payable, accrued expenses and
other liabilities 2,370,122 (1,675,330)
Decrease in tenants' security
deposits payable (314,427) (20,200)
Decrease in due to general
partners of subsidiaries and
their affiliates 0 (28,500)
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 1999
(Unaudited)
Note 1 - General
The consolidated financial statements for the six months ended
August 31, 1999, include the accounts of Cambridge + Related
Housing Properties Limited Partnership, a Massachusetts limited
Partnership (the "Partnership") and thirty Subsidiary Partnerships
("Subsidiaries", "Subsidiary Partnerships" or "Local Partnerships"),
five of which only have activity through the effective date of sale
of the Partnership's interest. The consolidated financial statements
for the six months ended August 31, 1998, include the accounts of
the Partnership and thirty five Subsidiary Partnerships, one of
which only has activity through the effective date of sale of the
Partnership's interest and four of which only have activity through
the effective date of sale of their properties and the related assets
and liabilities (see Note 4). 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 one of
its general partners (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 Part-
nerships and to approve certain major operating and financial
decisions, the Partnership has a controlling financial interest in the
Subsidiary Partnerships.
For financial reporting purposes, the Partnership's fiscal quarter
ends on August 31. All Subsidiaries have fiscal quarters ending
June 30. Accounts of Subsidiaries have been adjusted for inter-
company transactions from July 1 through August 31. The Part-
nership's fiscal quarter ends on August 31 in order to allow ade-
quate 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 Subsidi-
aries 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 $88,414 and
$0 and $88,414 and $0 for the three and six months ended August
31, 1999 and 1998, 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, 1999. 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 fi-
nancial position of the Partnership as of August 31, 1999, the re-
sults of operations for the three and six months ended August 31,
1999 and 1998 and cash flows for the six months ended August 31,
1999 and 1998. However, the operating results for the six months
ended August 31, 1999 may not be indicative of the results for the
year.
Certain information and note disclosures normally included in
financial statements prepared in accordance with GAAP have
been omitted. It is suggested that these consolidated financial
statements should be read in conjunction with the financial state-
ments and notes thereto included in the Partnership's February 28,
1999 Annual Report on Form 10-K.
Note 2 - Purchase Money Notes Payable
Nonrecourse promissory notes (the "Purchase Money Notes")
were issued to the selling partners of the Subsidiary Partnerships
as part of the purchase price, and are secured only by the Partner-
ship's interest in the Subsidiary Partnership to which the Purchase
Money Note relates.
The Purchase Money Notes, which provide for simple interest,
will not be in default, 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. (As of
August 31, 1999, the maturity dates of the Purchase Money Notes
associated with the remaining properties owned by the Subsidiary
Partnerships were extended for three to five years (see below).
Any interest not paid currently accrues, without further interest
thereon, through the extended due date of the Purchase Money
Note. Continued accrual of such interest without payment would
impact the effective rate of the Purchase Money Notes, specifically
by reducing the current effective interest rate of 9%. The exact
effect is not determinable inasmuch as it is dependent on the ac-
tual future interest payments and ultimate repayment dates of the
Purchase Money Notes. Unpaid interest of $37,004,703 and
$49,651,170 at August 31, 1999 and February 28, 1999, respec-
tively, 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 refinanc-
ing of the apartment complex, or in some cases the interest in the
Local Partnership in which the Partnership invested ("Local Part-
nership Interest") which the Purchase Money Note relates.
The Partnership was permitted to extend the term of the Purchase
Money Notes for up to five additional years. In connection with
such extensions, the Partnership incurred an extension fee of
1 1/2% per annum of the outstanding principal balance of the
Purchase Money Notes. The Partnership sent an extension notice
to each Purchase Money Note holder that pursuant to the note it
was extending the maturity. However in certain cases, the Part-
nership did not pay the extension fee at that time, deferring such
payment to the future. Extension fees in the amount of $657,962
were incurred by the Partnership through August 31, 1999. Such
Purchase Money Notes are now extended with maturity dates
ranging from July 2001 to December 2004. Extension fees of
$154,797 were accrued and added to the Purchase Money Notes
balance.
The Partnership expects that upon final maturity it will be re-
quired 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 unlikely that the proceeds from such sales
will be sufficient to meet the outstanding balances. Management
is working with the Purchase Money Note holders to restructure
and/or refinance the Purchase Money Notes. No assurance can be
given that management's efforts will be successful. The Purchase
Money Notes are without personal recourse to either the Partner-
ship 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.
