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 September 25, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14941
CAMBRIDGE ADVANTAGED
PROPERTIES II LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 13-3330195
------------------------------- -------------------
(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 ____
---
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PART I
Item 1. Financial Statements
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
September 25, March 25,
1997 1997
------------- ----------
ASSETS
Property and equipment - net of
accumulated depreciation of
$44,766,207 and $43,124,557,
respectively $76,124,385 $77,764,894
Cash and cash equivalents 1,194,536 1,225,369
Cash - restricted for tenants'
security deposits 604,701 572,624
Mortgage escrow deposits 1,941,169 1,895,569
Deferred costs, net of accumulated
amortization of $943,944 and
$841,465, respectively 2,219,097 2,330,143
Prepaid expenses and other assets 498,741 424,003
----------- -----------
Total assets $82,582,629 $84,212,602
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable $97,946,234 $98,340,680
Accounts payable, accrued
expenses and other liabilities 8,188,836 7,573,750
Tenants' security deposits payable 604,701 572,624
Due to general partners of
subsidiaries and their affiliates 1,579,259 1,731,240
Due to general partners and
affiliates 4,404,669 4,103,650
----------- -----------
Total liabilities 112,723,699 112,321,944
----------- -----------
Minority interest 4,954,123 5,111,554
----------- -----------
Commitments and contingencies
(Note 6)
Partners' deficit:
Limited partners (34,426,694) (32,571,140)
General partners (668,499) (649,756)
----------- -----------
Total partners' deficit (35,095,193) (33,220,896)
----------- -----------
Total liabilities and partners'
deficit $82,582,629 $84,212,602
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
2
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
September 25, September 25,
------------------------ ------------------------
1997 1996* 1997 1996*
------------------------ ------------------------
Revenues
Rentals, net $4,197,182 $4,331,849 $8,466,829 $8,735,279
Other 189,257 325,916 378,447 658,130
Gain on sale of
property (Note 4) 0 5,457,073 0 5,457,073
----------- ---------- ----------- -----------
Total revenues 4,386,439 10,114,838 8,845,276 14,850,482
----------- ---------- ----------- -----------
Expenses
Administrative
and management 792,302 913,921 1,532,867 1,791,834
Administrative
and management-
related parties
(Note 2) 408,964 235,555 832,333 468,207
Operating 342,808 329,609 696,813 688,416
Repairs and
maintenance 610,481 965,348 1,135,318 1,861,318
Taxes and
insurance 527,854 491,991 1,033,697 1,055,491
Interest 1,959,502 2,074,127 3,827,064 4,373,038
Depreciation and
amortization 871,999 947,200 1,744,129 1,962,064
----------- ---------- ----------- -----------
Total expenses 5,513,910 5,957,751 10,802,221 12,200,368
----------- ---------- ----------- -----------
Income (loss)
before minority
interest and
extraordinary item (1,127,471) 4,157,087 (1,956,945) 2,650,114
Minority interest
in (income) loss
of subsidiaries 16,496 (48,855) 27,648 (36,012)
----------- ---------- ----------- -----------
Income (loss) before
extraordinary
item (1,110,975) 4,108,232 (1,929,297) 2,614,102
Extraordinary
item-forgiveness
of indebtedness
income (Note 5) 0 5,161,583 55,000 5,161,583
----------- ---------- ----------- -----------
Net income (loss) $(1,110,975) $9,269,815 $(1,874,297) $7,775,685
=========== ========== =========== ==========
*Reclassified for comparative purposes
See Accompanying Notes to Consolidated Financial Statements
3
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
Limited General
Total Partners Partners
------------- ------------- ----------
Balance-
March 26, 1997 $(33,220,896) $(32,571,140) $(649,756)
Net loss - six
months ended
September 25, 1997 (1,874,297) (1,855,554) (18,743)
------------ ------------ ---------
Balance-
September 25, 1997 $(35,095,193) $(34,426,694) $(668,499)
============ ============ =========
See Accompanying Notes to Consolidated Financial Statements
4
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(Unaudited)
Six Months Ended
September 25,
-------------------------------
1997 1996
-------------------------------
Cash flows from operating activities:
Net income (loss) $(1,874,297) $7,775,685
