UNITED STATES
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, 2000
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 - Financial Information
Item 1. Financial Statements
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============ ============
November 30, February 29,
2000 2000
------------ ------------
ASSETS
Property and equipment, net of
accumulated depreciation of
$28,846,010 and $27,628,782,
respectively $20,670,075 $21,782,960
Property and equipment-held for
sale, net of accumulated
depreciation of $10,010,840
and $17,631,202, respectively 11,926,973 17,929,686
Cash and cash equivalents 2,452,892 3,431,673
Cash - restricted for tenants'
security deposits 352,655 420,362
Mortgage escrow deposits 5,839,013 5,306,020
Rents receivable 195,130 130,231
Prepaid expenses and other assets 778,527 505,853
----------- -----------
Total assets $42,215,265 $49,506,785
=========== ===========
2
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
============ ============
November 30, February 29,
2000 2000
------------ ------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 24,084,850 $ 29,892,264
Purchase money notes payable
(Note 2) 22,728,531 26,637,019
Due to selling partners (Note 2) 32,396,116 36,669,868
Accounts payable, accrued expenses
and other liabilities 1,591,012 1,913,437
Tenants' security deposits payable 352,655 420,362
Due to general partners of
subsidiaries and their affiliates 221,850 326,159
Due to general partners and affiliates 1,574,133 1,706,224
Distribution payable 0 1,004,200
------------ ------------
Total liabilities 82,949,147 98,569,533
------------ ------------
Minority interest 125,678 28,932
------------ ------------
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (40,002,434) (48,152,233)
General partners (857,126) (939,447)
------------ ------------
Total partners' deficit (40,859,560) (49,091,680)
------------ ------------
Total liabilities and partners' deficit $ 42,215,265 $ 49,506,785
============ ============
See Accompanying Notes to Consolidated Financial Statements.
3
<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,
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- ----------------------------
<S> <C> <C> <C> <C>
Revenues:
Rentals, net $ 3,384,472 $ 3,640,999 $ 10,359,641 $ 14,134,256
Other 140,935 148,298 385,721 488,716
Gain (loss) on sale
of properties
(Note 4) 151,528 0 2,700,575 (6,050,854)
------------ ------------ ------------ ------------
Total revenues 3,676,935 3,789,297 13,445,937 8,572,118
------------ ------------ ------------ ------------
Expenses
Administrative and
management 771,899 843,687 2,511,131 3,370,927
Administrative and
management-
related parties
(Note 3) 400,773 427,128 1,212,861 1,522,457
Operating 519,405 626,032 1,669,233 2,281,449
Repairs and
maintenance 886,900 855,463 2,621,902 3,661,563
Taxes and
insurance 385,305 414,818 1,202,194 1,783,317
Interest 746,724 942,516 2,320,372 3,318,888
Depreciation 415,198 429,057 1,217,228 2,162,166
------------ ------------ ------------ ------------
Total expenses 4,126,204 4,538,701 12,754,921 18,100,767
------------ ------------ ------------ ------------
(Loss) income before
minority interest
and extraordinary
item (449,269) (749,404) 691,016 (9,528,649)
Minority interest in
(income) loss
of subsidiaries (510) 74 (29,118) 89
------------ ------------ ------------ ------------
(Loss) income before
extraordinary
item (449,779) (749,330) 661,898 (9,528,560)
Extraordinary item-
forgiveness of
indebtedness
income (Note 4) 4,024,244 0 7,570,222 26,330,313
------------ ------------ ------------ ------------
Net income (loss) $ 3,574,465 $ (749,330) $ 8,232,120 $ 16,801,753
============ ============ ============ ============
</TABLE>
4
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(continued)
<TABLE>
<CAPTION>
============================= ============================
Three Months Ended Nine Months Ended
November 30, November 30,
----------------------------- ----------------------------
2000 1999 2000 1999
----------------------------- ----------------------------
<S> <C> <C> <C> <C>
(Loss) income before
extraordinary
item - limited
partners $ (445,281) $ (741,837) $ 655,279 $ (9,433,275)
Extraordinary item -
limited partners 3,984,002 0 7,494,520 26,067,010
------------ ------------ ------------ ------------
Net income (loss) -
limited partners $ 3,538,721 $ (741,837) $ 8,149,799 $ 16,633,735
============ ============ ============ ============
Number of limited
partnership
units outstanding 10,038 10,038 10,038 10,038
============ ============ ============ ============
(Loss) income before
extraordinary