During the six months ended August 31, 1999 and 1998, the Part-
nership received cash flow distributions aggregating $182,415 and
$454,597, respectively, of which $109,449 and $85,784 was used to
pay interest on the Purchase Money Notes. In addition, the Part-
nership received a distribution of proceeds from the sale of zero
and four Local Partnerships and proceeds from the sale of its Local
Partnership Interest in five and one Local Partnership aggregating
$0 and $1,810,906, and $2,828,103 and $100,000, respectively, of
which $0 and $488,172 was used to pay principal on the Purchase
Money Notes during the six months ended August 31, 1999 and
1998, respectively.
Note 3 - Related Party Transactions
<TABLE>
The costs incurred to related parties for the three and six months
ended August 31, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $ 241,709 $ 241,500 $ 483,419 $ 483,000
Expense reimburse-
ment (b) 27,621 28,060 56,621 52,560
Property manage-
ment fees
incurred to
affiliates of
the General
Partners (c) 7,054 40,867 38,198 101,079
Local administra-
tive fee (d) 6,000 6,000 11,000 13,000
Total general and
administrative-
General Partners 282,384 316,427 589,238 649,639
Property manage-
ment fees
incurred to
affiliates of the
Subsidiary
Partnerships'
general
partners (c) 242,427 258,659 495,321 515,329
Subsidiary
Partnerships'
general partners
incentive fee (e) 10,770 0 10,770 0
Total general and
administrative-
related parties $ 535,581 $ 575,086 $1,095,329 $1,164,968
</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. Part-
nership management fees owed to the General Partners amount-
ing to approximately $1,478,000 and $1,143,000 were accrued and
unpaid as of August 31, 1999 and February 28, 1999.
(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 Partner-
ship. These services include site visits and evaluations of the Sub-
sidiary Partnerships' performance.
(c) Property management fees incurred by Local Partnerships to
affiliates of the Local Partnerships amounted to $242,427 and
$258,659 and $495,321 and $515,329 for the three and six months
ended August 31, 1999 and 1998, respectively. Of such fees $7,054
and $40,867 and $38,198 and $101,079, respectively, were incurred
to a company which is also an affiliate of the General Partners.
(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.
(e) The Partnership entered into an agreement with the local gen-
eral partner of Parktowne Ltd. and Westwood Apartment Com-
pany Ltd., which provides for an annual incentive fee based on
cash flow distributed from the respective properties. Such fee
amounted to $10,770 and $0 and $10,770 and $0 for the three and
six months ended August 31, 1999 and 1998, respectively.
Note 4 - Sale of Properties
On January 16, 1998, the property and related assets and liabilities
of Country Ltd. ("Country") and Northbrook III, Ltd. ("North-
brook") 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 ap-
proximately $860,000 and $90,000, respectively, of the net pro-
ceeds 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 $(3,000), 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 an additional gain of approximately
$7,407,000.
On April 27, 1998, the property and the related assets and liabili-
ties of Riverside Gardens Limited Partnership ("Riverside") and
Cudahy Gardens Limited Partnership ("Cudahy") were sold to a
third party for approximately $1,834,000 and $232,000, respec-
tively, resulting in losses of approximately $(473,000) and
$(240,000) plus the assumption of the related mortgage notes. The
Partnership used approximately $442,000 and $47,000, respec-
tively, 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.
On April 28, 1999, the Pacific Palms, a limited partnership entered
into a letter of intent to sell the Pacific Palms apartments to an
unaffiliated third party purchaser for a price of $4,800,000. The
contract was cancelled and is being modified to comply with a
recently enacted State of California regulation regarding prepay-
ment of FHA mortgages such as the one secured by the Pacific
Palms property. No assurances can be given that the transaction
will close.
On May 3, 1999, Rolling Meadows Apartments, Ltd., entered into
an agreement for the purchase and sale of real estate with an unaf-
filiated third party for a price of $3,150,000. This agreement was
conditioned upon several factors. The contract was cancelled.
The local general partner is actively pursuing other interested
purchasers.
