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 November 30, 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>
=========== ===========
November 30, February 28,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
Property and equipment, net of accumulated
depreciation of $55,019,018
and $67,405,570, respectively $49,202,713 $66,541,368
Property and equipment-held for sale,
net of accumulated depreciation of
$12,147,984 and $7,466,033 11,231,230 8,372,413
Cash and cash equivalents 7,273,081 6,069,843
Certificates of deposit 0 205,509
Cash - restricted for tenants'
security deposits 819,828 843,561
Mortgage escrow deposits 5,846,931 6,784,348
Rents receivable 318,583 304,888
Prepaid expenses and other assets 1,362,603 955,224
----------- -----------
Total assets $76,054,969 $90,077,154
=========== ===========
</TABLE>
3
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(continued)
(Unaudited)
<TABLE>
<CAPTION>
=========== ===========
November 30, February 28,
1998 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $45,198,704 $55,464,577
Purchase money notes payable
(Note 2) 39,902,759 46,352,956
Due to selling partners (Note 2) 48,895,135 54,951,723
Accounts payable, accrued expenses
and other liabilities 2,594,509 4,637,981
Tenants' security deposits payable 819,828 843,561
Due to general partners of
Subsidiaries and their affiliates 420,430 502,593
Due to general partners and affiliates 1,311,247 1,308,614
Distribution payable 0 2,030,972
----------- -----------
Total liabilities 139,142,612 166,092,977
----------- -----------
Minority interest 288,377 167,391
----------- -----------
Commitments and contingencies (Note 6)
Partners' deficit:
Limited partners (62,293,729) (74,972,851)
General partners (1,082,291) (1,210,363)
----------- -----------
Total partners' deficit (63,376,020) (76,183,214)
----------- -----------
Total liabilities and partners' deficit $76,054,969 $90,077,154
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
========================= ===========================
Three Months Ended Nine Months Ended
November 30, November 30,
------------------------- ---------------------------
1998 1997 1998 1997
------------------------- ---------------------------
<S> <C> <C> <C> <C>
Revenues:
Rentals, net $ 5,356,967 $ 6,888,566 $ 16,632,164 $ 20,896,535
Other 171,038 209,248 562,273 686,263
Gain (loss) on sale of
properties (Note 5) (46,161) (254,466) 5,381,595 229,152
----------- ----------- ------------ ------------
Total revenues 5,481,844 6,843,348 22,576,032 21,811,950
----------- ----------- ------------ ------------
Expenses
Administrative and
management 910,730 1,115,204 2,975,261 3,726,841
Administrative and
management-
related parties
(Note 3) 579,141 635,452 1,744,109 2,020,549
Operating 787,650 1,000,679 2,558,430 3,514,051
Repairs and
maintenance 1,441,738 1,869,079 4,302,948 5,562,010
Taxes and insurance 648,289 961,928 2,113,404 2,803,592
Interest 1,284,250 1,802,724 4,062,678 5,571,277
Depreciation 1,024,657 1,424,401 3,204,928 4,312,826
Loss on impairment
of assets (Note 4) 0 0 3,191,072 0
----------- ----------- ------------ ------------
Total expenses 6,676,455 8,809,467 24,152,830 27,511,146
----------- ----------- ------------ ------------
Loss before minority
interest and
extraordinary item (1,194,611) (1,966,119) (1,576,798) (5,699,196)
Minority interest
in (income) loss
of subsidiaries 134 (10,835) (621,160) (10,588)
----------- ----------- ------------ ------------
Loss before
extraordinary item (1,194,477) (1,976,954) (2,197,958) (5,709,784)
Extraordinary item-
forgiveness of
indebtedness
income (loss)
(Note 5) (3,750) 1,982,923 15,005,152 5,170,873
----------- ----------- ------------ ------------
Net income (loss) $(1,198,227) $ 5,969 $ 12,807,194 $ (538,911)
=========== =========== ============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<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--
nine months ended
November 30, 1998 12,807,194 12,679,122 128,072
------------ ------------ -----------
Balance--
November 30, 1998 $(63,376,020) $(62,293,729) $(1,082,291)
============ ============ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
=============================
Nine Months Ended
November 30,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 12,807,194 $ (538,911)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on sale of properties (Note 5) (5,381,595) (229,152)
Extraordinary item - forgiveness
of indebtedness income (Note 5) (15,005,152) (5,170,873)
Depreciation 3,204,928 4,312,826
Loss on impairment of assets (Note 4) 3,191,072 0
Minority interest in income
of Subsidiaries 621,160 10,588
Decrease (increase) in cash-restricted
for tenants' security deposits 1,269 (6,073)
Decrease (increase) in mortgage
escrow deposits 478,414 (242,105)
Increase in rents receivable (18,324) (97,783)
Increase in prepaid
expenses and other assets (415,861) (334,988)
Increase in due to selling partners 2,680,055 3,735,764
Payments to selling partners (85,784) (173,488)
(Decrease) increase in accounts payable,
accrued expenses and other liabilities (368,142) 189,712
