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 June 25, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-13782
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3228969
- - ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 25, March 25,
1996 1996
------------- -------------
<S> <C> <C>
Property and equipment at cost, net of accumulated depreciation
of $96,769,445 and $94,655,094, respectively $ 147,265,324 $ 149,262,982
Cash and cash equivalents 3,005,475 2,651,994
Cash - restricted for tenants' security deposits 1,501,225 1,510,971
Mortgage escrow deposits 10,430,105 10,523,258
Prepaid expenses and other assets 1,669,747 1,661,130
------------- -------------
Total assets $ 163,871,876 $ 165,610,335
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable $ 93,797,539 $ 94,374,639
Purchase money notes payable (Note 2) 89,795,242 89,795,242
Due to selling partners (Note 2) 99,591,575 97,169,422
Accounts payable, accrued expenses and other liabilities 3,633,328 3,620,602
Tenants' security deposits payable 1,458,459 1,451,411
Due to general partners of subsidiaries and their affiliates 2,285,018 2,380,398
Due to general partners and affiliates 1,459,992 1,403,448
------------- -------------
Total liabilities 292,021,153 290,195,162
------------- -------------
Minority interest 137,871 150,518
------------- -------------
Commitments and contingencies (Note 5)
Partners' deficit (128,287,148) (124,735,345)
------------- -------------
Total liabilities and partners' deficit $ 163,871,876 $ 165,610,335
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 25,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenues
Rentals, net $ 8,983,663 $ 8,843,497
Other 388,974 342,160
------------ ------------
Total revenues 9,372,637 9,185,657
------------ ------------
Expenses
Selling and renting 103,886 101,778
Administrative and management 1,358,808 1,441,091
Administrative and management-related parties (Note 3) 579,410 563,214
Operating 1,921,372 1,742,701
Repairs and maintenance 2,101,207 1,999,766
Taxes and insurance 1,196,924 1,166,607
Interest 3,548,247 3,569,162
Depreciation 2,114,351 2,153,781
------------ ------------
Total expenses 12,924,185 12,738,100
------------ ------------
(3,551,548) (3,552,443)
------------ ------------
Minority interest in (income) loss of subsidiaries (255) 766
------------ ------------
Net loss $ (3,551,803) $ (3,551,677)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
(Unaudited)
Total Limited Partners General Partners
------------- ---------------- ----------------
Balance - March 26, 1996 $(124,735,345) $(122,950,467) $(1,784,878)
Net loss (3,551,803) (3,516,285) (35,518)
------------- ------------- -----------
Balance - June 25, 1996 $(128,287,148) $(126,466,752) $(1,820,396)
============= ============= ===========
See accompanying notes to consolidated financial statements
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<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE IN CASH AND CASH EQUIVALENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 25,
--------------------------
1996 1995*
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,551,803) $(3,551,677)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 2,114,351 2,153,781
Minority interest in income (loss) of subsidiaries 255 (766)
Decrease in cash-restricted for tenants' security deposits 9,746 4,413
Decrease (increase) in mortgage escrow deposits 93,153 (319,438)
(Increase) decrease in prepaid expenses and other assets (8,617) 38,777
Increase in due to selling partners 2,746,185 2,751,801
Payments of interest to selling partners (324,032) (192,299)
Increase in accounts payable, accrued expenses
and other liabilities 12,726 418,963
Increase in tenants' security deposits payable 7,048 11,414
Increase in due to general partners of subsidiaries
and their affiliates 0 17,179
Decrease in due to general partners of subsidiaries
and their affiliates (95,380) (165,414)
Increase (decrease) in due to general partners and affiliates 56,544 (141,032)
----------- -----------
Total adjustments 4,611,979 4,577,379
----------- -----------
Net cash provided by operating activities 1,060,176 1,025,702
----------- -----------
Cash flows from investing activities:
Acquisitions of property and equipment (116,693) (171,851)
----------- -----------
Cash flows from financing activities:
Principal payment of mortgage notes payable (577,100) (527,236)
Decrease in minority interest (12,902) (14,212)
----------- -----------
Net cash used in financing activities (590,002) (541,448)
----------- -----------
Net increase in cash and cash equivalents 353,481 312,403
Cash and cash equivalents - beginning of period 2,651,994 3,190,963
----------- -----------
Cash and cash equivalents - end of period $ 3,005,475 $ 3,503,366
=========== ===========
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to consolidated financial statements
-5-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1996
(Unaudited)
NOTE 1 - General
The consolidated financial statements include the accounts of the
Cambridge Advantaged Properties Limited Partnership (the "Partnership") and
sixty-one subsidiary partnerships ("subsidiary partnerships" or "Local
Partnerships") in which the Partnership is a limited partner, with an ownership
interest of 98.99%.