On May 5, 1999, the Westgate Associates Limited entered into an
agreement for the purchase and sale of real estate with an unaffili-
ated third party for a price of $2,055,000. The agreement for the
purchase and sale of real estate was conditioned upon several
factors. The contract was terminated on August 24, 1999 by the
unaffiliated third party pursuant to the terms of the agreement.
The local general partner is actively pursuing other interested
purchases. No assurances can be given that a new purchaser will
be identified or that a sale will actually occur.
On May 5, 1999, The Wingate Associates Limited entered into an
agreement for the purchase and sale of real estate with an unaffili-
ated third party for a price of $2,560,000. The agreement for the
purchase and sale of real estate is conditioned upon several fac-
tors; accordingly, no assurances can be given that the sale will
actually occur.
On June 1, 1999, Bethany Glen Associates entered into a purchase
agreement to sell the Bethany Glen apartments to an unaffiliated
third party purchaser for a purchase price of approximately
$3,450,000. The closing is expected to take place in late 1999. No
assurances can be given that a sale will actually occur.
On June 18, 1999, the Partnership's limited partnership interest in
Warren Manor Apartments Limited Partnership was sold to the
local general partners for $934,840, resulting in a loss in the
amount of approximately $3,548,000. No proceeds were used to
settle the associated Purchase Money Notes and accrued interest
which had a total outstanding balance of approximately
$9,187,000, resulting in forgiveness of indebtedness income. For
tax purposes, the entire gain to be realized by the Partnership is
anticipated to be approximately $9,480,000.
On June 18, 1999, the Partnership's limited partnership interest in
Golf Manor Apartments Limited Partnership was sold to the local
general partners for $255,473, resulting in a loss in the amount of
approximately $544,000. No proceeds were used to settle the as-
sociated purchase Money Notes and accrued interest which had a
total outstanding balance of approximately $2,227,000, resulting in
forgiveness of indebtedness income. For tax purposes, the entire
gain to be realized by the Partnership is anticipated to be ap-
proximately $2,826,000.
On June 18, 1999, the Partnership's limited partnership interest in
Warren Woods Apartments, L.P. was sold to the local general
partners for $376,585, resulting in a loss in the amount of ap-
proximately $1,914,000. No proceeds were used to settle the asso-
ciated Purchase Money Notes and accrued interest which had a
total outstanding balance of approximately $3,532,000, resulting in
forgiveness of indebtedness income. For tax purposes, the entire
gain to be realized by the Partnership is anticipated to be ap-
proximately $3,308,000.
On June 18, 1999, the Partnership's limited partnership interest in
Rosewood Manor Apartments Limited Partnership was sold to the
local general partners for $405,845, resulting in a loss in the
amount of approximately $1,031,000. No proceeds were used to
settle the associated Purchase Money Notes and accrued interest
which had a total outstanding balance of approximately
$3,568,000, resulting in forgiveness of indebtedness income. For
tax purposes, the entire gain to be realized by the Partnership is
anticipated to be approximately $5,081,000.
On June 18, 1999, the Partnership's limited partnership interest in
Canton Commons Apartments Limited Partnership was sold to
the local general partners for $855,360, resulting in a gain in the
amount of approximately $986,000. No proceeds were used to
settle the associated Purchase Money Notes and accrued interest
which had a total outstanding balance of approximately
$7,816,000, resulting in forgiveness of indebtedness income. For
tax purposes, the entire gain to be realized by the Partnership is
anticipated to be approximately $13,204,000.
Note 5 - Commitments and Contingencies
There were no material changes, except as set forth in Note 4,
and/or additions to disclosures regarding the Subsidiary Partner-
ships which were included in the Partnership's Annual Report on
Form 10-K for the period ended February 28, 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Con-
dition and Results of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are (i) cash distribu-
tions 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 six months ended August 31, 1999 and 1998, the Part-
nership received cash flow distributions aggregating $182,415 and
$454,597 respectively, of which $109,449 and $85,784 was used to
pay interest on the Purchase Money Notes. In addition, the Part-
nership received a distribution of proceeds from the sale of zero
and four Local Partnerships and proceeds from the sale of its Local
Partnership Interest in five and one Local Partnership aggregating
$0 and $1,810,906, and $2,828,103 and $100,000, respectively, of
which $0 and $488,172 was used to pay principal on the Purchase
Money Notes during the six months ended August 31, 1999 and
1998, respectively.