(Decrease) increase in tenants'
security deposits payable (3,533) 28,873
Increase in due to general partners of
Subsidiaries and their affiliates 173,859 189,986
Decrease in due to general partners of
Subsidiaries and their affiliates (211,760) (281,587)
Decrease in due to general
partners and affiliates (8,617) (351,538)
------------ -----------
Total adjustments (11,148,011) 1,580,162
------------ -----------
Net cash provided by operating
activities 1,659,183 1,041,251
------------ -----------
</TABLE>
7
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(continued)
(Unaudited)
<TABLE>
<CAPTION>
=============================
Nine Months Ended
November 30,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
Cash flows from investing activities:
Decrease (increase) in certificates
of deposit 205,509 (2,559)
Proceeds from sale of properties 7,035,898 2,983,756
Acquisitions of property and
equipment (388,507) (695,165)
Increase in mortgage escrow deposits (435,464) 0
----------- -----------
Net cash provided investing activities 6,417,436 2,286,032
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (4,241,819) (2,209,840)
Decrease in minority interest (500,174) (31,084)
Distributions paid to partners (2,030,972) (1,111,554)
Principal payments of purchase
notes payable (100,416) (1,264,735)
----------- -----------
Net cash used in financing activities (6,873,381) (4,617,213)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 1,203,238 (1,289,930)
Cash and cash equivalents at
beginning of period 6,069,843 5,981,506
----------- -----------
Cash and cash equivalents at
end of period $ 7,273,081 $ 4,691,576
=========== ===========
</TABLE>
8
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(continued)
(Unaudited)
<TABLE>
<CAPTION>
=============================
Nine Months Ended
November 30,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
Supplemental disclosures of
noncash activities:
Forgiveness of indebtedness
Decrease in purchase money
notes payable (6,349,781) (1,654,424)
Decrease in due to selling
partners (8,650,859) (3,516,449)
Increase in due to general
partners and affiliates 11,250 0
Decrease in due to general
partners of subsidiaries
and their affiliates (15,762) 0
Summarized below are the
components of the gain
on sale of properties:
Decrease in property and
equipment, net of accumulated
depreciation 8,472,345 4,609,200
Decrease in cash-restricted for
tenants' security deposits 22,464 43,945
Decrease in mortgage escrow
deposits 894,467 304,613
Decrease in rents receivable 4,629 3,710
Decrease in prepaid expenses and
other assets 8,482 58,456
Decrease in mortgage notes
payable (6,024,054) (1,681,707)
Decrease in accounts payable,
accrued expenses and other
liabilities (1,675,330) (42,376)
Decrease in tenants' security
deposits payable (20,200) (66,745)
Decrease in due to general
partners of Subsidiaries and
their affiliates (28,500) (474,492)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
9
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
Note 1 - General
The consolidated financial statements for the nine months ended November 30,
1998, include the accounts of Cambridge + Related Housing Properties Limited
Partnership, a Massachusetts limited Partnership (the "Partnership") and
thirty-five Subsidiary Partnerships ("Subsidiaries", "Subsidiary Partnerships"
or "Local 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 date of sale of their properties and the related assets and
liabilities (see Note 5). The consolidated financial statements for the nine
months ended November 30, 1997, include the accounts of the Partnership and
forty-one Subsidiary Partnerships, one of which only has activity through the
date of sale of the Partnership's interest and one of which only has activity
through the date of sale of its property and the related assets and liabilities
(see Note 5). 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 Partnerships.
For financial reporting purposes, the Partnership's fiscal quarter ends on
November 30. All Subsidiaries have fiscal quarters ending September 30. Accounts
of Subsidiaries have been adjusted for intercompany transactions from October 1
through November 30. The Partnership's fiscal quarter ends on November 30 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.
10
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
Increases (decreases) in the capitalization of consolidated Subsidiaries
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority interests'
investment in a Subsidiary have been charged to the Partnership. Such losses
aggregated approximately $0 and $1,000 and $0 and $6,500 for the three and nine
months ended November 30, 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 November 30, 1998, the results of operations
for the three and nine months ended November 30, 1998 and 1997 and cash flows
for the nine months ended November 30, 1998 and 1997. However, the operating
results for the nine months ended November 30, 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 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.