The Partnership's fiscal quarter ends June 25. All subsidiaries have
fiscal quarters ending March 31. Accounts of the subsidiary partnerships have
been adjusted for intercompany transactions from April 1 through June 25.
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 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 $16,000 and $15,000 for the three months ended
June 25, 1996 and 1995, respectively. The Partnership's investment in each
subsidiary is equal to the respective subsidiary's partners' equity less
minority interest capital, if any. In consolidation, all subsidiary partnership
losses are included in the Partnership's capital account except for losses
allocated to minority interest capital.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective March 26, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.
Property and equipment are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, and any other costs incurred in acquiring the properties. As required
by SFAS No. 121, a provision for loss on impairment of assets is recorded when
estimated amounts recoverable through future operations and sale of the property
on an undiscounted basis or a property appraisal when deemed necessary are below
depreciated cost. However, depreciated cost, adjusted for such reductions in
value, if any, may be greater than the fair value. Property investments
themselves are reduced to estimated fair value (generally using discounted cash
flows) when the property is considered to be impaired and the depreciated cost
exceeds estimate fair value. Through June 25, 1996, the Partnership has recorded
approximately $4,343,000 as an allowance for loss on impairment of assets.
The 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 March 25, 1996. 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 June 25, 1996 and the results of operations
and cash flows for the three months ended June 25, 1996 and 1995. However, the
operating results for the three months ended June 25, 1996 may not be indicative
of the results for the year.
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<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1996
(Unaudited)
NOTE 1 - General (continued)
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 March 25, 1996 Annual Report on Form 10-K.
NOTE 2 - Purchase Money Notes Payable
Purchase Money Notes in the original amount of $85,458,825 were issued
to the selling partners of the subsidiary partnerships as part of the purchase
price and are secured only by the interest in the subsidiary partnership to
which the note relates. A portion of these notes, in the original amount of
$31,932,568 are obligations at the subsidiary partnership level, whereas the
remaining $53,526,257 is recorded at the Partnership level. The Purchase Money
Notes provided for compound interest at rates which, in general, ranged from 9%
to 12% per annum through August 31, 1989. Thereafter, simple interest has
accrued, without further interest thereon, through maturity, August through
December 1996 (unless extended by the Partnership for up to three years in
general). Purchase money notes at June 25, 1996 and March 25, 1996 include
$4,336,417 of interest accrued through August 31, 1989.
The purchase money notes, which provide for simple interest through
maturity during the period August through December 1996, will not be in default
during the basic term (generally twelve years) if not less than 60% of the cash
flow actually distributed to the Partnership by the corresponding subsidiary
partnership (generated by the operations, as defined) is applied first to
accrued interest and then to current interest thereon. Any interest not paid
currently accrues, without further interest thereon, through the due date of the
note.
The Partnership may elect, upon the payment of an extension fee of 1/2%
per annum of the outstanding principal amount, to extend the term of the
Purchase Money Note for up to three additional years (four years with respect to
three subsidiary partnerships). Management is working with the selling partners
to extend, restructure and/or refinance the notes. No assurance can be given
that management's efforts will be successful. The selling partners' recourse, in
the event of non-payment, would be to foreclose on the Partnership's interests
in the respective subsidiary partnerships.
Distributions aggregating $55,386 and $143,382 were made to the
Partnership for the three months ended June 25, 1996 and 1995, respectively, of
which $0 and $84,781, respectively, was used to pay interest on the purchase
money notes. Unpaid interest of $98,426,056 and $95,994,453 at June 25, 1996 and
March 25, 1996, respectively, has been accrued and is included in the caption
due to selling partners.
The Partnership expects that upon maturity, it will be required to
refinance or sell its investments in the Local Partnerships in order to pay the
Purchase Money Notes. The Partnership cannot sell or otherwise liquidate its
investments in those Local Partnerships which have subsidy agreements with HUD
during the period that such agreements are in existence without HUD's approval.
