<PAGE>
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 May 31, 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)
<TABLE>
<CAPTION>
============ ============
May 31, February 29,
2000 2000
------------ ------------
<S> <C> <C>
ASSETS
Property and equipment, net of
accumulated depreciation of
$28,031,226 and $27,628,782,
respectively $21,458,785 $21,782,960
Property and equipment-held for
sale, net of accumulated
depreciation of $17,631,202
and $17,631,202 17,929,686 17,929,686
Cash and cash equivalents 2,989,153 3,431,673
Cash - restricted for tenants'
security deposits 420,523 420,362
Mortgage escrow deposits 5,601,871 5,306,020
Rents receivable 120,698 130,231
Prepaid expenses and other assets 549,338 505,853
------------ ------------
Total assets $49,070,054 $49,506,785
============ ============
</TABLE>
2
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<TABLE>
<CAPTION>
============ ============
May 31, February 29,
2000 2000
------------ ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 29,653,312 $ 29,892,264
Purchase money notes payable
(Note 2) 24,505,519 26,637,019
Due to selling partners (Note 2) 34,131,340 36,669,868
Accounts payable, accrued expenses
and other liabilities 8,497,839 1,913,437
Tenants' security deposits payable 420,523 420,362
Due to general partners of
subsidiaries and their affiliates 353,653 326,159
Due to general partners and affiliates 1,467,630 1,706,224
Distribution payable 0 1,004,200
------------ ------------
Total liabilities 99,029,816 98,569,533
------------ ------------
Minority interest 29,460 28,932
------------ ------------
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (49,040,800) (48,152,233)
General partners (948,422) (939,447)
------------ ------------
Total partners' deficit (49,989,222) (49,091,680)
------------ ------------
Total liabilities and partners' deficit $ 49,070,054 $ 49,506,785
============ ============
</TABLE>
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
May 31,
--------------------------
2000 1999
--------------------------
<S> <C> <C>
Revenues:
Rentals, net $ 3,506,286 $ 5,282,347
Other 91,557 135,326
----------- -----------
Total revenues 3,597,843 5,417,673
----------- -----------
Expenses
Administrative and management 952,967 1,095,863
Administrative and management-
related parties (Note 3) 406,189 559,748
Operating 589,607 875,110
Repairs and maintenance 889,427 1,300,001
Taxes and insurance 445,008 669,148
Interest 809,081 1,296,135
Depreciation 402,444 896,991
----------- -----------
Total expenses 4,494,723 6,692,996
----------- -----------
Loss before minority interest
(896,880) (1,275,323)
Minority interest in income
of subsidiaries (662) (312)
----------- -----------
Net loss $ (897,542) $(1,275,635)
=========== ===========
Net loss-limited partners $ (888,567) $(1,262,879)
=========== ===========
Number of limited partnership
units outstanding 10,038 10,038
=========== ===========
Net loss per limited partnership unit $ (88.52) $ (125.81)
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<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 loss-
three months ended
May 31, 2000 (897,542) (888,567) (8,975)
------------- ------------- -----------
Balance-
May 31, 2000 $(49,989,222) $(49,040,800) $ (948,422)
============= ============= ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
==========================
Three Months Ended
May 31,
--------------------------
2000 1999
--------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (897,542) $(1,275,635)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation 402,444 896,991
Minority interest in income
of subsidiaries 662 312
Increase in cash-restricted
for tenants' security deposits (161) (13,410)
(Increase) decrease in mortgage
escrow deposits (204,233) 85,974
Decrease in rents receivable 9,533 81,763
(Increase) decrease in prepaid
expenses and other assets (43,485) 354,821
Increase in due to selling partners 569,928 894,009
(Increase) decrease in accounts payable,
accrued expenses and other liabilities 3,038,424 (438,968)
Increase in tenants'
security deposits payable 161 13,410
Increase in due to general
partners of subsidiaries and their
affiliates 27,830 108,396
Decrease in due to general partners of
subsidiaries and their affiliates (336) (303,724)
(Decrease) increase in due to general
partners and affiliates (238,594) 253,602
----------- -----------
Total adjustments 3,562,173 1,933,176
----------- -----------
Net cash provided by
operating activities 2,664,631 657,541
----------- -----------
</TABLE>
6
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
<TABLE>
<CAPTION>
==========================
Three Months Ended
May 31,
--------------------------
2000 1999
--------------------------
<S> <C> <C>
Cash flows from investing activities:
Acquisitions of property and
equipment (78,269) (166,896)
Increase in mortgage escrow deposits (91,618) (248,960)
----------- -----------
Net cash used in
investing activities (169,887) (415,856)
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (238,952) (419,122)
Decrease in minority interest (134) (2)
Distributions paid to partners (1,004,200) (2,020,374)
Principal payments of purchase
notes payable 0 (61,089)
Payments to selling partners (1,693,978) (57,394)
----------- -----------
Net cash used in financing activities (2,937,264) (2,557,981)
----------- -----------
Net decrease in cash and
cash equivalents (442,520) (2,316,296)
Cash and cash equivalents at
