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 June 25, 1997
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
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
<PAGE>
PART I
Item 1. Financial Statements
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============= =============
June 25, March 25,
1997 1997
------------- -------------
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $101,997,546 and $99,888,832,
respectively $ 138,337,114 $ 140,195,814
Cash and cash equivalents 3,191,567 2,618,155
Cash - restricted for tenants'
security deposits 1,562,541 1,552,990
Mortgage escrow deposits 10,880,166 11,055,072
Prepaid expenses and other assets 1,698,891 1,740,633
------------- -------------
Total assets $ 155,670,279 $ 157,162,664
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable $ 91,371,991 $ 92,002,763
Purchase money notes payable
(Note 2) 83,674,690 83,670,532
Due to selling partners (Note 2) 101,576,143 99,414,749
Accounts payable, accrued
expenses and other liabilities 3,649,710 3,370,928
Tenants' security deposits payable 1,448,592 1,441,410
Due to general partners of
subsidiaries and their affiliates 1,804,369 1,737,269
Due to general partners and
affiliates 2,747,480 2,507,375
------------- -------------
Total liabilities 286,272,975 284,145,026
------------- -------------
Minority interest 112,066 116,611
------------- -------------
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (128,870,090) (125,290,459)
General partners (1,844,672) (1,808,514)
------------- -------------
Total partners' deficit (130,714,762) (127,098,973)
------------- -------------
Total liabilities and partners'
deficit $ 155,670,279 $ 157,162,664
============= =============
See Accompanying Notes to Consolidated Financial Statements
2
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CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
============================
Three Months Ended
June 25,
----------------------------
1997 1996*
----------------------------
Revenues
Rentals, net $ 8,905,977 $ 8,983,663
Other 305,435 388,974
------------ ------------
Total revenues 9,211,412 9,372,637
------------ ------------
Expenses
Administrative and management 1,512,084 1,462,674
Administrative and management-
related parties (Note 3) 863,225 579,410
Operating 1,889,403 1,921,372
Repairs and maintenance 2,163,580 2,101,207
Taxes and insurance 1,053,007 1,196,924
Interest 3,234,660 3,548,247
Depreciation 2,108,714 2,114,351
------------ ------------
Total expenses 12,824,673 12,924,185
------------ ------------
Net loss before minority interest (3,613,261) (3,551,548)
Minority interest in income
of subsidiaries (2,528) (255)
------------ ------------
Net loss $ (3,615,789) $ (3,551,803)
============ ============
* Reclassified for comparative purposes
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Changes In Partners' Deficit
(Unaudited)
===================================================
Limited General
Total Partners Partners
---------------------------------------------------
Balance -
March 26, 1997 $(127,098,973) $(125,290,459 $ (1,808,514)
Net loss (3,615,789) (3,579,631) (36,158)
------------- ------------- -------------
Balance -
June 25, 1997 $(130,714,762) $(128,870,090) $ (1,844,672)
============= ============= =============
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
============================
Three Months Ended
June 25,
----------------------------
1997 1996
----------------------------
Cash flows from operating activities:
Net loss $(3,615,789) $(3,551,803)
----------- -----------
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation 2,108,714 2,114,351
Minority interest in income
of subsidiaries 2,528 255
(Increase) decrease in cash-restricted
for tenants' security deposits (9,551) 9,746
Decrease in mortgage
escrow deposits 174,906 93,153
Decrease (increase) in prepaid
expenses and other assets 45,900 (8,617)
Increase in due to selling partners 2,469,484 2,746,185
Payments of interest to selling
partners (308,090) (324,032)
Increase in accounts payable,
accrued expenses
and other liabilities 278,782 12,726
Increase in tenants' security
deposits payable 7,182 7,048
Increase in due to general partners
of subsidiaries and their affiliates 69,125 0
Decrease in due to
general partners of subsidiaries
and their affiliates (2,025) (95,380)
Increase in due to general
partners and affiliates 240,105 56,544
----------- -----------
Total adjustments 5,077,060 4,611,979
----------- -----------
Net cash provided by operating
activities 1,461,271 1,060,176
----------- -----------
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(continued)
(Unaudited)
============================
Three Months Ended
June 25,
----------------------------
1997 1996
----------------------------
