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 December 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
--- ---
<PAGE>
PART I
Item 1. Financial Statements
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
------------ ------------
December 25, March 25,
1997 1997
------------ ------------
ASSETS
Property and equipment - net of
accumulated depreciation of
$45,594,715 and $43,124,557,
respectively $75,353,548 $77,764,894
Cash and cash equivalents 1,164,151 1,225,369
Cash - restricted for tenants'
security deposits 641,772 572,624
Mortgage escrow deposits 2,206,679 1,895,569
Deferred costs, net of accumulated
amortization of $978,068 and
$841,465, respectively 2,184,973 2,330,143
Prepaid expenses and other assets 437,892 424,003
----------- -----------
Total assets $81,989,015 $84,212,602
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable $97,748,989 $98,340,680
Accounts payable, accrued
expenses and other liabilities 8,571,469 7,573,750
Tenants' security deposits payable 641,772 572,624
Due to general partners of
subsidiaries and their affiliates 1,579,259 1,731,240
Due to general partners and
affiliates 4,629,394 4,103,650
----------- -----------
Total liabilities 113,170,883 112,321,944
----------- -----------
Minority interest 4,936,660 5,111,554
----------- -----------
Commitments and contingencies
(Note 6)
Partners' deficit:
Limited partners (35,439,796) (32,571,140)
General partners (678,732) (649,756)
----------- -----------
Total partners' deficit (36,118,528) (33,220,896)
----------- -----------
Total liabilities and partners'
deficit $81,989,015 $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 Nine Months Ended
December 31, December 31,
------------------------ --------------------------
1997 1996* 1997 1996*
------------------------ --------------------------
REVENUES
Rentals, net $4,252,149 $4,223,442 $12,718,978 $12,958,721
Other 189,361 227,310 567,808 885,440
Gain on sale of 0 0 0 5,457,073
property ---------- ---------- ----------- -----------
(Note 4)
Total revenues 4,441,510 4,450,752 13,286,786 19,301,234
---------- ---------- ----------- -----------
EXPENSES
Administrative 710,772 779,735 2,243,639 2,603,729
and
management
Administrative 311,082 771,626 1,143,415 1,239,833
and management-
related parties
(Note 2)
Operating 367,038 358,161 1,063,851 1,046,577
Repairs and 769,904 716,895 1,905,222 2,546,053
maintenance
Taxes and 562,438 581,649 1,596,135 1,637,140
insurance
Interest 1,898,442 1,820,216 5,725,506 6,193,254
Depreciation 862,632 870,570 2,606,761 2,832,634
and amorti- ---------- ---------- ----------- -----------
zation
Total expenses 5,482,308 5,898,852 16,284,529 18,099,220
---------- ---------- ----------- -----------
Income (loss) (1,040,798) (1,448,100) (2,997,743) 1,202,014
before
minority
interest and
extraordinary
item
Minority 17,463 12,264 45,111 (23,748)
interest ---------- ---------- ----------- -----------
in (income)
loss of
subsidiaries
Income (loss) (1,023,335) (1,435,836) (2,952,632) 1,178,266
before
extraordinary
item
Extraordinary 0 0 55,000 5,161,583
item-forgive- ---------- ---------- ----------- -----------
ness of
indebtedness
income
(Note 5)
Net income $(1,023,335) $(1,435,836) $(2,897,632) $6,339,849
(loss) =========== =========== =========== ==========
*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 - nine
months ended
December 25, 1997 (2,897,632) (2,868,656) (28,976)
------------ ------------ ---------
Balance-
December 25, 1997 $(36,118,528) $(35,439,796) $(678,732)
============ ============ =========
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)
--------------------------
Nine Months Ended
December 25,
--------------------------
1997 1996
--------------------------
Cash flows from operating activities:
Net income (loss) ($2,897,632) $6,339,849
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) 0 (5,161,583)
Depreciation and amortization 2,606,761 2,832,634
Minority interest in income (loss) of
subsidiaries (45,111) 23,748
Increase in cash-restricted
for tenants' security deposits (69,148) (50,359)
Increase in mortgage
escrow deposits (311,110) (994,993)
Increase in prepaid
expenses and other assets (13,889) (53,845)
Increase in accounts payable,
accrued expenses and other