item per limited
partnership unit $ (44.36) $ (73.90) $ 65.28 $ (939.76)
Extraordinary item
per limited
partnership unit 396.89 0.00 746.61 2,596.83
------------ ------------ ------------ ------------
Net income (loss)
per limited
partnership unit $ 352.53 $ (73.90) $ 811.89 $ 1,657.07
============ ============ ============ ============
</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, 2000 $(49,091,680) $(48,152,233) $ (939,447)
Net income -
nine months ended
November 30, 2000 8,232,120 8,149,799 82,321
------------ ------------ ------------
Balance-
November 30, 2000 $(40,859,560) $(40,002,434) $ (857,126)
============ ============ ============
</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)
==============================
Nine Months Ended
November 30,
------------------------------
2000 1999
------------------------------
Cash flows from operating activities:
Net income $ 8,232,120 $ 16,801,753
------------ ------------
Adjustments to reconcile net income
to net cash used in
operating activities:
(Gain) loss on sale of properties
(Note 4) (2,700,575) 6,050,854
Extraordinary item - forgiveness
of indebtedness income (Note 4) (7,570,222) (26,330,313)
Depreciation 1,217,228 2,162,166
Minority interest in income (loss)
of subsidiaries 29,118 (89)
Decrease in cash-restricted
for tenants' security deposits 67,707 173,021
(Increase) decrease in mortgage
escrow deposits (348,114) 59,025
Increase in rents receivable (104,811) (25,434)
(Increase) decrease in prepaid
expenses and other assets (340,291) 268,530
Increase in due to selling partners 1,609,927 2,184,247
Decrease in accounts payable,
accrued expenses and other liabilities (436,673) (2,852,170)
(Decrease) increase in tenants'
security deposits payable (41,672) 5,826
Increase in due to general partners
of subsidiaries and their affiliates 154,991 3,163
Decrease in due to general partners of
subsidiaries and their affiliates (136,197) (1,082,330)
(Decrease) increase in due to general
partners and affiliates (132,091) 728,032
------------ ------------
Total adjustments (8,731,675) (18,655,472)
------------ ------------
Net cash used in operating activities (499,555) (1,853,719)
------------ ------------
7
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
============================
Nine Months Ended
November 30,
----------------------------
2000 1999
----------------------------
Cash flows from investing activities:
Proceeds from sale of properties 8,969,083 2,828,103
Acquisitions of property and
equipment (243,364) (497,745)
Increase in mortgage escrow deposits (239,014) (436,449)
----------- -----------
Net cash provided by
investing activities 8,486,705 1,893,909
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (5,807,414) (1,093,116)
Decrease (increase) in minority interest 67,628 (734)
Distributions paid to partners (1,004,200) (2,020,374)
Principal payments of purchase
notes payable (838,729) (180,111)
Payments to selling partners (1,693,978) (109,450)
Increase in purchase money note
extension fees payable 310,762 0
----------- -----------
Net cash used in financing activities (8,965,931) (3,403,785)
----------- -----------
Net decrease in cash and
cash equivalents (978,781) (3,363,595)
Cash and cash equivalents at
beginning of period 3,431,673 6,906,857
----------- -----------
Cash and cash equivalents at
end of period $ 2,452,892 $ 3,543,262
=========== ===========
8
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
=============================
Nine Months Ended
November 30,
-----------------------------
2000 1999
-----------------------------
Supplemental disclosures of noncash activities:
Forgiveness of indebtedness
Decrease in purchase money
notes payable $ (3,380,521) $(12,242,127)
Decrease in due to selling partners (4,189,701) (15,061,636)
Increase in accounts payable,
accrued expenses and
other liabilities 0 973,450
Summarized below are the components
of the gain on sale of properties:
Decrease in property and
equipment, net of accumulated
depreciation 6,141,734 16,424,662
Decrease in cash-restricted for
tenants' security deposits 0 135,580
Decrease in mortgage escrow deposits 54,135 759,183
Decrease in rents receivable 39,912 123,742
Decrease in prepaid expenses and
other assets 67,617 412,072
Decrease in mortgage notes payable 0 (12,301,905)
Increase in accounts payable, accrued
expenses and other liabilities 114,248 2,347,188
Decrease in tenants' security
deposits payable (26,035) (314,427)
(Decrease) increase in due to general
partners of subsidiaries and
their affiliates (123,103) 1,292,862
See Accompanying Notes to Consolidated Financial Statements.