During the six months ended August 31, 1999, cash and cash
equivalents of the Partnership and its thirty consolidated Local
Partnerships decreased approximately ($3,765,000). This decrease
was primarily due to principal payments of mortgage notes pay-
able ($848,000), principal payments of Purchase Money Notes
payable ($233,000), an increase in mortgage escrow deposits
($497,000), distributions paid to partners ($2,020,000), payments to
selling partners ($127,000), acquisitions of property and equip-
ment ($237,000) and cash used in operating activities ($2,630,000)
which exceeded the proceeds from the sale of properties
($2,828,000). Included in the adjustments to reconcile the net in-
come to cash used in operating activities is loss on sale of proper-
ties ($6,051,000), forgiveness of indebtedness income ($26,330,000)
and depreciation ($1,733,000).
The Partnership had a working capital reserve of approximately
$2,247,000 (which does not include approximately $2,020,000 of
net proceeds from sale of properties which was distributed to
limited partners and General Partners in March 1999) at August
31, 1999. The working capital reserve is temporarily invested in
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
assuming the General Partners continue to defer payment of man-
agement fees, and plan to continue investing available reserves in
short term investments. In March 1999 and 1998, a distribution of
approximately $2,000,000 and $2,011,000 and $20,000 and $20,000
was paid to the limited partners and General Partners, respec-
tively, from net proceeds from the sale of properties. None of the
total distributions of approximately $2,020,000 and $2,031,0000 for
the six months ended August 31, 1999 and 1998, was deemed to be
a return of capital in accordance with GAAP.
Partnership management fees owed to the General Partners
amounting to approximately $1,478,000 and $1,143,000 were ac-
crued and unpaid as of August 31, 1999 and February 28, 1999.
Without the General Partners continued accrual without payment,
the Partnership will not be in a position to meet its obligations.
The General Partners have continued allowing the allowance of
accrual without payment of these amounts but are under no obli-
gation to continue to do so.
The Local Partnerships which receive government assistance are
subject to low-income use restrictions which limited 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 U.S. Department of Housing and Urban Development
("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 Limited Partnership, Pa-
cific Palms, Canton Commons Associates, Rosewood Manor Asso-
ciates, Bethany Glen Associates and South Munjoy Associates,
Limited. The South Munjoy Associates, Limited property and the
Riverside Gardens Limited Partnership were sold on September 9,
1997 and April 27, 1998, respectively. On June 18, 1999, the Rose-
wood Manor Apartments, Limited Partnership and Canton Com-
mons Apartments, Limited Partnership were sold. The local gen-
eral partners of the other properties are either negotiating pur-
chase and sale contracts or exploring their alternatives under the
1996 Act.
In September 1997, Congress enacted the Multi-Family Assisted
Housing Reform and Affordability Act of 1997 ("MAHRA") which
provides for the renewal of Section 8 Housing Assistance Pay-
ments Contracts ("Section 8 Contracts") to be based upon market
rentals instead of the above-market rentals which is generally the
case under existing Section 8 Contracts. As a result, Section 8
Contracts that are renewed in the future in projects insured by the
Federal Housing Administration ("FHA") May not provide suffi-
cient cash flow to permit owners of properties to meet the debt
service requirements of these existing FHA-insured mortgages.
MAHRA also provides for the restructuring of these mortgage
loans so that the annual debt service on the restructured loan (or
loans) can be supported by Section 8 rents established at the mar-
ket rents. The restructured loans will be held by the current lender
or another lender. There can be no assurance that a property
owner will be permitted to restructure its mortgage indebtedness
pursuant to the new rules implementing MAHRA or that an
owner, or the holder of the mortgage, would choose to restructure
the mortgage if it were able to participate. MAHRA went into
effect on September 11, 1998, when interim regulations imple-
menting the program were published. It should be noted that
there are many uncertainties as to the economic and tax impact on
a property owner because of the combination of the reduced Sec-
tion 8 contract rents and the restructuring of the existing FHA-
insured mortgage loan under MAHRA.
On October 21, 1998, President Clinton signed the Fiscal Year 1999
Departments of Veteran Affairs, Housing and Urban Development
and Independent Agencies Appropriation Legislation into law.