Cash flows from investing activities:
Acquisitions of property and
equipment (250,014) (116,693)
----------- -----------
Cash flows from financing activities:
Principal payment of mortgage
notes payable (630,772) (577,100)
Decrease in minority interest (7,073) (12,902)
----------- -----------
Net cash used in financing
activities (637,845) (590,002)
----------- -----------
Net increase in cash and cash
equivalents 573,412 353,481
Cash and cash equivalents -
beginning of period 2,618,155 2,651,994
----------- -----------
Cash and cash equivalents -
end of period $ 3,191,567 $ 3,005,475
=========== ===========
Supplemental disclosures of noncash
financing activities:
Increase in purchase money
notes payable due to the
capitalization of prepaid
expenses and other assets $ 4,158 $ 0
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 1 - General
The consolidated financial statements for the three months ended June 25, 1997
and 1996 include the accounts of Cambridge Advantaged Properties Limited
Partnership (the "Partnership") and sixty and sixty-one subsidiary partnerships
("subsidiaries," "subsidiary partnerships" or "Local Partnerships"),
respectively. 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 an affiliate of the General Partner, which affiliate has a
contractual obligation to act on behalf of the Partnership, to remove the
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.
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 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 $17,000 and $16,000 for the three months ended June 25,
1997 and 1996, 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.
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, 1997. In the opinion of the General Partners, the
accompanying unaudited financial statements contain all adjustments (consisting
only of
7
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 1 - General (continued)
normal recurring adjustments) necessary to present fairly the financial position
of the Partnership as of June 25, 1997 and the results of operations and cash
flows for the three months ended June 25, 1997 and 1996. However, the operating
results for the three months ended June 25, 1997 may not be indicative of the
results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's March 25, 1997 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 (the "Purchase Money Notes"). 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 On
May 2, 1996 the property owned by Bicentennial was sold to a third party and the
associated purchase money note and accrued interest thereon, which were
obligations at the subsidiary partnership level, were canceled. The Purchase
Money Notes provided for compound interest at rates which, in general, ranged
from 9% to 10% per annum (except that the Purchase Money Note with respect to
Cabarrus Arms Associates bears interest at 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). As of June 25, 1997, the maturity
dates of each of the Purchase Money Notes associated with the remaining
properties owned by the subsidiary partnerships were extended for one year (see
below). Purchase money notes at June 25, 1997 and March 25, 1997 include
$4,336,417 of interest accrued through August 31, 1989.
8
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 2 - Purchase Money Notes Payable (continued)
The Purchase Money Notes, which provide for simple interest through maturity
during the period August through December 1996 (unless extended by the
Partnership), 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. Continued accrual of such
interest beyond the initial term, without payment, would reduce the effective
interest rate of 9%. The exact effect is not determinable inasmuch as it is
dependent on the actual future interest payments and ultimate repayment dates of
the notes. Unpaid interest of approximately $100,439,000 and $98,278,000 as of
June 25, 1997 and March 25, 1997, has been accrued and is included in due to
selling partners in the consolidated balance sheets. 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 of the sale or refinancing of the
Apartment Complex, or in some cases the Local Partnership Interest to which the
Purchase Money Note relates.
The Partnership 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
subsidiary partnerships). As of June 25, 1997, the maturity dates of each of the
Purchase Money Notes associated with the remaining properties owned by the
subsidiary partnerships (ranging from August to December 1996) were extended for
one year and extension fees in the amount of $264,522 were incurred by the
Partnership. Of such fees incurred, $210,968 was accrued and added to the
Purchase Money Notes balance in accordance with the respective note agreements.