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.
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<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1996
(Unaudited)
NOTE 3 - Related Party Transactions
The costs incurred to related parties for the three months ended June
25, 1996 and 1995 were as follows:
Three Months Ended
June 25,
-------------------
1996 1995
-------- --------
Partnership management fees (a) $ 31,250 $ 31,250
Expense reimbursement (b) 47,576 31,947
Property management fees (c) 479,584 472,017
Local administrative fee (d) 21,000 28,000
-------- --------
$579,410 $563,214
======== ========
(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 $512,487 and $481,237 were accrued and
unpaid as of June 25, 1996 and March 25, 1996, respectively.
(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 Related General Partner performs
asset monitoring for the Partnership. These services include site visits and
evaluations of the subsidiary partnerships' performance. Expense reimbursements
and asset monitoring fees owed to the Related General Partner amounting to
$201,326 and $153,750 were accrued and unpaid as of June 25, 1996 and March 25,
1996, respectively.
(c) Property management fees incurred to affiliates of the subsidiary
partnerships' general partners amounted to $468,081 and $460,874 for the three
months ended June 25, 1996 and 1995, respectively. Property management fees
incurred to affiliates of the Partnership amounted to $11,503 and $11,143 for
the three months ended June 25, 1996 and 1995, respectively.
(d) H/R Special Partnership, the special limited partner, owning a .01%
interest, is entitled to receive a local administrative fee of up to $2,500 per
year from each subsidiary partnership.
NOTE 4 - Property and Equipment
On May 2, 1996 the property owned by Bicentennial Associates.,
Ltd. was sold to an unaffiliated third party for $1,700,000 resulting in no net
proceeds to the Partnership after repayment of the first mortgage owed to Beal
Bank and expenses of the sale. The Partnership's investment in Bicentennial
Associates, Ltd. ("Bicentennial") at May 2, 1996 was a deficit of approximately
$12,700,000 resulting in a gain of $12,700,000. In addition, voluntary
noninterest bearing loans in the amount of approximately $494,000 which were
made by the Partnership from its working capital reserve to fund Bicentennial's
negative cash flow were forgiven, resulting in forgiveness of indebtness income
of $494,000. Therefore, the entire gain realized by the Partnership from this
transaction is anticipated to be approximately $13,200,000. For financial
reporting purposes, this transaction will be reflected in the financial
statements in the second quarter, coinciding with Bicentennial's fiscal quarter,
which includes the date of sale.
-8-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1996
(Unaudited)
NOTE 5 - Commitments and Contingencies
The following disclosures include changes 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 March 25, 1996.
Bellfort
--------
Bellfort has been in default on the required interest payments due on
the wraparound purchase note payable to HUD since 1992. Delinquent interest
payments at March 31, 1996 aggregated $3,176,090 on the wraparound purchase note
payable of $7,000,000 due on November 1, 1996. The note is secured by a first
lien on and security interest in the Partnership's and the subsidiary
partnership's special limited partner's rights, titles and interest in Bellfort.
In December 1994 Bellfort signed a work-out agreement with HUD (which
replaced a similar agreement of December 1993) that required monthly payments of
$40,917 through November 30, 1995 to cover service charges, tax escrows and 90%
of accruing interest. The agreement, which acceded to HUD a 15% equity position
due upon sale or refinancing of the project, expired November 30, 1995. Bellfort
submitted a proposal for a new work-out agreement which had not been approved by
HUD. On December 15, 1995, HUD announced its intention to sell Bellfort's
mortgage during the second quarter of 1996, and on June 27, 1996, the underlying
mortgage note was sold to Multifamily Mortgage Trust 1996-1. Although Bellfort
has not yet received a notice of demand for payment from the new mortgage
holder, management is considering two options to remedy the default. One option
is to obtain new financing from the wraparound purchase note holder and repay
the underlying mortgage note held by Multifamily Mortgage Trust 1996-1 at a
discount. The second option, if the first one is not successful, would be for
the wraparound purchase note holder to lend to Bellfort the funds necessary to
repay all arrearages and keep the underlying mortgage note current until the
wraparound purchase note matures on November 1, 1996.
The Partnership's investment is Bellfort has been reduced to zero by
prior years losses. The minority balance was zero at June 25, 1996 and March 25,
1996. Bellfort's net loss after minority interest amounted to approximately
$165,000 and $252,000 for the three months ended June 25, 1996 and 1995.