The bill provides, among other things, that owners of a property
that was eligible for prepayment had to give notice of such pre-
payment to HUD tenants and to the chief executive of the state or
local government for the jurisdiction in which the housing is lo-
cated. The notice must be provided not less than 150 days, but not
more than 270 days, before such payment. Moreover, the owner
May not increase the rent charged to tenants for a period of 60
days following such prepayment. The bill also provides for ten-
ant-based vouchers for eligible tenants (generally below 80% of
area median income) at the true comparable market rents for un-
assisted units in order to protect current residents from substantial
increases in rent.
Effective January 1, 1999, the State of California now requires
owners of a property benefiting from FHA-insured mortgages
under Section 236 or 221(d)(3) of Title II of the National Housing
Act to provide a nine month notice of contract termination or
prepayment of the FHA-insured loan. In addition, the owner
must offer the properties for sale to those entities who agree to
maintain the property as affordable housing.
For a discussion of Purchase Money Notes payable see Note 2 to
the financial statements.
For a discussion of the Partnership's sale of properties see Note 4
to the financial statements.
For a discussion of contingencies affecting certain Local Partner-
ships, see Note 5 to the financial statements and Part II, Item 1 of
this report. 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 although the Partnership would lose its entire
investment in the property and any ability for future appreciation.
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 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, remained fairly consistent during the three and six
months ended August 31, 1999 and 1998 excluding Country,
Northbrook, Riverside and Cudahy which sold their properties
and Town and Country, Warren Manor Apartments Limited Part-
nership, Golf Manor Limited Partnership, Warren Woods Apart-
ments L.P., Canton Commons Apartments Limited Partnership
and Rosewood Manor Apartments Limited Partnership in which
the Partnership's interest was sold (collectively the "Sold Assets")
and loss on impairment of assets. 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 4% and 7% for the three
and six months ended August 31, 1999 as compared to 1998. Ex-
cluding the Sold Assets, rental income decreased by approxi-
mately 1% for both the three and six months ended August 31,
1999 as compared to 1998.
Other income decreased approximately $48,000 for the six months
ended August 31, 1999 as compared to 1998. Excluding the Sold
Assets such income decreased approximately $23,000.
Total expenses, excluding the Sold Assets, administrative and
management and loss on impairment of assets, remained fairly
consistent with a decrease of approximately 1% and an increase of
approximately 1% for the three and six months ended August 31,
1999 as compared to 1998.
Administrative and management increased approximately
$490,000 and $463,000 for the three and six months ended August
31, 1999 as compared to 1998. Excluding the Sold Assets, such
expense increased approximately $454,000 and $562,000 primarily
due to an increase in legal fees incurred by the Partnership and the
amortization of the Purchase Money Note extension fees.
Interest and depreciation expense decreased approximately
$299,000 and $402,000, and $252,000 and $447,000 for the three
and six months ended August 31, 1999 as compared to 1998, pri-
marily due to decreases relating to the Sold Assets. Excluding the
Sold Assets, interest expense decreased approximately $27,000
and $39,000, respectively. Excluding the Sold Assets, Pacific
Palms, Ziegler Boulevard, Ltd., New Jersey, Ltd., Eastwyck II Ltd.,
Westwood Apartments Company, Ltd., Parktowne, Ltd., Rolling
Meadows Apartments, Ltd., Westgate Associates, Limited, Win-
gate Associates, Limited and Bethany Glen Associates for depre-
ciation only, depreciation expense remained fairly consistent with
a decrease of approximately $1,000 and $2,000 for the three and
six months ended August 31, 1999 as compared to 1998. Pacific
Palms, Ziegler Boulevard, Ltd., New Jersey, Ltd., Eastwyck II Ltd.,
Westwood Apartments Company, Ltd., Parktowne, Ltd., Rolling
Meadows Apartments, Ltd., Westgate Associates, Limited, Win-
gate Associates, Limited and Bethany Glen Associates are not
depreciated during the period because they are classified as assets
held for sale.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the
General Partners. The affiliate of the General Partners has up-
graded its computer information systems to be year 2000 compli-
ant. The most likely worst case scenario that the General Partners
face is that computer operations will be suspended for a few days
to a week commencing on January 1, 2000. The Partnership con-
tingency plan is to (i) have a complete backup done on December
31, 1999 and (ii) both electronic and printed reports generated for
all critical data up to and including December 31, 1999.