The extension fees are being amortized over the term of the extension. The
Partnership expects that upon maturity of the Purchase Money Notes, 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
9
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 2 - Purchase Money Notes Payable (continued)
uncertain as to whether the proceeds from such sales will be sufficient to meet
the outstanding balances of principal, accrued interest and extension fees.
Management is working with the selling partners to restructure and/or refinance
the notes. No assurance can be given that management's efforts will be
successful. The Purchase Money Notes are without personal recourse to either the
Partnership or any of its partners and the sellers' recourse, in the event of
non-payment, would be to foreclose on the Partnership's interests in the
respective subsidiary partnerships.
Cash flow distributions aggregating approximately $640,000 and $55,000 were made
to the Partnership for the three months ended June 25, 1997 and 1996,
respectively, of which approximately $384,000, and $0, respectively, was used to
pay interest on the Purchase Money Notes. Distributions of proceeds from sales
of properties aggregating approximately $2,071,000 were made to the Partnership
during the three months ended June 25, 1997, none of which was used to pay
principal and interest on the Purchase Money Notes.
Note 3 - Related Party Transactions
The costs incurred to related parties for the three months ended June 25, 1997
and 1996 were as follows:
Three Months Ended
June 25,
-------------------------
1997 1996
-------------------------
Partnership management fees (a) $285,500 $ 31,250
Expense reimbursement (b) 90,469 47,576
Property management fees (c) 466,256 479,584
Local administrative fee (d) 21,000 21,000
-------- --------
$863,225 $579,410
======== ========
(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 $1,783,737 and $1,623,237 were accrued and unpaid as of
June 25, 1997 and March 25, 1997, respectively.
(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by
10
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 3 - Related Party Transactions (continued))
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
$230,467 and $141,498 were accrued and unpaid as of June 25, 1997 and March 25,
1997, respectively.
(c) Property management fees incurred to affiliates of the subsidiary
partnerships amounted to $466,256 and $468,081 for the three months ended June
25, 1997 and 1996, respectively. Property management fees incurred to affiliates
of the Partnership amounted to $0 and $11,503 for the three months ended June
25, 1997 and 1996, 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 - Sale of Properties
On May 7, 1997, the properties and the related assets and liabilities of
Knollwood I, Ltd., Knollwood II, Ltd., Knollwood III, Ltd., and Knollwood IV,
Ltd. (together, the "Knollwoods") were sold to a third party for $20,750,000,
which took title subject to the principal balance of the associated Purchase
Money Notes in the amount of approximately $6,027,000, resulting in a gain in
the amount of approximately $6,100,000. No proceeds were used to settle the
accrued interest on the associated Purchase Money Notes which amounted to
approximately $6,000,000, resulting in forgiveness of indebtedness income. For
tax purposes, the entire gain to be realized by the Partnership is anticipated
to be approximately $19,900,000. For financial reporting purposes, this
transaction will be reflected in the financial statements in the second quarter
coinciding with the Knollwoods' fiscal quarter which includes the date of sale.
Note 5 - Commitments and Contingencies
The following disclosure includes changes and/or additions to disclosures
regarding the subsidiary partnerships which were in-
11
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 5 - Commitments and Contingencies (continued)
cluded in the Partnership's Annual Report on Form 10-K for the period ended
March 25, 1997 (see Note 6 for a discussion of the sale of the property and
related assets and liabilities of Northgate and Westminster).
Bonnie Doone Apartments, Ltd.
Bonnie Doone Apartments, Ltd. ("Bonnie Doone") relies on continuance of the
Section 8 rent subsidy contracts which represented 56% of total revenue for the
three months ended March 31, 1997. The current contracts expired on July 31,
1997 and were extended through September 30, 1997, after which renewal is
uncertain. Management of Bonnie Doone intends to actively pursue renewal of the
rental subsidy contract with HUD. The Partnership's investment in Bonnie Doone
was approximately $411,000 and $416,000 at June 25, 1997 and March 25, 1997,
respectively, and the minority interest balance was $0 at each date. Bonnie
Doone's net loss after minority interest amounted to approximately $5,000 and
$6,000 for the three months ended June 25, 1997 and 1996, respectively.