----------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on sale of property (Note 4) 0 (5,457,073)
Extraordinary item-forgiveness of
indebtedness (Note 5) (55,000) (5,161,583)
Depreciation and amortization 1,744,129 1,962,064
Minority interest in income (loss) of
subsidiaries (27,648) 36,012
Increase in cash-restricted
for tenants' security deposits (32,077) (44,625)
Increase in mortgage
escrow deposits (45,600) (789,987)
(Increase) decrease in prepaid
expenses and other assets (74,738) 39,682
Increase in accounts payable,
accrued expenses and other
liabilities 615,086 2,000,084
Increase in tenants'
security deposits payable 32,077 50,960
Increase in due to general
partners of subsidiaries and their
affiliates 0 47,622
Decrease in due to general partners
of subsidiaries and their affiliates (151,981) (24,901)
Increase in due to general partners
and affiliates 356,019 71,877
----------- ----------
Total adjustments 2,360,267 (7,269,868)
----------- ----------
Net cash provided by operating
activities 485,970 505,817
----------- ----------
See Accompanying Notes to Consolidated Financial Statements
5
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(continued)
(Unaudited)
Six Months Ended
September 25,
----------------------------
1997 1996
----------------------------
Net cash from operating activities
brought forward 485,970 505,817
---------- ----------
Cash flows from investing activities:
Improvements to property and equipment (1,141) 0
Proceeds from sale of property 0 14,685,000
---------- ----------
Net cash (used in) provided by
investing activities (1,141) 14,685,000
---------- ----------
Cash flows from financing activities:
Proceeds from mortgage
note payable 0 6,800,000
Principal payments of mortgage
notes payable (394,446) (21,829,856)
(Decrease) increase in capitalization
of consolidated subsidiaries
attributable to minority interest (129,783) 559,864
Decrease (increase) in deferred
costs 8,567 (541,384)
---------- ----------
Net cash used in financing
activities (515,662) (15,011,376)
---------- ----------
Net (decrease) increase in cash and
cash equivalents (30,833) 179,441
Cash and cash equivalents-
beginning of period 1,225,369 1,022,522
---------- ----------
Cash and cash equivalents-
end of period $1,194,536 $1,201,963
========== ==========
See Accompanying Notes to Consolidated Financial Statements
6
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(continued)
(Unaudited)
Six Months Ended
September 25,
-------------------------
1997 1996
-------------------------
Supplemental disclosure of noncash
investing and financing activities:
Forgiveness of indebtedness (Note 5):
Decrease in due to general
partners and affiliates (55,000) 0
Decrease in mortgage notes
payable 0 (3,200,000)
Decrease in accounts payable,
accrued expenses
and other liabilities 0 (1,320,280)
Decrease in due to selling partners 0 (641,303)
Summarized below are the components
of the gain on sale of property:
Decrease in property and
equipment, net of
accumulated depreciation 0 9,193,658
Decrease in cash-restricted
for tenants' security deposits 0 64,862
Decrease in mortgage
escrow deposits 0 410,165
Decrease in prepaid expenses
and other assets 0 18,646
Decrease in accounts payable,
accrued expenses
and other liabilities 0 (394,542)
Decrease in tenants' security
deposits payable 0 (64,862)
See Accompanying Notes to Consolidated Financial Statements
7
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
Note 1 - General
The consolidated financial statements for the six months ended September 25,
1997 and 1996 include the accounts of Cambridge Advantaged Properties II Limited
Partnership, (the "Partnership"), and eleven (one of which only has activity
through the date of sale of its property and the related assets and liabilities
on May 31, 1997 (see Note 4)) and twelve subsidiary partnerships
("subsidiaries", "subsidiary partnerships" or "Local Partnerships"),
respectively. The Partnership is a limited partner, with an ownership interest
of 98% in each of the subsidiary partnerships. Through the rights of the
Partnership and/or a General Partner, which General Partner has a contractual
obligation to act on behalf of the Partnership, to remove the general partner of
the subsidiary local partnerships and to approve certain major operating and
financial decisions, the Partnership has a controlling financial interest in the
subsidiary local partnerships.