In regard to third parties, the General Partners are in the process
of evaluating the potential adverse impact that could result from
the failure of material service providers to be year 2000 compliant.
A detailed survey and assessment was sent to material third par-
ties in the fourth quarter of 1998. The Partnership has received
assurances from a majority of the material service providers with
which it interacts that they have addressed the year 2000 issues
and is evaluating these assurances for their adequacy and accu-
racy. In cases where the Partnership has not received assurances
from third parties, it is initiating further mail and/or phone corre-
spondence. The Partnership relies heavily on third parties and is
vulnerable to the failures of third parties to address their year 2000
issues. There can be no assurance given that the third parties will
adequately address their year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
None
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Rolling Meadows of Chickasha, Ltd.
The Partnership was a plaintiff in the Oklahoma County District
Court in Oklahoma against Jerry L. Womack and Womack Prop-
erty Management, Inc., an Oklahoma corporation. In this action
entitled Shearson + Related Housing Properties Limited Partner-
ship and Shearson/Related Housing Associates Limited Partner-
ship v. Jerry L. Womack and Womack Property Management, Inc.
(the "Litigation"), the Partnership sought judgment for damages
caused by the individual defendant's resignation as general part-
ner 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 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 counter-
claimed against the plaintiffs for unpaid management fees and
expenses approximating $6,000. Both counterclaims sought costs
and attorneys' fees. The parties have agreed to a settlement of the
case pursuant to a mediation proceeding. The parties have en-
tered into a settlement agreement and mutual release terminating
the action and, pursuant to which, plaintiffs have been paid
$30,000 to date and will receive an additional $30,000 when Roll-
ing Meadows Apartments, Ltd. is sold. The Litigation was dis-
missed on July 16, 1999.
Westwood Apartments Company Ltd.
On October 16, 1998, the Westwood Apartments Company Ltd.
("Westwood") commenced this action in the Supreme Court of the
State of New York, County of New York, against Edward Osborn,
Charles V. Welden, Jr. and Westwood, Ltd. In the complaint,
Westwood asserted that defendants improperly took the position
that the maturity dates of promissory notes signed by Westwood
in the amounts of $850,000 and $1,225,000, respectively, were not
extended by Westwood as the result of which, according to defen-
dants, the notes were past due and defendants were entitled to sell
Westwood's 99% partnership interests in Parktowne, Ltd. and
Westwood which collateralized the notes.
In May, 1999, Westwood entered into a settlement agreement
discontinuing the litigation with the defendants pursuant to
which, among other things, the defendants have acknowledged
that the notes were properly extended and spelling out the per-
centage of the proceeds to which Westwood will be entitled upon
the sale of the underlying properties, depending on when they are
sold.
Bethany Glen Associates
The Partnership was a defendant in a lawsuit, Civil Action No. 99-
00489; "William P. Monahan, et al. v. Cambridge + Related Hous-
ing Properties Limited Partnership, et al.", in the Superior Court of
the State of Arizona, in and for the county of Maricopa (the
"Court"). Mr. Monahan ("Plantiff") was the general partner of
Bethany Glen Associates, an Arizona limited partnership ("Beth-
any Glen"), and sought a judgment based on a Purchase Money
Note executed by the Partnership in the original principal amount
of $1,200,000 (the "Note"), plus alleged accrued interest and costs.
Plaintiff also sought to foreclose on the limited partnership interest
in Bethany Glen held by the Partnership. The Partnership had
assigned its interest in Bethany Glen to Cambridge Liquidating
Trust, L.L.C. Plaintiff noticed a private sale of its alleged security
interest in the limited partnership interest in Bethany Glen. A
temporary restraining order was signed prohibiting any such fore-
closure sale. Thereafter, a stipulation was filed in the case which
provided that no foreclosure sale would take place, and Plaintiff
would not be removed as general partner, until a preliminary
injunction hearing took place. On April 13, 1999, counsel an-
nounced to the Court that the parties had reached an agreement in
principle to settle. In June of 1999, the parties executed formal
settlement documents which settled the pending litigation and
provided for, inter alia, the payment of consideration by the Part-
nership, the modification of the existing terms of the Bethany Glen
partnership agreement, an acknowledgement by Plaintiff that the
Purchase Money Note was extended and reinstated, as well as the
dismissal of all claims asserted in the lawsuit. Cambridge Liqui-
dating Trust L.L.C.'s interest in Bethany Glen was assigned back to
the Partnership. No foreclosure sale of any interest in Bethany
Glen took place and Mr. Monahan was not removed as general
partner. An Order of Dismissal with Prejudice was signed by the
Court on or about June 16, 1999, formally concluding the lawsuit.
Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral
Apartments II, Ltd., El Paso-Gateway East, ltd., Albuquerque-
Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay
Apartments, Ltd., San Diego-Logan Square Gardens Co.,
Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-
Northwoods Apartments, Ltd., Stephenville-Tarleton Arms
Apartments, Ltd., and Caddo Parrish-Villas South, a Louisiana
Limited Partnership f/k/a Villas South, Ltd. (the "Roar Proper-
ties").
In 1998, the Purchase Money Note holder, Roar Company (the
"Noteholders") disputed the exact calculation of the extension fee.
At the same time, negotiations began with the Noteholders to
refinance or sell the Partnership's investments in the Roar Proper-
ties in order to pay the Purchase Money Notes. The Partnership
cannot sell or otherwise liquidate its investments in those Local
Partnerships which have subsidy agreements with the HUD dur-
ing the period that such agreements are in existence without
HUD's approval. It is uncertain as to whether the proceeds from
such sales will be sufficient to meet the outstanding balances of
principal, accrued interest and extension fees. No agreement has
been reached with the Noteholders regarding the sale of the Roar
Properties or the calculation of the extension fee.
In order to facilitate an orderly disposition of the Partnership's
assets the Partnership formed Cambridge Liquidating Trust II
("Trust II"), a Massachusetts general partnership, on December 31,
1998, which is owned 99% by Cambridge Liquidating GP II, L.L.C.
("GP II") and 1% by Cambridge Liquidating GP I, L.L.C. ("GP I").
GP I and GP II are both owned by the Partnership.
The Partnership then assigned its limited partnership interests in
the Roar Properties to Trust II. In each case, the interests were
assigned subject to each respective Purchase Money Note. The
assignment did not involve any consideration being paid to the
Partnership; therefore, there should not be any tax effect to the
limited partners of the Partnership.
Prior to September 1, 1999, the Noteholders were tendered the
sums calculated to be due as the extension fees under the Purchase
Money Notes as of August 31, 1999. The Noteholders did not
respond to this tender with a dispute of the calculation of the ex-
tension fee amount and did not return the fees. However, a repre-
sentative stated that the tender of the fees will be rejected and the
fees will be returned.
On August 27, 1999, Trust II filed a Declaratory Judgment Action
styled Cambridge Liquidating Trust II v. Roar Company, et al,
Cause No. 99-6802 in the 191st District Court of Dallas County
Texas seeking a court ruling as to the proper calculation of the
extension fee issue. On September 20, 1999, the Noteholders filed
an Answer in this action and denied all allegations. The Note-
holders have previously asserted a valid security interest in the
Local Partnership Interests. It is possible that the Noteholders
could attempt to declare the Purchase Money Notes to be due and
commence foreclosure on the Local Partnership Interests based
upon a contention that the extension fees were not paid in the
proper amount. Management of the Partnership will vigorously
prosecute and defend against such a claim and may assert claims
against the Noteholders. The General Partner can express no
opinion on the outcome of the case.
Item 2. Changes in Securities and Use of Proceeds - 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.
<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: September 27, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President and
Principal Financial Officer
Date: September 27, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: September 27, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President and
Principal Financial Officer
Date: September 27, 1999
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> 6-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 9,017,692
<SECURITIES> 0
<RECEIVABLES> 201,035
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 666,020
<PP&E> 88,688,716
<DEPRECIATION> 46,986,131
<TOTAL-ASSETS> 51,587,332
<CURRENT-LIABILITIES> 4,140,112
<BONDS> 96,120,432
0
0
<COMMON> 0
<OTHER-SE> (48,673,212)
<TOTAL-LIABILITY-AND-EQUITY> 51,587,332
<SALES> 0
<TOTAL-REVENUES> 4,782,821
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,185,694
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,376,372
<INCOME-PRETAX> 17,551,068
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 26,330,313
<CHANGES> 0
<NET-INCOME> 17,551,083
<EPS-BASIC> 1,730.98
<EPS-DILUTED> 0
</TABLE>