Rockdale West at New Bedford and Solemar at South Dartmouth
On April 8, 1997, the Partnership entered an option agreement with Rockdale West
at New Bedford ("Rockdale") and Solemar at South Dartmouth ("Solemar") whereby
Rockdale and/or Solemar can purchase the Partnership's respective limited
partnership interests for prices of approximately $1,066,000 and $902,000,
respectively. The prices are each indexed for inflation and the associated
Purchase Money Notes cannot be foreclosed upon during the term of the option
agreement.
Note 6 - Subsequent Events
On June 30, 1997, the property and related assets and liabilities of Parklane
II, Ltd. ("Parklane") were sold to a third party for $3,450,000 which took title
subject to the principal balance of a portion of the associated Purchase Money
Notes which amounted to approximately $1,254,000, resulting in a gain in the
amount of approximately $700,000. The Partnership used $400,000 of the net
proceeds to settle the remaining principal balance of the Purchase Money Notes
and accrued interest thereon which amounted to approximately $2,900,000,
resulting in forgiveness of indebtedness income of approximately $2,500,000. For
tax purposes, the entire gain to be realized by the Partnership is anticipated
to be approximately $4,800,000. For financial reporting purposes this
transaction will be reflected in the financial statement in the second
12
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 6 - Subsequent Events (continued)
quarter coinciding with Parklane's fiscal quarter which includes the date of
sale.
On August 1, 1997, the property and the related assets and liabilities of
Northgate Townhouse Apartments ("Northgate ") were sold to a third party for
approximately $4,000,000, resulting in a loss in the amount of approximately
$300,000 and forgiveness of indebtedness income of approximately $200,000 as a
result of forgiveness of amounts due to the general partner of Northgate. The
Partnership used approximately $700,000 of the net proceeds to settle the
associated Purchase Money Notes and accrued interest which had a total
outstanding balance of approximately $6,900,000, resulting in forgiveness of
indebtedness income of approximately $6,200,000. Therefore, the entire
forgiveness of indebtedness income realized by the Partnership from this
transaction is approximately $6,400,000. For tax purposes, the entire gain to be
realized by the Partnership is anticipated to be approximately $9,100,000. For
financial reporting purposes, this transaction will be reflected in the
financial statements in the third quarter coinciding with Northgate's fiscal
quarter which includes the date of sale.
On August 1, 1997, the property and the related assets and liabilities of
Westminster Manor Apartments ("Westminster") were sold to a third party for
approximately $7,300,000, resulting in a gain in the amount of approximately
$800,000 and forgiveness of indebtedness income of approximately $500,000 as a
result of forgiveness of amounts due to the general partner of Westminster. The
Partnership used approximately $2,700,000 of the net proceeds to settle the
associated Purchase Money Notes and accrued interest which had a total
outstanding balance of approximately $8,300,000, resulting in forgiveness of
indebtedness income of approximately $5,600,000. Therefore, the entire
forgiveness of indebtedness income realized by the Partnership from this
transaction is approximately $6,100,000. For tax purposes, the entire gain to be
realized by the Partnership is anticipated to be approximately $10,500,000. For
financial reporting purposes, this transaction will be reflected in the
financial statements in the third quarter coinciding with Westminster's fiscal
quarter which includes the date of sale.
On August 11, 1997, the Partnership's Local Partnership Interest in Buttonwood
Acres at New Bedford ("Buttonwood") was sold back to Buttonwood for
approximately $533,000, resulting in a loss in the amount of approximately
$2,300,000 and forgiveness of indebtedness income of approximately $1,700,000 as
a result of forgiveness of the mortgage note payable to HUD and accrued interest
thereon. No proceeds were used to settle the associated Purchase Money Notes and
accrued interest which had a total outstanding balance of approximately
$4,800,000, resulting in additional forgiveness of indebtedness income.