9
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
Note 1 - General
The consolidated financial statements for the nine months ended November 30,
2000 and 1999, include the accounts of Cambridge + Related Housing Properties
Limited Partnership, a Massachusetts limited Partnership (the "Partnership") and
twenty-four and thirty Subsidiary Partnerships ("Subsidiaries", "Subsidiary
Partnerships" or "Local Partnerships"), respectively, zero and five of which,
respectively, only have activity through the effective date of the sale of
Partnership interest and three and one of which, respectively, only have
activity through the date of the sale of property and 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 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.
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 $0 and $0 and
10
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
$86,000 for the three and nine months ended November 30, 2000 and 1999. 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 29, 2000. 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, 2000, the results of operations
for the three and nine months ended November 30, 2000 and 1999 and cash flows
for the nine months ended November 30, 2000 and 1999. However, the operating
results for the nine months ended November 30, 2000 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 statements and notes thereto included in the Partnership's
February 29, 2000 Annual Report on Form 10-K.
Note 2 - Purchase Money Notes Payable
Nonrecourse Purchase Money 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 Partnership'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 November 30, 2000, 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
11
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
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 actual future
interest payments and ultimate repayment dates of the Purchase Money Notes.
Unpaid interest of $32,271,068 and $36,560,820 at November 30, 2000 and February
29, 2000, 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 interest in the Local Partnerships in which the Partnership invested ("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 Purchase Money Notes. The Partnership sent an extension notice to each
Purchase Money Note holder that, pursuant to the Purchase Money Note, it was
extending the maturity. However, in certain cases, the Partnership did not pay
the extension fee at that time, deferring such payment to the future. Extension
fees in the amount of $923,272 were incurred by the Partnership through November
30, 2000. Such Purchase Money Notes are now extended with maturity dates ranging
from July 2001 to December 2004. Extension fees of $831,194 were 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 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
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.
12
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
During the nine months ended November 30, 2000 and 1999, the Partnership
received cash flow distributions aggregating $43,500 and $182,415, respectively,
of which $26,100 and $109,449 was used to pay interest on the Purchase Money
Notes. In addition, the Partnership received a distribution of proceeds from the
sales of three and one Local Partnerships aggregating $4,469,580 and $1,915,569
and proceeds from the sale of its Local Partnership Interest in zero and five
Local Partnerships aggregating $0 and $2,828,103, respectively, of which
$2,506,606 and $1,915,569 was used to pay principal on the Purchase Money Notes
during the nine months ended November 30, 2000 and 1999, respectively.
13
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
Note 3 - Related Party Transactions
The costs incurred to related parties for the three and nine months ended
November 30, 2000 and 1999 were as follows:
======================== ========================
Three Months Ended Nine Months Ended
November 30, November 30,
------------------------ ------------------------
2000 1999 2000 1999
------------------------ ------------------------
Partnership manage-
ment fees (a) $ 241,710 $ 241,710 $ 725,129 $ 725,129
Expense reimburse-
ment (b) 29,346 31,877 77,724 88,498
Property manage-
ment fees
incurred to
affiliates of
the General
Partners (c) 20,013 32,188 81,769 70,386
Local administra-
tive fee (d) 5,000 5,000 14,000 16,000
---------- ---------- ---------- ----------
Total general and
administrative-
General Partners 296,069 310,775 898,622 900,013
---------- ---------- ---------- ----------
Property manage-
ment fees
incurred to
affiliates of the
Subsidiary
Partnerships'
general
partners (c) 104,704 123,958 306,634 619,279
Subsidiary
Partnerships'
general partners
incentive fee (e) 0 (7,605) 7,605 3,165
---------- ---------- ---------- ----------
Total general and
administrative-
related parties $ 400,773 $ 427,128 $1,212,861 $1,522,457
========== ========== ========== ==========
(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 $851,000 and $875,000 were accrued and
unpaid as of November 30, 2000 and February 29, 2000, respectively. Without the
General Partners' continued allowance of accrual without payment of certain fees
14
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
and expense reimbursements, the Partnership will not be in a position to meet
its obligations. The General Partners have continued to allow the accrual
without payment of these amounts but is under no obligation to continue to do
so.