Westminster
-----------
In February, 1995, Westminster received an unsatisfactory physical
inspection report from HUD. In response to the inspection report, the subsidiary
partnership submitted, for HUD approval, a Management Improvement Objective Plan
(the "MIO Plan") with an accompanying estimate of restorations and improvements
and a request for funding. Westminster does not have the working capital
necessary to cover the costs contained in the MIO Plan to cure the deficiencies.
The determination of whether the identified instances of noncompliance
and the subsidiary partnership's lack of capital to fund the repair costs will
ultimately effect future cash flow cannot presently be determined. Accordingly,
no provision for any liability that may result has been recognized in the
subsidiary partnership's 1995 financial statements.
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<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1996
(Unaudited)
NOTE 5 - Commitments and Contingencies (continued)
The inability of the subsidiary partnership to satisfy the deficiencies
sited in the inspection report without approval of the funding request
accompanying the MIO Plan raises substantial doubt about the entity's ability to
continue as a going concern. Management of the Local Partnership is now working
on securing a commercial loan to cover the cost of physical improvements. The
Partnership's investment in Westminster has been reduced to zero by prior years
losses. The minority interest balance was zero at June 25, 1996 and March 25,
1996. Westminster's net loss after minority interest amounted to approximately
$130,000 and $55,000 for the three months ended June 25, 1996 and 1995,
respectively.
Northgate
---------
During November 1995, the Colorado Department of Public Health
identified a contamination problem on the Northgate property. The complex hired
environmental specialists and other contractors to remedy the problem. Costs in
the amount of $245,353 have been incurred relating to the work performed. The
remaining costs to complete the cleanup and installation of preventive measures
is estimated to be an additional $32,000. The Partnership's investment in
Northgate at June 25, 1996 and March 25, 1996 was approximately $1,528,000 and
$1,670,000, respectively. The minority interest balance was zero at June 25,
1996 and March 25, 1996. Northgate's net loss after minority interest amounted
to approximately $142,000 and $82,000 for the three months ended June 25, 1996
and 1995, respectively.
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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 capital has been invested primarily in 61 Local
Partnerships, in which the Partnership made an initial investment of $50,293,934
(including acquisition expenses) in the Local Partnerships. These investments
are highly illiquid.
During the three months ended June 25, 1996, cash and cash equivalents
of the Partnership increased approximately $353,000. Cash generated primarily
from operations of the Local Partnerships of approximately $1,060,000 exceeded
principal payments of mortgage notes of approximately $577,000 and net capital
additions of approximately $117,000. Included in the adjustments to reconcile
the net loss to cash flow from operations is depreciation in the amount of
approximately $2,114,000.
The Partnership's primary sources of funds are the cash distributions
from operations of the Local Partnerships in which the Partnership has invested.
These sources are available to meet the obligations of the Partnership. However,
the cash distributions received from the Local Partnerships to date have not
been sufficient to meet all such obligations of the Partnership. During the
three months ended June 25, 1996 and 1995, the Partnership received
approximately $55,000 and $143,000, respectively, of cash flow distributions, of
which approximately $0 and $85,000, respectively, was used to pay interest on
the related Local Partnership purchase money notes. Accordingly, the General
Partners advanced funds totaling approximately $205,000 at June 25, 1996 and
March 25, 1996 to meet the Partnership's third party obligations. In addition,
certain fees and expense reimbursements owed to the General Partners amounting
to approximately $714,000 and $635,000 were accrued and unpaid as of June 25,
1996 and March 25, 1996, respectively. Without the General Partners' advances
and continued 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 advancing and allowing the
accrual without payment of these amounts but are under no obligation to do so.
As part of the purchase price of its investment in the Local
Partnerships, the Partnership issued approximately $85,459,000 of Purchase Money
Notes. The typical Purchase Money Note has a basic term of twelve years
(maturities range from August 1996 to December 1996), subject to certain
possible extensions as described below.
The Purchase Money Notes typically bear interest at a rate of between
9% and 10% per annum (except that the Purchase Money Note with respect to
Cabarrus Arms Associates bears interest at 12% per annum) during their entire
term. A Purchase Money Note will not be in default during the basic twelve-year
term if not less than 60% of the cash flow actually distributed to the
Partnership by the corresponding Local Partnership (generated by the operations
of its Apartment Complex) is applied first to accrued interest and then to
current interest thereon.