Therefore, the entire forgiveness of indebtedness income realized by the
13
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 25, 1997
(Unaudited)
Note 6 - Subsequent Events (continued)
Partnership from this transaction is approximately $6,500,000. For tax purposes,
the entire gain to be realized by the Partnership is anticipated to be
approximately $5,700,000. For financial reporting purposes, this transaction
will be reflected in the financial statements in the third quarter coinciding
with Buttonwood's fiscal quarter which includes the date of sale.
On July 30, 1997, Lancaster Manor Associates, Ltd. solicited the holders of the
associated Purchase Money Notes to a sale for a total price of $4,000,000. The
offer expires August 14, 1997.
14
<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 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, 1997 and 1996, the Partnership received
approximately $640,000 and $55,000, respectively, of cash flow distributions, of
which approximately $384,000 and $0, respectively, was used to pay interest on
the Purchase Money Notes. Distributions of proceeds from sales of properties
aggregating approximately $2,071,000 were made to the Partnership during the
three months ended June 25, 1997, none of which was used to pay principal and
interest on the Purchase Money Notes. Accordingly, the General Partners advanced
funds totaling approximately $206,000 at both June 25, 1997 and March 25, 1997
to meet the Partnership's third party obligations. In addition, certain fees and
expense reimbursements owed to the General Partners amounting to approximately
$2,014,000 and $1,765,000 were accrued and unpaid as of June 25, 1997 and March
25, 1997, respectively. Without the General Partners' advances and continued
accrual without payment of certain fees and expense reimbursements, the
Partnership may 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.
During the three months ended June 25, 1997, cash and cash equivalents of the
Partnership and its sixty consolidated Local Partnerships increased
approximately $573,000. This increase was primarily due to cash provided by
operating activities ($1,461,000) which exceeded an increase in property and
equipment ($250,000) and repayments of mortgage notes payable ($631,000).
Included in the adjustments to reconcile the net income to cash flow from
operations is depreciation ($2,109,000).
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 (the "Purchase Money Notes"). 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 On
May 2, 1996 the property owned by Bicentennial was sold to a third party and the
associated purchase money note and accrued interest thereon, which were
obligations
15
<PAGE>
at the subsidiary partnership level, were canceled. In addition, during the
period May 7, 1997 through August 11, 1997, the properties and the related
assets and liabilities of seven Local Partnerships and the Partnership's
interest in one Local Partnership were sold to third parties and back to the
Local Partnership, respectively and the associated Purchase Money Notes and
accrued interest thereon were settled (see below). The Purchase Money Notes
provided for compound interest at rates which, in general, ranged from 9% to 10%
per annum (except that the Purchase Money Note with respect to Cabarrus Arms
Associates bears interest at 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). As of June 25, 1997, the maturity dates of each of the
Purchase Money Notes associated with the remaining properties owned by the
subsidiary partnerships were extended for one year (see below). Purchase money
notes at June 25, 1997 and March 25, 1997 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 (unless extended by the
Partnership), 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. Continued accrual of such
interest beyond the initial term, without payment, would reduce the effective
interest rate of 9%. The exact effect is not determinable inasmuch as it is
dependent on the actual future interest payments and ultimate repayment dates of
the notes. Unpaid interest of approximately $100,439,000 and $98,278,000 as of
June 25, 1997 and March 25, 1997, respectively, has been accrued and is included
in due to selling partners in the consolidated balance sheets. 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 of the sale or
refinancing of the Apartment Complex, or in some cases the Local Partnership
Interest to which the Purchase Money Note relates.