The Partnership's fiscal quarter ends September 25. All subsidiaries have fiscal
quarters ending June 30. Accounts of the subsidiary partnerships have been
adjusted for intercompany transactions from July 1 through September 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 $800 and $0 and, $1,000 and $4,000 for the three and
six months ended September 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.
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
8
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
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
September 25, 1997, the results of operations for the three and six months ended
September 25, 1997 and cash flows for the six months ended September 25, 1997
and 1996, respectively. However, the operating results for the six months ended
September 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.
As of September 25, 1997, several subsidiary partnerships are experiencing
financial difficulties. There is substantial doubt about the ability of the
Partnership and some of the subsidiary partnerships to continue as going
concerns. Recoverability of a significant portion of the Partnership's
investments will depend upon material improvements in the ability of each
subsidiary partnership to meet its debt service obligations. In addition, the
level of cash distributions provided to the Partnership by the subsidiary
partnerships have not been sufficient, and may not be sufficient in the future,
to cover the Partnership's operating expenses. As a result, the Partnership has
required, and may in the future require, funding from other sources for such
purposes. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties. See Note 6 and the
Partnership's March 25, 1997 Annual Report on Form 10-K for management's
intentions.
Note 2 - Related Party Transactions
One of the general partners of the Partnership, Related and Cambridge Associates
Limited Partnership ("Related and Cambridge Associates"), has a 1% interest as a
special limited partner in each of the subsidiary partnerships.
9
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
Whitney Management Corp., an affiliate of the Related General Partner, is the
general partner of one and managing agent of four properties.
The costs incurred to related parties for the three and six months ended
September 25, 1997 and 1996 were as follows:
Three Months Ended Six Months Ended
September 25, September 25,
------------------- --------------------
1997 1996 1997 1996
------------------- --------------------
Partnership management fees (a) $191,250 $ 15,000 $382,500 $ 30,000
Expense reimbursement (b) 19,140 21,749 50,176 41,128
Property management fees (c) 195,574 195,806 393,657 391,079
Local administrative fee (d) 3,000 3,000 6,000 6,000
-------- -------- -------- --------
$408,964 $235,555 $832,333 $468,207
======== ======== ======== ========
(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 have been charged
to operations and are included in administrative and management-related parties
expenses. Partnership management fees owed to the general partners amounting to
approximately $1,605,000 and $1,222,000 were accrued and unpaid as of September
25, 1997 and March 25, 1997, respectively.
(b) An affiliate of the Related General Partner performs services for the
Partnership which include, but are not limited to: accounting and financing
management, registrar, transfer and assignment functions, asset management,
investor communications, printing and other administrative services. 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
10
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
approximately $508,000 and $458,000 were accrued and unpaid as of September 25,
1997 and March 25, 1997, respectively.
(c) Property management fees paid by subsidiary partnerships amounted to
$206,314 and $219,399 and, $416,111 and $434,359 for the three and six months
ended September 25, 1997 and 1996, respectively. Of these fees $107,461 and
$109,700 and, $213,860 and $217,015 were incurred to affiliates of the
subsidiary partnerships. In addition, $139,009 and $140,076 and, $279,270 and
$281,459 were incurred to affiliates of the Related General Partner for the
three and six months ended September 25, 1997 and 1996. Of such amounts incurred
to affiliates of the Related General Partner, $50,896 and $53,970 and, $99,473
and $107,395 are also included in amounts incurred to affiliates of the
subsidiary partners because they were incurred to affiliates of both.