(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the partnership agreement. Another
affiliate of the General Partners performs asset monitoring for the Partnership.
These services include site visits and evaluations of the Subsidiary
Partnerships' performance.
(c) Property management fees incurred by Local Partnerships to affiliates of the
Local Partnerships amounted to $124,717 and $156,146 and $388,403 and $689,665
for the three and nine months ended November 30, 2000 and 1999, respectively. Of
such fees $20,013 and $32,188 and $81,769 and $70,386, 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 general partner of
Parktowne Ltd. and Westwood Apartment Company Ltd., which provides for an annual
incentive fee based on cash flow distributed from the respective properties.
Such fee amounted to $0 and $(7,605) and $7,605 and $3,165 for the three and
nine months ended November 30, 2000 and 1999, respectively.
Note 4 - Sale of Properties
General
The Partnership is currently in the process of winding up its operations and
disposing of its investments. It is anticipated that this process will take a
number of years. As of November 30, 2000, the Partnership has disposed of
twenty-three of its forty-four original investments. Subsequently, on December
1, 2000, one additional Local Partnership was sold. Five additional investments
are listed for sale and the Partnership
15
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
anticipates that the fifteen remaining investments will be listed for sale by
December 31, 2001. There may be no assurance as to when the Partnership will
dispose of its last remaining investments or the amount of proceeds which may be
received. However, 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 received by the Partnership
will be sufficient to return to the limited partners their original investment.
Information Regarding Disposition
On June 18, 1999, the Partnership's limited partnership interest in Warren Manor
Apartments Limited Partnership was sold to the local general partners for
approximately $935,000, resulting in a loss in the amount of approximately
$3,548,000. No proceeds were used to settle the associated Purchase Money Note
and accrued interest thereon, which had a total outstanding balance of
approximately $9,187,000, resulting in forgiveness of indebtedness income.
On June 18, 1999, the Partnership's limited partnership interest in Golf Manor
Apartments Limited Partnership was sold to the local general partners for
approximately $255,000, resulting in a loss in the amount of approximately
$544,000. No proceeds were used to settle the associated Purchase Money Note and
accrued interest thereon, which had a total outstanding balance of approximately
$2,227,000, resulting in forgiveness of indebtedness income.
On June 18, 1999, the Partnership's limited partnership interest in Warren Woods
Apartments, L.P. was sold to the local general partners for approximately
$377,000, resulting in a loss in the amount of approximately $1,914,000. No
proceeds were used to settle the associated Purchase Money Note and accrued
interest thereon, which had a total outstanding balance of approximately
$3,532,000, resulting in forgiveness of indebtedness income.
On June 18, 1999, the Partnership's limited partnership interest in Rosewood
Manor Apartments Limited Partnership was sold to the local general partners for
approximately $406,000, resulting in a loss in the amount of approximately
$1,031,000. No proceeds were used to settle the associated Purchase Money Note
and accrued interest thereon, which had a total outstanding balance of
approximately $3,568,000, resulting in forgiveness of indebtedness income.
16
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
On June 18, 1999, the Partnership's limited partnership interest in Canton
Commons Apartments Limited Partnership was sold to the local general partners
for approximately $855,000, resulting in a gain in the amount of approximately
$987,000. No proceeds were used to settle the associated Purchase Money Note and
accrued interest thereon, which had a total outstanding balance of approximately
$7,816,000, resulting in forgiveness of indebtedness income.
On May 5, 1999, Wingate Associates Limited entered into an agreement for the
purchase and sale of real estate with an unaffiliated third party for a price of
$2,560,000. Since entering into the agreement, the purchaser and Wingate
Associates Limited have negotiated amendments to such agreement. The amendments
call for a reduction in the purchase price to $2,360,000 and an additional down
payment of $25,000. The closing is expected to occur in late 2000. No assurances
can be given that the sale will actually occur.
On November 8, 1999, the property and the related assets and liabilities of
Bethany Glen Associates ("Bethany") were sold to an unaffiliated third party for
$3,450,000 resulting in a gain in the amount of approximately $1,582,000. The
Partnership used $2,494,000 of the net proceeds to settle the associated
Purchase Money Note and accrued interest thereon which had a total outstanding
balance of approximately $2,889,000, resulting in forgiveness of indebtedness
income of $395,000.