The Partnership 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
subsidiary partnerships). As of June 25, 1997, the maturity dates of each of the
Purchase Money Notes associated with the remaining properties owned by the
subsidiary partnerships (ranging from August to
16
<PAGE>
December 1996) were extended for one year and extension fees in the amount of
$264,522 were incurred by the Partnership. Of such fees incurred, $210,968 was
accrued and added to the Purchase Money Notes balance in accordance with the
respective note agreements. The extension fees are being amortized over the term
of the extension. The Partnership expects that upon maturity of the Purchase
Money Notes, 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 of principal, accrued
interest and extension fees. Management is working with the selling partners to
restructure and/or refinance the notes. No assurance can be given that
management's efforts will be successful. The Purchase Money Notes are without
personal recourse to either the Partnership or any of its partners and the
sellers' recourse, in the event of non-payment, would be to foreclose on the
Partnership's interests in the respective subsidiary partnerships.
Six of the Local Partnerships have entered into contracts of sale (Villa Apollo
and Villa Apollo #2, Carlton Terrace, Cranbrook Manor, Oakbrook Villa and
Lancaster Manor) for an aggregate selling price of approximately $48,000,000.
The net proceeds will be used to satisfy the existing mortgage debt of
approximately $17,946,000. 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 7, 1997, the properties and the related assets and liabilities of
Knollwood I, Ltd., Knollwood II, Ltd., Knollwood III, Ltd., and Knollwood IV,
Ltd. were sold to a third party for $20,750,000, which took title subject to the
principal balance of the associated Purchase Money Notes in the amount of
approximately $6,027,000, resulting in a gain in the amount of approximately
$6,100,000. No proceeds were used to settle the accrued interest on the
associated Purchase Money Notes which amounted to approximately $6,000,000,
resulting in forgiveness of indebtedness income. For tax purposes, the entire
gain to be realized by the Partnership is anticipated to be approximately
$19,900,000.
17
<PAGE>
On June 30, 1997, the property and related assets and liabilities of Parklane
II, Ltd. were sold to a third party for $3,450,000 which took title subject to
the principal balance of a portion of the associated Purchase Money Notes which
amounted to approximately $1,254,000, resulting in a gain in the amount of
approximately $700,000. The Partnership used $400,000 of the net proceeds to
settle the remaining principal balance of the Purchase Money Notes and accrued
interest thereon which amounted to approximately $2,900,000, resulting in
forgiveness of indebtedness income of approximately $2,500,000. For tax
purposes, the entire gain to be realized by the Partnership is anticipated to be
approximately $4,800,000.
On August 1, 1997, the property and the related assets and liabilities of
Northgate Townhouse Apartments ("Northgate ") were sold to a third party for
approximately $4,000,000, resulting in a loss in the amount of approximately
$300,000 and forgiveness of indebtedness income of approximately $200,000 as a
result of forgiveness of amounts due to the general partner of Northgate. The
Partnership used approximately $700,000 of the net proceeds to settle the
associated Purchase Money Notes and accrued interest which had a total
outstanding balance of approximately $6,900,000, resulting in forgiveness of
indebtedness income of approximately $6,200,000. Therefore, the entire
forgiveness of indebtedness income realized by the Partnership from this
transaction is approximately $6,400,000. For tax purposes, the entire gain to be
realized by the Partnership is anticipated to be approximately $9,100,000.
On August 1, 1997, the property and the related assets and liabilities of
Westminster Manor Apartments ("Westminster") were sold to a third party for
approximately $7,300,000, resulting in a gain in the amount of approximately
$800,000 and forgiveness of indebtedness income of approximately $500,000 as a
result of forgiveness of amounts due to the general partner of Westminster. The
Partnership used approximately $2,700,000 of the net proceeds to settle the
associated Purchase Money Notes and accrued interest which had a total
outstanding balance of approximately $8,300,000, resulting in forgiveness of
indebtedness income of approximately $5,600,000. Therefore, the entire
forgiveness of indebtedness income realized by the Partnership from this
transaction is approximately $6,100,000. For tax purposes, the entire gain to be
realized by the Partnership is anticipated to be approximately $10,500,000.