liabilities 997,719 2,711,014
Increase in tenants'
security deposits payable 69,148 56,694
Increase in due to general
partners of subsidiaries and their
affiliates 0 45,025
Decrease in due to general partners
of subsidiaries and their affiliates (151,981) (39,276)
Increase in due to general partners
and affiliates 525,744 658,648
----------- -----------
Total adjustments 3,608,133 (5,429,366)
----------- -----------
Net cash provided by operating
activities 710,501 910,483
----------- -----------
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)
-------------------------
Nine Months Ended
December 25,
-------------------------
1997 1996
-------------------------
Net cash from operating activities
brought forward 710,501 910,483
---------- ----------
Cash flows from investing activities:
Improvements to property and
equipment (58,812) 0
Proceeds from sale of property 0 14,685,000
---------- ----------
Net cash (used in) provided by
investing activities (58,812) 14,685,000
---------- ----------
Cash flows from financing activities:
Proceeds from mortgage
note payable 0 6,800,000
Principal payments of mortgage
notes payable (591,691) (22,014,969)
(Decrease) increase in capitalization
of consolidated subsidiaries
attributable to minority interest (129,783) 478,174
Decrease (increase) in deferred
costs 8,567 (541,384)
---------- ----------
Net cash used in financing
activities (712,907) (15,278,179)
---------- ----------
Net (decrease) increase in cash and
cash equivalents (61,218) 317,304
Cash and cash equivalents-
beginning of period 1,225,369 1,022,522
---------- ----------
Cash and cash equivalents-
end of period $1,164,151 $1,339,826
========== ==========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(continued)
(Unaudited)
-----------------------
Nine Months Ended
December 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
December 25, 1997
(Unaudited)
Note 1 - General
The consolidated financial statements for the nine months ended December 25,
1997 and 1996 include the accounts of Cambridge Advantaged Properties II Limited
Partnership, (the "Partnership"), and eleven and twelve (one of which only has
activity through the date of sale of its property and the related assets and
liabilities on May 31, 1996 (see Note 4)) 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 December 25. All subsidiaries have fiscal
quarters ending September 30. Accounts of the subsidiary partnerships have been
adjusted for intercompany transactions from October 1 through December 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 $0 and $0 and, $1,000 and $0 for the three and nine
months ended December 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
December 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
December 25, 1997, the results of operations for the three and nine months ended
December 25, 1997 and cash flows for the nine months ended December 25, 1997 and
1996, respectively. However, the operating results for the nine months ended
December 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 December 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
December 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 nine months ended
December 25, 1997 and 1996 were as follows:
Three Months Ended Nine Months Ended
December 25, December 25,
-------------------- -----------------------
1997 1996 1997 1996
-------------------- -----------------------
Partnership $111,250 $543,750 $ 493,750 $ 573,750
management
fees (a)
Expense reim- 14,000 26,466 64,176 67,594
bursement (b)
Property man- 183,832 199,410 577,489 590,489
agement fees (c)
Local adminis- 2,000 2,000 8,000 8,000
trative fee (d) -------- -------- ---------- ----------
$311,082 $771,626 $1,143,415 $1,239,833
======== ======== ========== ==========
(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 $1,716,000 and $1,222,000 were accrued and unpaid as of December
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 part-
10
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 1997
(Unaudited)
nerships' performance. Expense reimbursements and asset monitoring fees owed to
the Related General Partner amounting to approximately $522,000 and $458,000
were accrued and unpaid as of December 25, 1997 and March 25, 1997,
respectively.