11
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
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 November 30, 1998, the maturity dates of each 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 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 $48,770,087 and $54,826,676 at November 30, 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 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 1/2% per annum of the outstanding principal balance
of the assets. The Partnership sent an extension notice to each Purchase Note
holder that pursuant to the note it was extending the maturity. However, the
Partnership did not pay the extension fee at that time, deferring such payment
to the future. The holders of the Note could argue that until the fee is paid
the Note has not been properly extended. Extension fees in the amount of
$408,212 were incurred by the Partnership through November 30, 1998. Such notes
are now due with maturity dates ranging from July 2001 to December 2004. Of such
fees incurred, $388,295 was accrued and added to the Purchase Money Notes
balance. The Partnership expects that upon final maturity it will be required to
refinance or sell its in-
12
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
vestments 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.
The Purchase Note holders of three of the Local Partnerships had sent default
notices to the Partnership. The Partnership has negotiated stand still
agreements with each of the note holders.
During the nine months ended November 30, 1998 and 1997, the Partnership
received cash flow distributions aggregating $142,973 and $307,277,
respectively, of which $85,784 and $200,684 was used to pay interest on the
purchase money notes. In addition, the Partnership received a distribution of
proceeds from the sale of property of four Local Partnerships aggregating
$1,847,379 for the nine months ended November 30, 1998 and proceeds from the
sale of its Local Partnership Interest in one Local Partnership and the sale of
a property of another Local Partnership aggregating $2,135,762 for the nine
months ended November 30, 1997, of which $488,712 and $1,264,735 was used to pay
principal on the Purchase Money Notes, respectively.
13
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
Note 3 - Related Party Transactions
The costs incurred to related parties for the three and nine months ended
November 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
-------------------- ------------------------
1998 1997 1998 1997
-------------------- ------------------------
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $241,500 $241,500 $ 724,500 $ 724,500
Expense reimburse-
ment (b) 36,972 11,017 89,532 141,642
Property manage-
ment fees incurred
to affiliates of the
General Partners (c) 32,014 62,916 133,093 197,734
Local administra-
tive fee (d) 7,000 7,000 20,000 20,000
-------- -------- ---------- ----------
317,486 322,433 967,125 1,083,876
-------- -------- ---------- ----------
Property manage-
ment fees incurred
to affiliates of
the subsidiary
partnerships'
general partners (c) 261,655 313,019 776,984 936,673
-------- -------- ---------- ----------
Total general and
administrative-
related parties $579,141 $635,452 $1,744,109 $2,020,549
======== ======== ========== ==========
</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 $900,000 and $426,000 were accrued and
unpaid as of November 30, 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 the provisions of the Partnership Agreement. Another
affiliate of the General Partners performs asset monitoring for the Partner-
14
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
ship. These services include site visits and evaluations of the Subsidiary
Partnership's performance.
(c) Property management fees incurred by Local Partnerships to affiliates of the
Local Partnerships amounted to $293,669 and $375,935 and $910,077 and $1,134,407
for the three and nine months ended August 31, 1998 and 1997, respectively. Of
such fees $32,014 and $62,916 and $133,093 and $197,734, 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.
Note 4 - Property and Equipment
Caddo Parish-Villas South, Ltd. ("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 nine months
ended November 30, 1998, an impairment loss in the amount of $3,191,072 has been
recognized. As of November 30, 1998, the building was written down to zero.
Note 5 - Sale of Properties
On November 25, 1998, the Parktowne, Ltd., Westwood Apartments Company, Ltd.,
Eastwyck III, Ltd., New Jersey, Ltd., and Zeigler Boulevard, Ltd. Partnerships
entered into purchase and sale agreements to sell the properties and the related
assets and liabilities to an unaffiliated third party for a purchase price of
$2,500,000, $2,628,571, $1,328,571, $2,057,143 and $2,057,143, respectively.
During December 1998, the purchaser failed to provide the necessary down payment
thereby terminating the contract. The Local General Partner is actively pursuing
other interested purchasers.
On June 24, 1998, the Pacific Palm Limited Partnership entered into a contract
to sell the property and the related assets and liabilities to an unaffiliated
third party for a price of $4,500,000. The
15
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
buyer failed to close and a contract termination notice was sent on September
22, 1998. The Local General Partner is actively pursuing other interested
purchasers.