On January 17, 2000, Rolling Meadows Apartments, Ltd. ("Rolling Meadows")
entered into an agreement for the purchase and sale of real estate with an
unaffiliated third party for a purchase price of $2,400,000. The sale is
expected to occur in early 2001. No assurances can be given that the sale will
actually occur.
On April 28, 2000, the property and the related assets and liabilities of
Pacific Palms were sold to a third party for approximately $4,900,000, resulting
in a gain of approximately $2,549,000. The Partnership used approximately
$1,668,000 of the net proceeds to settle the associated Purchase Money Notes and
accrued interest thereon which had a total outstanding balance of approximately
$5,214,000, resulting in forgiveness of indebtedness of approximately
$3,546,000. The Partnership netted approximately $1,905,000 of cash which was
placed into working
17
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
capital to pay Partnership expenses. For tax purposes, the entire gain to be
realized by the Partnership is anticipated to be approximately $6,402,000.
On June 19, 2000, New Jersey Ltd. entered into a purchase and sale agreement to
sell its property and the related assets and liabilities to an unaffiliated
third party for a purchase price of approximately $2,050,000. The closing is
expected to take place in late 2000. No assurances can be given that the sale
will actually occur.
On September 14, 2000, the property and the related assets and liabilities of
Westwood Apartments Company, Ltd. ("Westwood") were sold to an unaffiliated
third party for $2,025,000, resulting in a loss of approximately $229,000. The
Partnership advanced approximately $234,000 and along with the net sales
proceeds used these funds to pay off the outstanding HUD mortgage. No proceeds
were used to settle the associated Purchase Money Note and accrued interest
thereon, which had a total outstanding balance of approximately $3,059,000,
resulting in forgiveness of indebtedness income. For tax purposes, the entire
gain to be realized by the Partnership is anticipated to be approximately
$4,993,000.
On September 14, 2000, the property and the related assets and liabilities of
Parktowne Ltd. ("Parktowne") were sold to an unaffiliated third party for
$2,500,000, resulting in a gain of approximately $380,000. The Partnership used
approximately $839,000 of the net proceeds to settle the associated Purchase
Money Note and accrued interest thereon, which had an outstanding balance of
approximately $1,804,000, resulting in forgiveness of indebtedness income of
approximately $965,000. For tax purposes, the entire gain to be realized by the
Partnership is anticipated to be approximately $2,819,000.
Note 5 - Commitments and Contingencies
The following disclosure includes changes and/or additions to disclosures
regarding the Subsidiary Partnership which were included in the Partnership's
Annual Report on Form 10-K for the period ended February 29, 2000.
a) Purchase Money Notes
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
As part of the purchase price of its investment in the Local Partnerships, the
Partnership issued approximately $61,029,000 of Purchase Money Notes. As of the
end of the 1999 Fiscal Year, unpaid accrued interest on the Purchase Money Notes
amounted to approximately $36,561,000. The principal of and all accrued interest
on the Purchase Money Notes is due at maturity. 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 Money Note holder that
pursuant to the note, it was extending the maturity. However, in certain cases
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.
b) Legal Proceedings
The Partnership is the sole member of Cambridge Liquidating GP I, L.L.C., which
is a 1% general partner in Cambridge Liquidating Trust II, a Massachusetts
General Partnership ("CLT II"). The Partnership is the sole member of Cambridge
Liquidating GP II, L.L.C., which is a 99% general partner in CLT II.
CLT II is a party to Cause No. 99-06802, pending in the 191st Judicial District
Court of Dallas County, Texas; styled "CLT II v. Roar Company, a Texas
Corporation, et al." CLT II has asserted claims against the alleged owners and
holders, Roar Company and Liquidating Trusts for whom Roar Company purports to
act as trustee, of Purchase Money Notes executed by the Partnership in 1983. CLT
II seeks a declaratory judgment that maturity dates of the Purchase Money Notes
were extended. CLT II also seeks an accounting that the Trustee for the alleged
owners and holders of the Purchase Money Notes have failed to make distributions
to CLT II and/or its predecessors. Discovery has begun but is not finished. CLT
II intends to vigorously pursue its claims. Defendants have denied CLT II's
claims. The time for amendment of pleadings has not yet expired.