On August 11, 1997, the Partnership's Local Partnership Interest in Buttonwood
Acres at New Bedford ("Buttonwood") was sold back to Buttonwood for
approximately $533,000, resulting in a loss in the amount of approximately
$2,300,000 and forgiveness of indebtedness income of approximately $1,700,000 as
a result of forgiveness of the mortgage note payable to HUD and accrued interest
thereon. No proceeds were used to settle the associated Purchase Money Notes and
accrued interest which had a total outstanding balance of approximately
$4,800,000, resulting in additional forgiveness of indebtedness income.
Therefore, the entire forgiveness of indebtedness income realized by the
Partnership from this transaction is approximately $6,500,000. For
18
<PAGE>
tax purposes, the entire gain to be realized by the Partnership is anticipated
to be approximately $5,700,000.
On April 8, 1997, the Partnership entered into an option agreement with Rockdale
West at New Bedford ("Rockdale") and Solemar at South Dartmouth ("Solemar")
whereby Rockdale and/or Solemar can purchase the Partnership's respective
limited partnership interests for prices of approximately $1,066,000 and
$902,000, respectively. The prices are each indexed for inflation and the
associated Purchase Money Notes cannot be foreclosed upon during the term of the
option agreement.
On July 30, 1997, Lancaster Manor Associates, Ltd. solicited the holders of the
associated Purchase Money Notes to a sale for a total price of $4,000,000. The
offer expires August 14, 1997.
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 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 downturn in
the national economy.
Results of Operations
Excluding Bicentennial, which sold its property on May 2, 1996, and
administrative and management-related parties, the results of operations of the
Partnership, as well as the Local Partnerships, remained fairly consistent for
the three months ended June 25, 1997 as compared to the same period in 1996. 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.
19
<PAGE>
Rental income decreased approximately 1% during the three months ended June 25,
1997 as compared to 1996. Excluding Bicentennial, rental income increased
approximately 2% during the three months ended June 25, 1997 as compared to 1996
primarily due to rental rate increases.
Other income decreased approximately $84,000 for the three months ended June 25,
1997 as compared to 1996 primarily due to the receipt of insurance proceeds in
the first quarter of 1996 relating to a fire claim at one Local Partnership and
roof damage caused by a hurricane at another Local Partnership.
Total expenses excluding Bicentennial and administrative and management-related
parties remained fairly consistent with an increase of less than 1% for the
three months ended June 25, 1997 as compared to the same period in 1996.
Administrative and management-related parties increased approximately $284,000
for the three months ending June 25, 1997 as compared to the same period in 1996
primarily due to an increase in partnership management fees payable to the
General Partners.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The litigation described in Note 5 to the financial statements
contained in Part I, Item I 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
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAMBRIDGE ADVANTAGED
PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: RELATED BETA CORPORATION,
a General Partner
Date: August 8, 1997
By:/s/ Alan P. Hirmes
---------------------------------
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: August 8, 1997
By:/s/ Richard A. Palermo
---------------------------------
Richard A. Palermo,
Treasurer
(principal accounting officer)
By: ASSISTED HOUSING ASSOCIATES,
INC., a General Partner
Date: August 8, 1997
By:/s/ Paul L. Abbott
---------------------------------
Paul L. Abbott,
President
22
<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 Adv. Prop. Ltd Partnership
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-25-1998
<PERIOD-START> MAR-26-1997
<PERIOD-END> JUN-25-1997
<CASH> 15,634,274
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,698,891
<PP&E> 240,334,660
<DEPRECIATION> 101,997,546
<TOTAL-ASSETS> 155,670,279
<CURRENT-LIABILITIES> 9,699,142
<BONDS> 276,573,833
0
0
<COMMON> 0
<OTHER-SE> (130,602,696)
<TOTAL-LIABILITY-AND-EQUITY> 155,670,279
<SALES> 0
<TOTAL-REVENUES> 9,211,412
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,590,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,234,660
<INCOME-PRETAX> (3,613,261)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,613,261)
<EPS-PRIMARY> 296
<EPS-DILUTED> 0
</TABLE>