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 $1,834,000
and $232,000, respectively, 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, 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 $4,587,000. The related purchase money note and interest
thereon were canceled resulting in forgiveness of indebtedness income of
approximately $7,404,000. 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
Part-
16
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
nership is anticipated to be approximately $4,200,000 and $1,600,000,
respectively.
On September 9, 1997, the property and the related assets and liabilities of
South Munjoy Associates, Limited ("South Munjoy") were sold to Montfort Housing
Limited Partnership (which is an affiliate of Mainland Development Company of
Portland, Maine) for $3,000,000, resulting in a loss in the amount of $254,466.
The Partnership used $1,264,735 of the net proceeds to settle the associated
Purchase Money Note and accrued interest thereon which had a total outstanding
balance of $3,247,658, resulting in forgiveness of indebtedness income of
$1,982,923.
On April 25, 1997, the Partnership's Local Partnership Interest in Los
Caballeros Apartments ("Los Caballeros") was sold to the Local 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 material changes, except as 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.
Note 7 - Subsequent Events
In order to facilitate an orderly disposition of the Partnership's assets the
Partnership formed two new entities: Cambridge Liquidating Trust LLC (the
"Trust"), a Massachusetts limited liability company which is owned 99.99% by the
Partnership and .01% by affiliates of Related; and, Cambridge Liquidating Trust
II ("Trust II"), a Massachusetts general partnership which is owned 99.99% by
the Partnership and .01% by J. Michael Fried.
On December 30, 1998 the Partnership contributed its limited partnership
interest in Bethany Glen Associates, Westwood, Ltd.,
17
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1998
(Unaudited)
Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd.
and Wingate Associates, Ltd. to the Trust.
On December 31, 1998 the Partnership contributed its partnership interests in
Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd.,
El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd.,
Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San
Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort
Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments,
Ltd. to Trust II.
In each case, the interests were contributed subject to each respective Purchase
Money Note. The contribution 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.
18
<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 nine months ended November 30, 1998 and 1997, the Partnership
received cash flow distributions aggregating $142,973 and $307,277,
respectively, of which $85,794 and $200,684 was used to pay interest on the
Purchase Money Notes. In addition, the Partnership received a distribution of
proceeds from the sale of property of four Local Partnerships aggregating
$1,847,379 for the nine months ended November 30, 1998 and proceeds from the
sale of its Local Partnership Interest in one Local Partnership and the sale of
the property of another Local Partnership aggregating $2,135,762 for the nine
months ended November 30, 1997, of which $488,712 and $1,264,735 was used to pay
principal on the Purchase Money Notes, respectively.
During the nine months ended November 30, 1998, cash and cash equivalents of the
Partnership and its thirty-five consolidated Local Partnerships increased
approximately $1,203,000. This increase was due to cash provided by operating
activities ($1,660,000), a decrease in certificates of deposit ($206,000) and
proceeds from sale of properties ($7,036,000) which exceeded principal payments
of mortgage notes payable ($4,242,000), principal payments of purchase money
notes payable ($100,000), an increase in mortgage escrow deposits ($435,000),
distributions paid to partners ($2,031,000), a decrease in minority interest
($500,00) and acquisitions of property and equipment ($389,000). Included in the
adjustments to reconcile the net income to cash provided by operating activities
is gain on sale of properties ($5,382,000), forgiveness of indebtedness income
($15,005,000), a loss on impairment of assets ($3,191,000) and depreciation
($3,205,000).
The Partnership had a working capital reserve of approximately $3,062,000 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 November 30, 1998 and February 28, 1998,
respectively, of
19
<PAGE>
which approximately $0 and $206,000 was restricted at November 30, 1998 and 1997
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 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 nine months ended November 30, 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 $900,000 and $426,000 were accrued and unpaid as of November 30,
1998 and February 28, 1998.
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
20
<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.
On October 21, 1998 President Clinton signed H.R. 4194 into law. The bill
provided that owners of a property that was eligible for prepayment had to give
notice of such prepayment to both his tenants and to the chief executive of the
state or local government for the jurisdiction in which the housing is located.
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 Local 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 option has expired and the Local General
Partners are pursuing other opportunities. The Partnership's investment in
Westgate was approximately $849,000 at November 30, 1998. Westgate's assets
constituted approximately 3% of the consolidated total assets at November 30,
1998.
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 5 to the
financial statements.
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.
Management has been in contact with all the Local Partnerships in the southeast
region and does not anticipate any significant increases to repairs and
maintenance due to the effect of Hurricane Georges on the portfolio.
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
21
<PAGE>
believes the only impact would be from laws that have not yet been adopted. The
portfolio is diversified by the location of the properties around the United
States so that if one area of the country is experiencing downturns in the
economy, the remaining properties in the portfolio may be experiencing upswings.