(d) Related and Cambridge Associates, a limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.
Note 3 - Mortgage Notes Payable
Suncreek - 268, Ltd.
In 1985, Suncreek-268 Ltd. ("Suncreek") obtained a $10,000,000 variable rate
mortgage loan from the County of Sacramento, California (the County) which was
to mature in April 2007. In connection with the mortgage loan, Suncreek obtained
a $10,000,000 irrevocable letter of credit, which was provided to the County as
additional collateral. During 1995, the mortgage loan from the County was paid
in full by Resolution Trust Corporation (RTC), by drawing upon the letter of
credit. During 1996, Suncreek, RTC and the County agreed to replace the mortgage
loan by issuing bonds, resulting in recognizing a $3,200,000 extraordinary gain
from the forgiveness of debt relating to the mortgage loan.
On April 15, 1996, Suncreek entered into an agreement with the County to issue
$6,800,000 in bonds which mature April 1, 2026, with interest at variable rates
payable in monthly installments through May 1, 1998, when payments of $10,000
per month will begin. The payments will be accumulated in an interest bearing
account until $100,000 is accumulated and then will be used to
11
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
begin redeeming the bonds. Suncreek entered into a Reimbursement Agreement and a
Collateral Security Agreement with the Bank which set forth how payments to the
bond holders are to be made. In conjunction with these agreements, the Bank has
issued an Irrevocable Letter of Credit (the Letter) in favor of First Trust of
California, the Trustee for the bond holders in the amount of $6,878,247. In
connection with the Letter, Suncreek incurs an annual fee of 1.37% of the letter
of credit. The California State Teacher's Retirement System (CALSTRS) has
entered into a Confirmation Agreement with the Bank whereby CALSTRS has agreed
to honor the Letter of Credit from the Bank in the event that U.S. Bank is
unable to honor the Letter.
Refinancing costs incurred in connection with the agreements described above of
$559,864 were paid by the general partner and accounted for as a capital
contribution.
In connection with the agreements above, Suncreek entered into a new Regulatory
Agreement with the County which requires that at least 20% of the available
units be rented to very low income tenants (as defined). Suncreek was in
compliance with this requirement as of September 30, 1997.
In connection with the refinancing under which Suncreek will pay a substantially
lower interest rate on a lower principal amount, the Partnership amended the
terms of its partnership agreement with Robert Randall, ("Randall"), the general
partner of Suncreek, to reflect the elimination of the land lease together with
all accrued and unpaid land lease payments, Randall's contribution to Suncreek
of the underlying land, as well as the elimination of all other existing
guarantee agreements between the partners. In addition, the balance of a note
payable to the selling partner amounting to $641,303 which represented a portion
of the original purchase price was forgiven.
Note 4 - Sale of Property
McAdam Park-336, Ltd.
On May 31, 1996, the property and the related assets and liabilities of McAdam
were sold to Fannie Mae for $14,685,000 resulting in a gain in the amount of
$5,457,073 and forgiveness of indebtedness
12
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
income of $1,320,280 as a result of forgiveness of interest on mortgage debt and
advances from the mortgage note holder.
Note 5 - Extraordinary Item
On May 2, 1997, amounts due to the Related General Partner totaling $55,000 were
forgiven resulting in forgiveness of indebtedness income.
Suncreek
In April 1996, Suncreek completed a refinancing of its mortgage debt resulting
in forgiveness of indebtedness income of $3,200,000 which was realized as a
result of forgiveness of former mortgage debt. In addition, the balance of a
note payable to the selling partner amounting to $641,303 which represented a
portion of the original purchase price was also forgiven (see Note 3).
McAdam
On May 31, 1996 the property and the related assets and liabilities of McAdam
were sold to Fannie Mae for $14,685,000. For financing reporting purposes,
forgiveness of indebtedness income of $1,320,280 was realized (see Note 4).