The obligation to pay the Purchase Money Note is on a non-recourse basis
to any General or Limited Partner but payment thereof is secured by a pledge
under the purchase, sale and security agreement of the related Local Partnership
Interest. The payee has the right to foreclose on the related Local Partnership
Interest in the event that any payment on the Purchase Money Note is not paid
when due or if the Partnership is otherwise in default thereunder.
At June 25, 1996, unpaid accrued interest on the Purchase Money Notes
amounted to approximately $93,426,000. The Partnership may elect, upon the
payment of an extension fee of 1/2% per annum of the outstanding principal
amount, to extend the term of the Purchase Money Notes for up to three
additional years (four years with respect to three Local Partnerships). The
Partnership expects that upon maturity it will be required to extend, refinance
or sell its investments in the Local Partnerships in order to pay the Purchase
Money Notes and accrued interest thereon. Based on the historical operating
results of the Local Partnerships and the current economic conditions including
changes in tax laws, it is uncertain as to whether the proceeds from such sales
will be sufficient to meet the outstanding balances. Management is currently
negotiating an extension of the due date of the Purchase Money Notes and the
sale of certain properties. No assurance can be given that management's efforts
will
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<PAGE>
be successful. The selling partners' recourse, in the event of non-payment,
would be to foreclose on the Partnership's interests in the respective Local
Partnerships.
The Local Partnerships which receive government assistance are subject
to low-income use contracts which restrict the sale or refinancing of the
properties. These contracts will begin to expire over the next several years. In
order to maintain the existing inventory of affordable housing, Congress passed
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 eliminating the owners right to prepay the HUD mortgage
and convert the property to market rate use, 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.
The following eight Local Partnerships filed for incentives under the
Preservation Acts: Lansing, MI - Cranbrook Manor Apts., Romulus, MI - Oakbrook
Villa Apts., New Bedford, MA - Buttonwood Acres, Wyandotte, MI - Villa Apollo
Associates Limited Partnership and Villa Apollo # 2 Limited Partnership, South
Dartmouth, MA - Solemar, Sterling Heights, MI - Carlton Terrace Apartments, and
San Diego, CA - Lancaster Manor Apartments. Only Villa Apollo Associates, Villa
Apollo #2, Carlton Terrace and Lancaster Manor are under contract of sale.
Funding for the Preservation Acts and the 1996 Act is subject to
appropriations by Congress. Congress funded $624 million in fiscal year 1996 for
the preservation of housing. At the present time, HUD has fully committed its
1996 preservation funding. No preservation funds have been requested by HUD nor
has Congress allocated such funds for the 1997 Fiscal Year.
HUD recently released the proposed American Community Partnerships Act
(the "ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing
needs in an era of static or decreasing budget authority.
Two key proposals in the ACPA that could affect the Local Partnerships
are: a discontinuation of project based Section 8 subsidy payments and an
attendant reduction in debt on properties that were supported by the Section 8
payments.
The ACPA calls for a transition during which the project-based Section 8
would be converted to a tenant-based voucher system. Any FHA insured debt would
then be "marked-to-market", that is revalued in light of the reduced income
stream, if any.
Several industry sources have already commented to HUD and Congress that
in the event the ACPA were fully enacted in its present form the reduction in
mortgage indebtedness would be considered taxable income to limited partners in
the Partnership. Legislative relief has been proposed to exempt
"marked-to-market" debt from cancellation of indebtedness income treatment.
Though HUD initially backed away from the "marked-to-market" proposal, it has
now been reintroduced as "Portfolio Restructuring".
The Partnership entered into negotiations to sell four properties (Villa
Apollo and Villa Apollo #2, Carlton Terrace and Lancaster Manor) for an
aggregate selling price of approximately $33,590,000. The net proceeds will be
used to satisfy the existing mortgage debt of approximately $12,800,000. The
balance of the proceeds will be used to settle the purchase money notes and
accrued interest with the balance, if any, available for Partnership purposes.
HUD has not yet approved the sale of these properties. No assurance can be given
that the transactions contemplated will close.