However, the geographic diversifications of the portfolio may not protect
against a general downturn in the national economy.
Results of Operations
The results of operations of the Partnership, as well as the Local Partnerships,
remained fairly consistent during the three and nine months ended November 30,
1998 and 1997 excluding South Munjoy, Country, Northbrook III, Riverside and
Cudahy 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 (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 22% and 20% for the three and nine months
ended November 30, 1998 as compared to 1997. Excluding the Sold Assets, rental
income increased approximately 2% and 1% for the three and nine months ended
November 30, 1998 as compared to 1997 primarily due to rental rate increases.
Other income decreased approximately $38,000 and $124,000 for the three and nine
months ended November 30, 1998 as compared to 1997. Excluding the Sold Assets
such income increased approximately $28,000 and $37,000 for the three and nine
months ended November 30, 1998, as compared to 1997, primarily due to
22
<PAGE>
a increase in interest income and late charges at four Local Partnerships.
Total expenses, excluding the Sold Assets and loss on impairment of assets,
remained fairly consistent with an increase of approximately 1% and a decrease
of approximately 1% for the three and nine months ended November 30, 1998 as
compared to 1997.
Administrative and management, administrative and management-related parties,
operating, repairs and maintenance, taxes and insurance, interest and
depreciation expense decreased approximately $204,000 and $752,000, $56,000 and
$276,000, $213,000 and $956,000, $427,000 and $1,259,000, $314,000 and $690,000,
$518,000 and $1,509,000, $400,000 and $1,108,000, respectively, for the three
and nine months ended November 30, 1998 as compared to 1997 primarily due to
decreases relating to the Sold Assets. Excluding the Sold Assets, and Pacific
Palm for depreciation only, such expenses remained fairly consistent with
(decreases) increases of approximately $62,000 and ($50,000), $45,000 and
($2,000), ($1,000) and ($170,00), $116,000 and $164,000, ($67,000) and
($36,000), ($33,000) and ($48,000), ($42,000) and ($135,000), respectively, for
the three and nine months ended November 30, 1998 as compared to 1997. Pacific
Palm is not depreciated during the quarter because it is classified an asset
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 is in the process of upgrading
its computer information systems to be year 2000 compliant and beyond. The Year
2000 compliance issue concerns the inability of a computerized system to
accurately record dates after 1999. The affiliate of the General Partners
recently underwent a conversion of its financial systems applications and is in
the process of upgrading and testing the in house software and hardware
inventory. The workstations that experienced problems from this process were
corrected with an upgrade patch. The affiliate of the General Partners have
incurred costs of approximately $1,000,000 to date and estimates the total costs
to be approximately $2,000,000. These costs are not being charged to the
Partnership. In regard to third parties, the Partnership's 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 of third party readiness will be sent to material third
parties in the fourth quarter of 1998. The results of the surveys will be
23
<PAGE>
compiled in early 1999. No estimate can be made at this time as to the impact of
the readiness of such third parties. The Partnership's General Partners plan to
have these issues fully assessed by early 1999, at which time the risks will be
addressed and a contingency plan will be implemented if necessary.
24
<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. The parties have agreed as a final
step to have the case heard in a non-binding proceeding. Such mediation is
expected to begin in January 1999.
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 - None
25
<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.
26
<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: January 5, 1999
By: /s/ Alan P. Hirmes
-------------------------------
Alan P. Hirmes,
Vice President and
Principal Financial Officer
Date: January 5, 1999
By: /s/ Glenn F. Hopps
-------------------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: January 5, 1999
By: /s/ Alan P. Hirmes
-------------------------------
Alan P. Hirmes,
Vice President and
Principal Financial Officer
Date: January 5, 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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 13,939,840
<SECURITIES> 0
<RECEIVABLES> 318,583
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,362,603
<PP&E> 127,600,945
<DEPRECIATION> 67,167,002
<TOTAL-ASSETS> 76,054,969
<CURRENT-LIABILITIES> 5,146,014
<BONDS> 133,996,598
0
0
<COMMON> 0
<OTHER-SE> (63,087,643)
<TOTAL-LIABILITY-AND-EQUITY> 76,054,969
<SALES> 0
<TOTAL-REVENUES> 22,576,032
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,899,080
<LOSS-PROVISION> 3,191,072
<INTEREST-EXPENSE> 4,062,678
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 15,005,152
<CHANGES> 0
<NET-INCOME> 12,807,194
<EPS-PRIMARY> 1,263
<EPS-DILUTED> 0
</TABLE>
