UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 25, 1999
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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Limited Partnership Interests
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 ____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
None
Index to exhibits may be found on page 68
Page 1 of 77
<PAGE>
PART I
Item 1. Business.
General
Cambridge Advantaged Properties II Limited Partnership (formerly
Hutton Advantaged Properties II Limited Partnership) (the
"Partnership") is a limited partnership which was formed under
the laws of the State of Delaware on June 25, 1985. Since
November 25, 1997, the general partners of the Partnership have
been Related Advantaged Residential Associates Inc., (the
"Related General Partner"), a Delaware corporation and an
affiliate of The Related Companies, L.P. ("Related"), a New York
limited partnership, and Related and Cambridge Associates
Limited Partnership (formerly Related and Hutton Associates
Limited Partnership), a Delaware limited partnership, ("Related
and Cambridge Associates"), and together with the Related
General Partner, the "General Partners". The general partner of
Related and Cambridge Associates is the Related General Partner.
On November 25, 1997, the Related General Partner and one of the
then other general partners of the Partnership, Advantaged
Housing Associates, Inc. ("AHA"), consummated a Purchase
Agreement pursuant to which the Related General Partner
purchased AHA's general partner interest in the Partnership (the
"Transfer"). In addition to the Transfer, the Related General
Partner also acquired AHA's general partner interest in Related
and Cambridge Associates Limited Partnership, another General
Partner which is also the special limited partner of the
Partnership. The General Partners manage and control the
affairs of the Partnership. See Item 10, Directors and
Executive Officers of the Registrant, below.
On May 19, 1994, the Partnership's name was changed to Cambridge
Advantaged Properties II Limited Partnership.
On August 9, 1985, pursuant to a prospectus dated August 9, 1985
as supplemented by the supplements thereto dated September 20,
1985 and October 25, 1985 (as so supplemented, the
"Prospectus"), the Partnership commenced a public offering (the
"Offering"). Pursuant to the Offering, the Partnership issued
and sold 7,150 Limited Partnership Interests resulting in
$35,750,000 in Gross Proceeds from 2,926 investors (before
offering expenses and sales commissions of $3,896,518). The
Offering was completed in January 1986 and no further issuance
of Limited Partnership Interests is anticipated.
Investment Objectives/Government Incentives
The Partnership was formed to invest, as a limited partner, in
other limited partnerships (referred to herein as "Local
Partnerships", "subsidiaries" or "subsidiary partnerships"),
each of which owns or leases and operates an existing
residential housing development ("Apartment Complexes") which
benefit from financing at rates below those otherwise available
from conventional lenders that is made available through various
federal and state government programs or through the issuance of
tax-exempt bonds ("Advantaged Financing"). In acquiring its
interests in the Local Partnerships ("Local Partnership
Interests"), the Partnership's investment objectives have been
to:
(1) provide current tax benefits in the form of tax losses
which Limited Partners may use to offset taxable income from
other sources;
(2) provide long-term capital appreciation through an increase
in the value of the Partnership's investments in Local
Partnerships;
(3) provide cash distributions from sale or refinancing
transactions; and
(4) preserve and protect the Partnership's capital.
Federal, state and local government agencies have provided
significant incentives in order to stimulate private investment
in housing which benefits from Advantaged Financing. The intent
of these incentives was to reduce certain market risks and
provide investors with (i) tax benefits, (ii) long-term capital
appreciation, and (iii) limited cash distributions.
Notwithstanding these factors, there remain significant risks.
These risks include, but are not limited to, the financial
strength and expertise of the general partners of the Local
Partnerships ("Local General Partners"); the long-term nature of
investments in Advantaged Housing which limits the ability of
the Partnership to vary its investments in response to changing
economic, financial and investment conditions; and changes in
local economic circumstances and housing patterns which have an
impact on real estate values. Apartment Complexes benefiting
from Advantaged Financing also require greater management
expertise and may have higher operating expenses than
conventional apartment buildings. See Item 7, Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
Further information concerning the Advantaged Financing programs
in which the Local Partnerships participate can be found in Item
2, Properties.
The Partnership is subject to risks incident to potential losses
arising from the management and ownership of improved real
estate. The Partnership can also be affected by poor economic
conditions generally, however no more than 30% of the properties
are located in any single state. There are also substantial
risks associated with owning properties receiving government
assistance, for example the possibility that Congress may not
appropriate funds to enable the U.S. Department of Housing and
Urban Development ("HUD") to make rental assistance payments.
HUD also restricts annual cash distributions to partners based
on operating results and a percentage of the owners' equity
contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the
period that the subsidy agreements are in existence, without
HUD's approval. Furthermore, there may not be market demand for
apartments at full market rents when the rental assistance
contracts expire.