Note 6 - 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, 1997.
Galveston-Stewart's Landing, Ltd.
Galveston-Stewart's Landing, Ltd. ("Galveston") has sustained continued
operating deficits and has a net partners' deficiency of approximately
$5,817,000 at September 25, 1997. Galveston's mortgage note was originally due
to HUD. During 1995, HUD assigned and transferred the mortgage note to Beal
Bank. On December 14, 1995, Galveston was notified that the mortgage note was in
default and Galveston was in arrears on required principal and interest in the
amount of approximately $427,000 and $2,359,000, respectively. Beal Bank then
commenced foreclosure
13
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
proceedings. In order to stay such proceedings, Galveston filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code. A contract of
sale of the property as part of a settlement plan which has received
confirmation by the Court and is expected to occur in November. Pursuant to the
terms of the contract, the property is to be sold to Beal Bank for $5,030,000
which will completely extinguish the mortgage indebtedness. As of September 25,
1997 the Partnership had advanced $606,445 of interest-free loans to Galveston
of which approximately $549,000 remains unpaid at September 25, 1997. The
Partnership's investment in Galveston has been reduced to zero by prior years'
losses. The minority interest balance was zero at both September 25, 1997 and
March 25, 1997. Galveston's net loss after minority interest amounted to
approximately $42,000 and $19,000 and $51,000 and $86,000 for the three and six
months ended September 25, 1997 and 1996, respectively.
Players Club at Fort Meyers, Ltd. and Suntree at Fort Meyers, Ltd.
Players Club at Fort Meyers, Ltd. ("Players Club") and Suntree at Fort Meyers,
Ltd. ("Suntree") have incurred operating losses and cash flow deficits due to
low occupancy levels. At September 25, 1997, Players Club and Suntree have
partners' deficiencies of approximately $3,618,000 and $2,621,000, respectively.
In addition, the Local General Partners' operating deficit guarantees have
expired and there is no further obligation to continue to fund operating
deficits. The Partnership entered into agreements with bondholders in January
1993 (further modified effective January 1996 and again extended and modified
effective January 1997). Pursuant to the modification, the minimum pay rate for
Suntree was reduced to 6.5% and 7.5% for the periods January 1, 1997 through
June 30, 1997 and July 1, 1997 through December 31, 1997, respectively. Due to
continuing weak market conditions and a change in property management, effective
with the July payment, the forbearance agreement with Suntree was further
modified extending the minimum pay rate of 6.5% through December 31, 1997.
Thereafter, the stated rate is to be reinstated. The minimum pay rate for
Players Club was reduced to 6.5% and 6.25% for the periods January 1, 1997
through January 31, 1997 and February 1, 1997 through December 31, 1997,
respectively. Thereafter, it is expected that the stated rate of 8% will be
reinstated. The difference between the minimum pay rate and the stated rate is
payable from all future available cash flow or is deferred to be paid
14
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 25, 1997
(Unaudited)
from sales/refinancing proceeds. Recoverability of a major portion of the
recorded asset amounts shown in the accompanying balance sheet is dependent upon
continued operation of the subsidiary partnerships, which is dependent upon
their abilities to meet financing requirements on a continuing basis, to
maintain present financing, and to succeed in future operations. In addition,
management has taken steps to control Suntree's operating expenses. In August
1997, the Partnership advanced approximately $9,000 to Suntree toward the
payment of certain utility deposits. The advance is expected to be repaid in
November 1997. The Partnership's investments in Players Club and Suntree have
been reduced to zero by prior years' losses. The minority interest balance for
Players Club was approximately $13,000 and $20,000 at September 25, 1997 and
March 25, 1997, respectively. In the case of Suntree, the minority interest
balance was approximately $14,000 and $18,000 at September 25, 1997 and March
25, 1997, respectively. Players Club's net loss after minority interest amounted
to approximately $181,000 and $97,000 and $326,000 and $198,000 for the three
and six months ended September 25, 1997 and 1996, respectively. Suntree's net
loss after minority interest amounted to approximately $157,000 and $100,000 and
$215,000 and $162,000 for the three and six months ended September 25, 1997 and
1996, respectively.