beginning of period 3,431,673 6,906,857
----------- -----------
Cash and cash equivalents at
end of period $ 2,989,153 $ 4,590,561
=========== ===========
Supplemental disclosures of
noncash activities:
Decrease in purchase money
note payable $(2,131,500) $ 0
Decrease in due to selling
partners (1,414,478) 0
Increase in accounts payable 3,545,978 0
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
7
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
NOTE 1 - GENERAL
The consolidated financial statements for the three months ended May 31, 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"). 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 May
31. All Subsidiaries have fiscal quarters ending March 31. Accounts of
Subsidiaries have been adjusted for intercompany transactions from April 1
through May 31. The Partnership's fiscal quarter ends on May 31 in order to
allow adequate time for the Subsidiaries' financial statements to be prepared
and consolidated. The books and records of the Partnership are maintained on the
accrual basis of accounting, in accordance with generally accepted accounting
principles ("GAAP").
All intercompany accounts and transactions have been eliminated in
consolidation.
Increases (decreases) in the capitalization of consolidated Subsidiaries
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
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 for both the three months ended May 31, 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.
8
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
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 May 31, 2000 and the results of operations and
cash flows for the three months ended May 31, 2000 and 1999. However, the
operating results for the three months ended May 31, 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 May 31, 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
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 $34,006,292 and $36,560,820 at May 31, 2000 and
February 29, 2000, respectively, has been accrued and is
9
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
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 $669,135 were incurred by the Partnership through
May 31, 2000. Such Purchase Money Notes are now extended with maturity dates
ranging from July 2001 to December 2004. Extension fees of $533,182 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.
During the three months ended May 31, 2000 and 1999, the Partnership received
cash flow distributions aggregating $43,500 and $95,656, respectively, of which
$26,100 and $57,393 was used to pay interest on the Purchase Money Notes. In
addition, the Partnership received a distribution of proceeds from the sale of
one Local Partnership aggregating $3,461,611, of which $1,667,877 was used to
pay principal on
10
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
the Purchase Money Notes during the three months ended May 31, 2000.
NOTE 3 - RELATED PARTY TRANSACTIONS
The costs incurred to related parties for the three months ended May 31, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
-----------------------
Three Months Ended
May 31,
-----------------------
2000 1999
-----------------------
<S> <C> <C>
Partnership management fees (a) $ 241,710 $ 241,710
Expense reimbursement (b) 25,455 29,000
Property management fees
incurred to affiliates of
the General Partners (c) 28,298 31,144
Local administrative fee (d) 5,000 5,000
---------- ----------
Total general and administrative-
General Partners 300,463 306,854
---------- ----------
Property management fees incurred
to affiliates of the Subsidiary
Partnerships' general partners (c) 98,121 252,894
Subsidiary Partnerships' general
partners incentive fee (e) 7,605 0
---------- ----------
Total general and administrative-
related parties $ 406,189 $ 559,748
========== ==========
</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 $742,000 and $875,000 were
accrued and unpaid as of May 31, 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.
(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
11
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
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 $126,419 and $284,038 for the three months
ended May 31, 2000 and 1999, respectively. Of such fees $28,298 and $31,144,
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 $7,605 and $0 for the three months ended May
31, 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 May 31, 2000, the Partnership has disposed of twenty-one
of its forty-four original investments. Eight additional investments are listed
for sale and the Partnership 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.
12
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
INFORMATION REGARDING DISPOSITION
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, an additional down
payment of $25,000, and a closing no later than June 30, 2000. The closing is
expected to occur in 2000. No assurances can be given that the sale will
actually occur.
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 August 2000. No assurances can be given that the sale will
actually occur.
On March 6, 2000, Westwood Apartments Company, Ltd. ("Westwood") entered into an
agreement for the purchase and sale of real estate with an unaffiliated third
party for a purchase price of $2,025,000. The sale is expected to occur in
September 2000. No assurances can be given that the sale will actually occur.