Trial is scheduled for May 7, 2001. Mediation was conducted on December 7, 2000;
but the case did not settle.
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2000
(Unaudited)
The Purchase Money Notes at issue in that lawsuit relate to the acquisition by
the Partnership, in 1983, of a 98.99% limited partnership interest in the
following partnership operating apartment projects in the indicated cities:
PARTNERSHIP LOCATION
----------- --------
Blue Ridge Manor, Ltd. Grandview, MO
Gateway East, Ltd. El Paso, TX
Lafayette Square Apartments, Ltd. Albuquerque, NM
Logan Square Gardens Co. San Diego, CA
Northwood Apartments, Ltd. Fort Worth, TX
Oso Bay Apartments, Ltd. Corpus Christi, TX
Tarleton Arms Apartments, Ltd. Stephensville, TX
Chaparral Apartments, II, Ltd. Breckenridge, TX
Rolling Meadows of Ardmore, Ltd. Ardmore, OK
Caddo Parish - Villas South, Ltd. Caddo Parish, LA
Based on the foregoing, we can express no opinion on the likely outcome of the
case.
Note 6 - Subsequent Event
On December 1, 2000, the property and the related assets and liabilities of
Westgate Associates, Limited ("Westgate") were sold to an unaffiliated third
party for $2,055,000, resulting in a loss of approximately $222,000. The
Partnership used approximately $614,000 of the net proceeds to settle the
associated Purchase Money Note and accrued interest thereon, which had a total
outstanding balance of approximately $1,506,000, resulting in forgiveness of
indebtedness income of approximately $892,000. For tax purposes, the entire gain
to be realized by the Partnership is anticipated to be approximately $2,350,000.
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<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, 2000 and 1999, the Partnership
received cash flow distributions aggregating $43,500 and $182,415, respectively,
of which $26,100 and $109,449 was used to pay interest on the Purchase Money
Notes. In addition, the Partnership received a distribution of proceeds from the
sales of three and one Local Partnerships aggregating $4,469,580 and $1,915,569
and proceeds from the sale of its Local Partnership Interest in zero and five
Local Partnerships aggregating $0 and $2,828,103, respectively, of which
$2,506,606 and $1,915,569 was used to pay principal on the Purchase Money Notes
during the nine months ended November 30, 2000 and 1999, respectively.
During the nine months ended November 30, 2000, cash and cash equivalents of the
Partnership and its twenty-one consolidated Local Partnerships decreased
approximately ($979,000). This decrease was due to cash used by operating
activities ($500,000) principal payments of mortgage notes payable ($5,807,000),
an increase in mortgage escrow deposits ($239,000), distributions paid to
partners ($1,004,000), payments to selling partners ($1,694,000), acquisitions
of property and equipment ($243,000) and principal payments of Purchase Money
Notes payable ($839,000) which exceeded proceeds from the sale of properties
($8,969,000), an increase in Purchase Money Note extension fees payable
($311,000) and an increase in capitalization of consolidated subsidiaries
attributable to minority interest ($68,000). Included in the adjustments to
reconcile the net income to cash used in operating activities is gain on sale of
properties ($2,701,000), forgiveness of indebtedness income ($7,570,000) and
depreciation ($1,217,000).
The Partnership has a working capital reserve of approximately $1,593,000 at
November 30, 2000. 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 and plan to continue investing available reserves in
short term investments. In March 2000 and 1999, a distribution of approximately
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$994,000 and $2,000,000 and $10,000 and $20,000 was paid to the limited partners
and General Partners, respectively, from net proceeds from the sale of
properties. None of the total distributions of approximately $1,004,000 and
$2,020,000 for the nine months ended November 30, 2000 and 1999, was deemed to
be a return of capital in accordance with GAAP.
Partnership management fees owed to the General Partners amounting to
approximately $851,000 and $875,000 were accrued and unpaid as of November 30,
2000 and February 29, 2000, respectively. Without the General Partners'
continued allowance of accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partners have continued to allow the accrual without
payment of these amounts but is under no obligation to continue to do so.
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 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, Pacific Palms, Canton Commons Associates,
Rosewood Manor Associates, 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. The Bethany Glen Associates property was sold on November 8, 1999.