15
<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 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 six
months ended September 25, 1997 and 1996 such distributions amounted to
approximately $150,000 and $5,000, respectively. Accordingly, the Related
General Partner advanced funds to meet the Partnership's third party obligations
with remaining unpaid balances totaling approximately $1,996,000 and $2,067,000
at September 25, 1997 and March 25, 1997, respectively. In addition, certain
fees and expense reimbursements owed to the General Partners amounting to
approximately $2,113,000 and $1,680,000 were accrued and unpaid as of September
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 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.
During the six months ended September 25, 1997, cash and cash equivalents of the
Partnership and its eleven consolidated Local Partnerships decreased
approximately $31,000. This decrease was primarily attributable to a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
($130,000) and principal payments of mortgage notes payable ($394,000) which
exceeded cash flow provided by operating activities ($486,000). Cash flow
provided by operating activities included timing differences relating to payment
of certain expenses of the Local Partnerships including cash flow interest which
is included in accounts payable and accrued expenses at June 30, 1997. Included
in the adjustments to reconcile the net loss to cash flow provided by operating
activities is forgiveness of indebtedness income ($55,000) and depreciation and
amortization ($1,744,000).
For a discussion of contingencies affecting certain Local Partnerships, see Note
6 to the Financial Statements. Since the maximum loss the Partnership would be
liable for is its net investment in the respective Local Partnerships, the
resolution of the existing contingencies is not anticipated to impact future
results of operations, liquidity or financial condition in a material way.
16
<PAGE>
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
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 McAdam, which sold its property on May 31, 1996, gain on sale of
property, administrative and management-related parties and forgiveness of
indebtedness income, the results of operations of the Partnership, as well as
the Local Partnerships remained fairly consistent during the three and six
months ended September 25, 1997 and 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.
Rental income decreased approximately 3% for both the three and six months ended
September 25, 1997 as compared to the corresponding periods in 1996. Excluding
McAdam, rental income increased approximately 1% and 2% for the three and six
months ended September 25, 1997, as compared to the corresponding periods in
1996 primarily due to rental rate increases.
Other income decreased approximately $137,000 and $280,000 for the three and six
months ended September 25, 1997 as compared to the corresponding periods in
1996. Excluding McAdam, such income decreased approximately $97,000 and $195,000
primarily due to a decrease in income from the funding of the Breakeven
Guarantee by the Local General Partner of Suncreek which was eliminated in
connection with the refinancing of the mortgage debt of Suncreek on April 15,
1996 and an increase in laundry room revenues at Galveston in the second quarter
of 1996.
Total expenses excluding administrative and management-related parties,
operating and repairs and maintenance expenses remained fairly consistent with
an increase of approximately 1% and a decrease of approximately 1% for the three
and six months ended September 25, 1997 as compared to 1996.
Administrative and management-related parties increased approximately $173,000
and $364,000 for the three and six months ended September 25, 1997 as compared
to the corresponding peri-
17
<PAGE>
ods in 1996 primarily due to an increase in partnership management fees payable
to the General Partners.
Operating expenses increased approximately $13,000 and $8,000 for the three and
six months ended September 25, 1997 as compared to the corresponding periods in
1996. Excluding McAdam, such expenses increased approximately $38,000 and
$73,000 primarily due to a credit in the first quarter of 1996 resulting from
billing errors relating to utilities which partially offset the expense at
Triangle/Oaks as well as increases in utilities at Player's Club and Apple Creek
in 1997.
Repairs and maintenance expenses decreased approximately $355,000 and $726,000
for the three and six months ended September 25, 1997 as compared to the
corresponding periods in 1996. Excluding McAdam, such expenses decreased
approximately $156,000 and $223,000 primarily due to the painting of the
buildings and trims at Triangle Oaks Limited Partnership in 1996.