Effective January 1, 1999, Parktowne Ltd. ("Parktowne") adopted a plan to sell
its property. Accordingly, the Subsidiary Partnership has revalued its assets
and liabilities to the amount expected to be collected and paid upon sale. Up
through January 1, 1999, Parktowne recorded its results of its operation using
accounting principles applicable to going concern entities. On March 6, 2000,
Parktowne, entered into an agreement for the purchase and sale of real estate
with an unaffiliated third party for a purchase price of $2,500,000. The sale is
expected to occur in September 2000. 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 $2,499,000. 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 $3,545,000
which is included in accounts payable at May 31, 2000. Such income will be
recognized in
13
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
the quarter ending August 31, 2000. The Partnership netted approximately
$1,785,000 of cash which was placed into working 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.
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
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
GRANDVIEW-BLUE RIDGE MANOR LIMITED, BRECKENRIDGE-CHAPARRAL APARTMENTS II, LTD.,
EL PASO-GATEWAY EAST, LTD., ALBUQUERQUE-LAFAYETTE SQUARE APARTMENTS, LTD.,
CORPUS CHRISTI-OSO BAY APARTMENTS, LTD., SAN DIEGO-LOGAN SQUARE GARDENS CO.,
ARDMORE-ROLLING MEADOWS OF ARDMORE, LTD., FORT WORTH-NORTHWOODS APARTMENTS,
LTD., STEPHENVILLE-TARLETON ARMS APARTMENTS, LTD., AND CADDO PARRISH-VILLAS
SOUTH, A LOUISIANA LIMITED PARTNERSHIP F/K/A VILLAS SOUTH, LTD. (THE "ROAR
PROPERTIES").
14
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
In 1998, the Purchase Money Note holder, Roar Company (the "Noteholders")
disputed the exact calculation of the extension fee. At the same time,
negotiations began with the Noteholders to refinance or sell the Partnership's
investments in the Roar Properties in order to pay the Purchase Money Notes. The
Partnership cannot sell or otherwise liquidate its investments in those Local
Partnerships that have subsidy agreements with HUD during the period that such
agreements are in existence without HUD's approval. It is uncertain as to
whether the proceeds from such sales will be sufficient to meet the outstanding
balances of principal, accrued interest and extension fees. No agreement has
been reached with the Noteholders regarding the sale of the Roar Properties or
the calculation of the extension fee.
In order to facilitate an orderly disposition of the Partnership's assets, the
Partnership formed Cambridge Liquidating Trust II ("Trust II"), a Massachusetts
general partnership, on December 31, 1998, which is owned 99% by Cambridge
Liquidating GP II, L.L.C. ("GP II") and 1% by Cambridge Liquidating GP I, L.L.C.
("GP I"). Both GP I and GP II are owned by the Partnership.
The Partnership then assigned its limited partnership interests in the Roar
Properties to Trust II. In each case, the interests were assigned subject to
each respective Purchase Money Note. The assignment did not involve any
consideration being paid to the Partnership; therefore, there should not be any
tax effect to the limited partners of the Partnership.
Prior to September 1, 1999, the Noteholders were tendered the sums calculated to
be due as the extension fees under the Purchase Money Notes as of August 31,
1999. The Noteholders did not formally respond to this tender or dispute the
calculation of the extension fee amount and did not return the fees. However, a
representative stated that the tender of the fees will be rejected and the fees
will be returned.
On August 27, 1999, Trust II filed a Declaratory Judgment Action styled
Cambridge Liquidating Trust II v. Roar Company, et al, Cause No. 99-06802 in the
191st District Court of Dallas County Texas seeking a court ruling as to the
proper calculation of the extension fee [the "Action"]. On September 20, 1999,
the Noteholders filed an Answer in the Action and denied all allegations. The
Noteholders have previously asserted that they have a valid security interest in
the Local Partnership
15
<PAGE>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2000
(Unaudited)
Interests. It is possible that the Noteholders will attempt to declare the
Purchase Money Notes to be due and commence foreclosure on the Local
Partnership Interests based upon a contention that the extension fees were not
paid in the proper amount. The Action has now been set for trial in August of
2000 and discovery is not complete. Management of the Partnership will
vigorously prosecute the Action and may assert claims against the Noteholders.
The General Partner can express no opinion on the outcome of the case.
NOTE 6 - SUBSEQUENT EVENT
On June 19, 2000, New Jersey Ltd. entered into a purchase agreement to sell the
property and 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.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds are (i) cash distributions from
operations and sales of the Local Partnerships in which the Partnership has
invested, (ii) interest earned on funds and (iii) cash in working capital
reserves. All of these sources of funds are available to meet the obligations of
the Partnership.