(c) Property management fees paid by subsidiary partnerships amounted to
$195,540 and $210,333 and, $611,651 and $644,692 for the three and nine months
ended December 25, 1997 and 1996, respectively. Of these fees $102,475 and
$112,979 and, $316,335 and $329,994 were incurred to affiliates of the
subsidiary partnerships. In addition, $128,851 and $142,089 and, $408,121 and
$423,548 were incurred to affiliates of the Related General Partner for the
three and nine months ended December 25, 1997 and 1996. Of such amounts incurred
to affiliates of the Related General Partner, $50,494 and $55,658 and, $149,967
and $163,053 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
The status of the refinancing with respect to Suncreek - 268 Ltd. ("Suncreek")
has remained the same since the events reported in form 10-Q dated September 25,
1997.
Note 4 - Sale of Properties
Galveston-Stewart's Landing, Ltd.
On November 12, 1997, the property and the related assets and liabilities of
Galveston-Stewart's Landing, Ltd. ("Galveston") were sold to Beal Bank for
approximately $5,030,000 resulting in a gain in the amount of approximately
$1,700,000 and forgiveness of indebtedness income of approximately $500,000, as
a result of forgiveness of amounts due to the Partnership. Galveston used
approximately $5,000,000 of the net proceeds to settle the mortgage indebtedness
and accrued interest thereon which amounted to approximately $8,600,000,
resulting in forgiveness of indebtedness income of approximately $3,600,000. For
tax purposes, the
11
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 1997
(Unaudited)
entire gain to be realized by the Partnership is anticipated to be approximately
$6,700,000.
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 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).
12
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 1997
(Unaudited)
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.
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 soft
market conditions and reduced occupancy levels. At December 25, 1997, Players
Club and Suntree have partners' deficiencies of approximately $3,819,000 and
$2,745,000, 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 from
sales/refinancing proceeds. Currently, Suntree and Players Club are in
negotiations with the bondholder with regard to a permanent modification of the
terms of the bonds, including an extension of maturity of the bonds. Based on
current negotiations and issuer approvals, it is expected that such
modifications will close in the first quarter 1998 but will be effective as of
December 31, 1997. 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 fi-
13
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CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED
PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 1997
(Unaudited)
nancing requirements on a continuing basis, to maintain present financing, and
to succeed in future operations. As of year-end 1997, the bondholders, pursuant
to forbearance and second mortgage agreements have advanced $280,000 and
$130,000 to Players Club and Suntree, respectively. Such funds were advanced to
cover certain deferred maintenance items and delinquent real estate taxes. These
loans will be repaid from available cash flow after payment of bond interest on
a self amortizing basis. 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 $9,000 and $20,000 at December 25,
1997 and March 25, 1997, respectively. In the case of Suntree, the minority
interest balance was approximately $11,000 and $18,000 at December 25, 1997 and
March 25, 1997, respectively. Players Club's net loss after minority interest
amounted to approximately $197,000 and $146,000 and $523,000 and $344,000 for
the three and nine months ended December 25, 1997 and 1996, respectively.
Suntree's net loss after minority interest amounted to approximately $122,000
and $98,000 and $337,000 and $260,000 for the three and nine months ended
December 25, 1997 and 1996, respectively.
14
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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 nine
months ended December 25, 1997 and 1996 such distributions amounted to
approximately $150,000 and $9,000, respectively. Accordingly, the Related
General Partner advanced funds to meet the Partnership's third party obligations
with remaining unpaid balances totaling approximately $2,006,000 and $2,067,000
at December 25, 1997 and March 25, 1997, respectively. In addition, certain fees
and expense reimbursements owed to the General Partners amounting to
approximately $2,238,000 and $1,680,000 were accrued and unpaid as of December
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 nine months ended December 25, 1997, cash and cash equivalents of the
Partnership and its eleven consolidated Local Partnerships decreased
approximately $61,000. This decrease was primarily attributable to a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
($130,000), improvements to property and equipment ($59,000) and principal
payments of mortgage notes payable ($592,000) which exceeded cash flow provided
by operating activities ($711,000). 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 December 31, 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
($2,607,000).