Administrative and management expenses decreased approximately $122,000 and
$259,000, respectively, for the three and six months ended September 25, 1997 as
compared to the corresponding periods in 1996 primarily due to the sale of the
property owned by McAdam. Excluding McAdam, such expenses remained fairly
consistent with increases of approximately 1% and 2%. Interest expense and
depreciation and amortization expense decreased approximately $546,000 and
$218,000 for the six months ended September 25, 1997 as compared to the
corresponding periods in 1996 primarily due to the sale of the property owned by
McAdam. Excluding McAdam such expenses remained fairly consistent with a
decrease of approximately 2% and an increase of less than 1%.
A gain on the sale of property in the amount of approximately $5,457,000 was
recorded during the three and six months ended September 25, 1996 and
forgiveness of indebtedness income in the amounts of approximately $0 and
$5,162,000 and $55,000 and $5,162,000 was recorded during the three and six
months ended September 25, 1997 and 1996, respectively (see Notes 4 and 5 to the
Financial Statements).
18
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The litigation described in Note 6 to the financial statements contained
in Part I, Item 1 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
Paul L. Abbott, ceased to serve as President, Chief Executive Officer and
Chief Financial Officer of Advantaged Housing Associates, Inc., effective
September 1, 1997. Effective September 1, 1997, Doreen D. Odell was elected
President, Chief Executive Officer and Chief Financial Officer of Advantaged
Housing Associates, Inc.
Affiliates of Related Advantaged Residential Associates, Inc. and
Advantaged Housing Associates, Inc., general partners of the Partnership, have
entered into a Purchase Agreement pursuant to which Advantaged Housing
Associates, Inc. agreed to sell and an affiliate of Related Advantaged
Residential Associates, Inc. agreed to purchase Advantaged Housing Associates,
Inc.'s general partner interest in the Partnership (the "Transfer"). The
Transfer may only be consummated if not more than 33.3% in interest of Limited
Partners of the Partnership disapprove of the Transfer in writing. Notice of the
proposed Transfer has been mailed to the Limited Partners of the Partnership
and, if authorized, the Partnership, Related Advantaged Residential Associates,
Inc. and Advantaged Housing Associates, Inc. intend to consummate the Transfer
no later than December 31, 1997. There can be no assurance, however, when or if
the Transfer will be consummated.
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.
19
<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 II LIMITED PARTNERSHIP
(Registrant)
By: RELATED ADVANTAGED RESIDENTIAL
ASSOCIATES, INC., a General Partner
Date: November 13, 1997
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: November 13, 1997
By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo,
Treasurer
(principal accounting officer)
By: ADVANTAGED HOUSING ASSOCIATES,
INC., a General Partner
Date: November 13, 1997
By: /s/ Doreen D. Odell
-------------------
Doreen D. Odell,
President, Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for Cambridge Advantaged Properties II L.P. and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<CIK> 0000771996
<NAME> Cambridge Advantaged Properties II L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-25-1998
<PERIOD-START> MAR-26-1997
<PERIOD-END> SEP-25-1997
<CASH> 1,194,536
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,044,611
<PP&E> 120,890,592
<DEPRECIATION> 44,766,207
<TOTAL-ASSETS> 82,582,629
<CURRENT-LIABILITIES> 14,777,465
<BONDS> 97,946,234
0
0
<COMMON> 0
<OTHER-SE> (30,141,070)
<TOTAL-LIABILITY-AND-EQUITY> 82,582,629
<SALES> 0
<TOTAL-REVENUES> 8,845,276
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,975,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,827,064
<INCOME-PRETAX> (1,956,945)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 55,000
<CHANGES> 0
<NET-INCOME> 1,901,945
<EPS-PRIMARY> (262)
<EPS-DILUTED> 0
</TABLE>