During the three months ended May 31, 2000 and 1999, the Partnership received
cash flow distributions aggregating $43,500 and $95,656, respectively, of which
$26,100 and $57,393 was used to pay interest on the Purchase Money Notes. In
addition, the Partnership received a distribution of proceeds from the sale of
one Local Partnership aggregating $3,461,611, of which $1,667,877 was used to
pay principal on the Purchase Money Notes during the three months ended May 31,
2000.
During the three months ended May 31, 2000, cash and cash equivalents of the
Partnership and its twenty-four consolidated Local Partnerships decreased
approximately ($443,000). This decrease was primarily due to principal payments
of mortgage notes payable ($239,000), an increase in mortgage escrow deposits
($92,000), distributions paid to partners ($1,004,000), payments to selling
partners ($1,694,000), and acquisitions of property and equipment ($78,000)
which exceeded cash provided by operating activities ($2,665,000). Included in
the adjustments to reconcile the net loss to cash provided by the operating
activities is depreciation ($402,000).
The Partnership had a working capital reserve of approximately $2,341,000 at May
31, 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 $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 three months ended May 31, 2000 and 1999, was deemed to be a return of
capital in accordance with GAAP.
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Partnership management fees owed to the General Partners amounting to
approximately $742,000 and $875,000 were accrued and unpaid as of May 31, 2000
and February 29, 2000.
The Local Partnerships which receive government assistance are subject to
low-income use restrictions which limited the owners' ability to sell or
refinance the properties. In order to maintain the existing inventory of
affordable housing, Congress passed a series of related acts including the
Emergency Low Income Preservation Act of 1987, the Low-Income Housing
Preservation and Resident Homeownership Act of 1990 (together the "Preservation
Acts") and the Housing Opportunity Program Extension Act of 1996 (the "1996
Act"). In exchange for maintaining the aforementioned use restrictions, the
Preservation Acts provide financial incentives for owners of government assisted
properties. The 1996 Act provides financial assistance by funding the sale of
such properties to not-for-profit owners and also restores the owners ability to
prepay their U.S. Department of Housing and Urban Development ("HUD") mortgage
and convert the property to condominiums or market-rate rental housing. Local
general partners have filed for incentives under the Preservation Acts or the
1996 Act for the following local partnerships: San Diego - Logan Square Gardens
Company, Albuquerque - Lafayette Square Apts. Ltd., Westgate Associates Limited,
Riverside Gardens Limited Partnership, 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 Westgate Associates Limited
Partnership entered into a purchase and sale contract with an unaffiliated third
party purchaser as of March 6, 2000. No assurance can be given that the
transaction will be consummated. The Pacific Palms property was sold on April
28, 2000. The local general partners of the other properties are either
negotiating purchase and sale contracts or exploring their alternatives under
the 1996 Act.
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
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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
Untied 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 months ended May 31, 2000 and 1999,
excluding Bethany which sold its property 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"). 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 34% for the three months ended May 31,
2000 as compared to 1999. Excluding the Sold Assets, rental income increased
approximately 3% for the three months ended May 31, 2000 as compared to 1999,
primarily due to rental rate increases.
Other income decreased approximately 32% for the three months ended May 31, 2000
as compared to 1999. Excluding the Sold Assets, such income increased
approximately 17%, primarily due to an increase in
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interest income, laundry and miscellaneous fees at two Local Partnerships.
Total expenses, excluding the Sold Assets, taxes and insurance, remained fairly
consistent with a decrease of less than 1% for the three months ended May 31,
2000 as compared to 1999.
Taxes and insurance decreased approximately 34% for the three months ended
May 31, 2000 as compared to 1999. Excluding the Sold Assets, taxes and insurance
increased approximately 15% primarily due to an under accrual at three Local
Partnerships in 1999 and an increase at one Local Partnership due to a change in
the Tennessee tax code.
Administrative and management, administrative and management-related parties,
operating, repairs and maintenance, interest and depreciation expense decreased
approximately $143,000, $154,000, $286,000, $411,000, $487,000 and $495,000,
respectively, for the three months ended May 31, 2000 as compared to 1999,
primarily due to decreases relating to the Sold Assets. Excluding the Sold
Assets, administrative and management, administrative and management-related
parties, operating, repairs and maintenance, and interest increased (decreased)
approximately $40,000, $2,000, ($12,000), $26,000 and ($66,000), respectively.
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
$8,000 for the three months ended May 31, 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
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.
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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: July 5, 2000
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: July 5, 2000
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: July 5, 2000
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive Financial Officer
Date: July 5, 2000
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