The Canton Commons Associates and Rosewood Manor Associates, limited partnership
interests were sold on June 18, 1999. The Pacific Palms property was sold on
April 28, 2000. The Westgate Associates Limited Partnership was sold on December
1, 2000. The local general partners of the other properties are either
negotiating purchase and sale contracts or exploring their alternatives under
the 1996 Act.
22
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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 Partnerships, 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
United States 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,
2000 and 1999, excluding Bethany Glen Associates, Pacific Palms, Westwood and
Parktowne, which sold their properties, and Warren Manor Apartments Limited
Partnership, Golf Manor Limited Partnership, Warren Woods Apartments 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 administrative and management and repairs and
maintenance. 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,
23
<PAGE>
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 7% and 27% for the three and nine months
ended November 30, 2000, respectively, as compared to 1999. Excluding the Sold
Assets, rental income increased approximately 5% for both the three and nine
months ended November 30, 2000, respectively, as compared to 1999, primarily due
to rental rate increases and decreases in vacancies at several Local
Partnerships.
Other income decreased approximately $7,000 and $103,000 for the three and nine
months ended November 30, 2000, respectively, as compared to 1999. Excluding the
Sold Assets, such income increased approximately $7,000 and $30,000 for the
three and nine months ended November 30, 2000, primarily due to a sales
extension fee paid to one Local Partnership by the potential buyer.
Total expenses, excluding the Sold Assets, administrative and management and
repairs and maintenance remained fairly consistent with decreases of
approximately 3% and 2% for the three and nine months ended November 30, 2000,
respectively, as compared to 1999.
Administrative and management decreased approximately 26% for the nine months
ended November 30, 2000, respectively, as compared to 1999. Excluding the Sold
Assets, administrative and management decreased approximately 13% primarily due
to a decrease in legal fees incurred by the Partnership and a decrease in the
amortization of the Purchase Money Note extension fees.
Repairs and maintenance increased (decreased) approximately 4% and (28%) for the
three and nine months ended November 3, 2000, respectively, as compared to 1999.
Excluding the Sold Assets, repairs and maintenance increased approximately 24%
and 8% primarily due to the receipt of insurance proceeds from hurricane damage
offset against the expense at one Local Partnership in 1999 and painting, carpet
repairs and new appliances at a second Local Partnership in 2000.
Administrative and management-related parties, operating, taxes and insurance,
interest and depreciation expense decreased approximately ($26,000) and
($310,000), ($107,000) and ($612,000), ($30,000) and ($581,000), ($196,000) and
($999,000), ($14,000) and ($945,000), respectively, for the three and nine
months ended November 30, 2000, respectively, as compared to 1999, primarily due
to decreases relating to the Sold Assets. Excluding the Sold Assets,
administrative and management-related parties, operating, taxes and insurance,
and interest increased (decreased) approximately $3,000 and $30,000, ($42,000)
and
24
<PAGE>
($31,000), $4,000 and $32,000, ($35,000) and ($165,000), respectively, for the
three and nine months ended November 30, 2000 as compared to 1999. Excluding the
Sold Assets, Rolling Meadows Apartments, Ltd., Westgate Associates, Limited and
Wingate Associates, Limited for depreciation only, depreciation expense remained
fairly consistent with a decrease of approximately $14,000 and $30,000 for the
three and nine months ended November 30, 2000 as compared to 1999. Rolling
Meadows Apartments, Ltd., Westgate Associates, Limited and Wingate Associates,
Limited are not depreciated during the period because they are classified as
assets held for sale. Subsequently on December 1, 2000, Westgate Associates,
Limited was sold (see Note 6).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
25
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings - This information is incorporated by reference to the
discussion of the Roar Properties in Note 5 to the Financial Statements.
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.
26
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBRIDGE + RELATED HOUSING
PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: GOVERNMENT ASSISTED PROPERTIES,
INC., a General Partner
Date: December 20, 2000
By: /s/ Alan P. Hirmes
-------------------------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: December 20, 2000
By: /s/ Glenn F. Hopps
-------------------------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: December 20, 2000
By: /s/ Alan P. Hirmes
-------------------------------------
Alan P. Hirmes,
President and Principal
Executive Financial Officer
Date: December 20, 2000
By: /s/ Glenn F. Hopps
-------------------------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