On November 12, 1997, the property and the related assets and liabilities of
Galveston-Stewart's Landing, Ltd. ("Galveston") were sold to Beal Bank for
approximately $5,030,000 resulting in a gain in the amount of approximately
$1,700,000 and forgiveness of indebtedness income of approximately $500,000, as
a result of forgiveness of amounts due to the Partnership. Galveston used
15
<PAGE>
approximately $5,000,000 of the net proceeds to settle the mortgage indebtedness
and accrued interest thereon which amounted to approximately $8,600,000,
resulting in forgiveness of indebtedness income of approximately $3,600,000. For
tax purposes, the entire gain to be realized by the Partnership is anticipated
to be approximately $6,700,000.
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.
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 nine
months ended December 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 increased approximately 1% and decreased approximately 2% for the
three and nine months ended December 25, 1997 as compared to the corresponding
periods in 1996. Excluding McAdam, rental income increased approximately 1% for
both the three and nine months ended December 25, 1997, as compared to the
corresponding periods in 1996 primarily due to rental rate increases.
Other income decreased approximately $38,000 and $318,000 for the three and nine
months ended December 25, 1997 as compared to the corresponding periods in 1996.
Excluding McAdam, such income decreased approximately $38,000 and $233,000
primarily
16
<PAGE>
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, an increase in
laundry room revenues at Galveston in the second quarter of 1996, as well as
small decreases at two other Local Partnerships.
Total expenses excluding administrative and management-related parties expense
remained fairly consistent with an increase of approximately 1% and a decrease
of approximately 2% for the three and nine months ended December 25, 1997 as
compared to 1996.
Administrative and management-related parties decreased approximately $461,000
for the three months ended December 25, 1997 as compared to the corresponding
period in 1996 primarily due to an increase in partnership management fees
payable to the General Partners in 1996.
Administrative and management expenses and repairs and maintenance expenses
decreased approximately $360,000 and $641,000 for the nine months ended December
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 decreases of approximately $71,000 and $138,000.
A gain on the sale of property in the amount of approximately $5,457,000 was
recorded during the nine months ended December 25, 1996 and forgiveness of
indebtedness income in the amounts of approximately $55,000 and $5,162,000 was
recorded during the nine months ended December 25, 1997 and 1996, respectively
(see Notes 4 and 5 to the Financial Statements).
17
<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
See Item 5. for results to submission to Limited Partners.
Item 5. Other information
On November 25, 1997, affiliates of Related Advantaged Residential
Associates, Inc. ("RARA") and Advantaged Housing Associates, Inc. ("AHA"),
general partners of the Partnership, consummated a Purchase Agreement pursuant
to which an affiliate of RARA purchased AHA's general partner interest in the
Partnership (the "Transfer"). In addition to the Transfer, an affiliate of RARA
also acquired AHA's general partner interest in Related and Cambridge Associates
Limited Partnership, the special limited partner of the Partnership. Pursuant to
the Partnership's Amended and Restated Partnership Agreement, the limited
partners approved the Transfer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - A report on Form 8-K dated November 27, 1997
was filed by the Partnership on December 5, 1997 which reported in Item 1. the
Transfer referred to in Item 5. Other Information of this Form 10-Q.
18
<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: February 3, 1998
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: February 3, 1998
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting 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> 9-MOS
<FISCAL-YEAR-END> MAR-25-1998
<PERIOD-START> MAR-26-1997
<PERIOD-END> DEC-25-1997
<CASH> 1,164,151
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,286,343
<PP&E> 120,948,263
<DEPRECIATION> 45,594,715
<TOTAL-ASSETS> 81,989,015
<CURRENT-LIABILITIES> 15,421,894
<BONDS> 97,748,989
0
0
<COMMON> 0
<OTHER-SE> (31,181,868)
<TOTAL-LIABILITY-AND-EQUITY> 81,989,015
<SALES> 0
<TOTAL-REVENUES> 13,286,786
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,559,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,725,506
<INCOME-PRETAX> (2,997,743)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 55,000
<CHANGES> 0
<NET-INCOME> (2,942,743)
<EPS-PRIMARY> (401)
<EPS-DILUTED> 0
</TABLE>