On May 2, 1996 the property owned by Bicentennial Associates., Ltd. was
sold to an unaffiliated third party for $1,700,000 resulting in no net proceeds
to the Partnership after repayment of the first mortgage owed to Beal Bank and
expenses of the sale. The Partnership's investment in Bicentennial Associates,
Ltd. ("Bicentennial") at May 2, 1996 was a deficit of approximately $12,700,000
resulting in a gain of $12,700,000. In addition,
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<PAGE>
voluntary noninterest bearing loans in the amount of approximately $494,000
which were made by the Partnership from its working capital reserve to fund
Bicentennial's negative cash flow were forgiven, resulting in forgiveness of
indebtness income of $494,000. Therefore, the entire gain realized by the
Partnership from this transaction is anticipated to be approximately
$13,200,000.
For a discussion of contingencies affecting certain Local Partnerships,
see Note 5 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 is not aware of any trends of trends or events, commitments
or uncertainties, which have not been otherwise disclosed, that will or are
likely to impact liquidity in a material way. Management believes the only
impact would be from laws that have not yet been adopted. The portfolio is
diversified by the location of the properties around the United States so that
if one area of the country is experiencing downturns in the economy, the
remaining properties in the portfolio may be experiencing upswings. However, the
geographic diversification of the portfolio may not protect against a general
downtown in the national economy.
Results of Operations
- - ---------------------
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective March 26, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.
Property and equipment are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, and any other costs incurred in acquiring the properties. As required
by SFAS No. 121 a provision for loss on impairment of assets is recorded when
estimated amounts recoverable through future operations and sale of the property
on an undiscounted basis or a property appraisal when deemed necessary are below
depreciated cost. However, depreciated cost, adjusted for such reductions in
value, if any, may be greater than the fair value. Property investments
themselves are reduced to estimated fair value (generally using discounted cash
flows) when the property is considered to be impaired and the depreciated cost
exceeds estimated fair value. Through June 25, 1996, the Partnership has
recorded approximately $4,343,000 as an allowance for loss on impairment of
assets.
The results of operations of the Partnership, as well as the Local
Partnerships, remained fairly constant during the three months ended June 25,
1996 as compared to the same period in 1995. 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 which were issued when the Local Partnerships were acquired.
Rental income has remained fairly consistent with an increase of
approximately 2% for the three months ended June 25, 1996 primarily due to
rental rate increases.
Other income increased approximately $47,000 for the three months ended
June 25, 1996 as compared to 1995 primarily due to the receipt of insurance
proceeds from a fire claim at one Local Partnership in the current year.
Total expenses excluding operating expenses remained fairly constant
with an increase of less than 1% during the three months ended June 30, 1996.
Operating expenses increased approximately $179,000 for the three months
ended June 25, 1996 as compared to 1995 primarily due to an increase in
utilities at five Local Partnerships.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The litigation described in the Partnership's Annual Report on Form 10-K
for the period ended March 25, 1996 is incorporated herein by reference.
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
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
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 ADVANTAGED PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: RELATED BETA CORPORATION, a General Partner
Date: August 8, 1996 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Vice President
Date: August 8, 1996 By: /s/ Lawrence J. Lipton
----------------------
Lawrence J. Lipton,
Treasurer
(Principal Financial and Accounting Officer)
By: ASSISTED HOUSING ASSOCIATES, INC.,
a General Partner
Date: August 8, 1996
By: /s/ Paul L. Abbott
------------------
Paul L. Abbott,
President
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Cambridge Advantaged Properties
Limited Partnership and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<CIK> 0000748847
<NAME> Cambridge Advantaged Properties Limited Partnership
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-25-1997
<PERIOD-START> MAR-26-1996
<PERIOD-END> JUN-25-1996
<CASH> 14,936,805
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,669,747
<PP&E> 244,034,769
<DEPRECIATION> 96,769,445
<TOTAL-ASSETS> 163,871,876
<CURRENT-LIABILITIES> 8,836,797
<BONDS> 283,184,356
0
0
<COMMON> 0
<OTHER-SE> (128,149,277)
<TOTAL-LIABILITY-AND-EQUITY> 163,871,876
<SALES> 0
<TOTAL-REVENUES> 9,372,637
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,375,938
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,548,247
<INCOME-PRETAX> (3,551,548)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,551,548)
<EPS-PRIMARY> (291)
<EPS-DILUTED> 0
</TABLE>