Investments
The Local Partnership Interests owned by the Partnership were
acquired from unaffiliated sellers. The Partnership became the
principal limited partner in these Local Partnerships pursuant
to local limited partnership agreements. As a limited partner,
the Partnership's liability for obligations of the Local
Partnerships is limited to its investment. The Local General
Partners of the Local Partnerships retain responsibility for
maintaining, operating and managing the Apartment Complexes.
However, Related and Cambridge Associates, a general partner of
the Partnership, is a special limited partner of each Local
Partnership, and, under certain circumstances, has the right to
replace the Local General Partners of the Local Partnership and
also has certain rights with respect to voting on or approving
of certain matters, including the sale of the Apartment Complex.
These rights were given to Related and Cambridge Associates
rather than the Partnership so as to avoid claims that by the
existence or exercise of such rights the Partnership was taking
part in the control of the Local Partnerships' operations and
should thereby incur liability for all debts and obligations of
the Local Partnerships (if this were found to be the case, the
Partnership's interest in one Local Partnership could have been
reached by creditors of another Local Partnership). Related and
Cambridge Associates has agreed to exercise these rights as a
fiduciary of the Limited Partners of the Partnership.
The Partnership purchased the Local Partnership Interests for a
purchase price consisting in each case of a cash down payment,
and a deferred cash payment, as evidenced by an Installment
Promissory Note. Such notes were and are payable upon the
occurrence of certain events, generally in two stages, upon
completion of construction and upon the later of permanent loan
closing or attainment of 95% occupancy. The cash payments were
made in part as the purchase price of the Local Partnership
Interests and in part as capital contributions to the Local
Partnerships. Such contributions were generally used by the
Local Partnership to pay partnership management fees to the
Local General Partners, fees to the Local General Partners for
guaranteeing the funding of operating deficits (generally for a
period of three to five years and subject to a maximum amount),
and payments to Related and Cambridge Associates or its
affiliates for acquisition fees, development consulting fees,
administrative service fees, and organizational expense
reimbursements in an amount of up to 6.6% of the aggregate cash
payments made by the Partnership to the Local Partnership and
the persons from whom the Partnership purchased its Local
Partnership Interest.
As of March 25, 1999, several Local Partnerships are
experiencing financial difficulties. As a consequence,
recoverability of a significant portion of the Partnership's
investments will depend upon material improvements in their
operating results and their ability to meet debt service
obligations. In addition, the level of cash distributions
provided to the Partnership by the Local Partnership has 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. See Item 7, Management's
Discussion and Analysis of Financial Condition and Results of
Operations for further discussion.
Tax Matters
The Tax Reform Act of 1986 (the "TRA") provides as of 1991 that
the passive losses generated by the Partnership can only be used
to shelter passive income or, in the alternative, may be carried
forward to offset a gain upon the sale of properties.
Competition
The real estate business is highly competitive and each of the
Local Partnerships in which the Partnership has invested owns an
Apartment Complex which must compete for tenants with other
rental housing in its area. However, the below market interest
rates on Advantaged Financing generally make it possible to
offer the apartments to eligible tenants at a cost to the tenant
significantly below the market rate for comparable
conventionally financed apartments in the area.
Employees
The Partnership does not have any employees. All services are
performed for the Partnership by its General Partners and their
affiliates. The General Partners receive compensation in
connection with such activities as set forth in Items 11 and 13
herein. In addition, the Partnership reimburses the General
Partners and certain of their affiliates for expenses incurred
in connection with the performance by their employees of
services for the Partnership in accordance with the Partnership
Agreement.
Item 2. Properties.
As of March 25, 1999, the Partnership holds a 98% Limited
Partnership Interest in 10 Local Partnerships each of which owns
an Apartment Complex. The original underlying properties in two
of the Local Partnerships in which the Partnership had an
interest have been sold. See Item 1, Business-Sales of
Underlying Properties. Set forth below is certain information
concerning the Apartment Complexes and their operations and
financing. See Schedule III to the consolidated financial
statements included herein for additional information pertaining
to the Apartment Complexes.
Each of the Local Partnerships owns one Apartment Complex. The
Apartment Complexes are located in California (1), Florida (3),
Kansas (2), Oklahoma (1), Texas (1) and Virginia (2). Three of
the Apartment Complexes are in the suburbs of major cities, while
the remaining Apartment Complexes are in close proximity to the
downtown business districts of their respective cities. The
Apartment Complexes are occupied by low, moderate and middle-
income tenants. The occupancy rates are set forth below. The
aggregate number of rental units contained in the Apartment
Complexes is 2,916. The largest Apartment Complex contains 520
units and the smallest contains 156 units.
All of the Apartment Complexes are subject to existing permanent
first mortgage loans ("Mortgage Loans on Real Estate"). See
Schedule III.
<TABLE>
LOCAL PARTNERSHIP SCHEDULE
<CAPTION>
Percentage of Units
Name and Location of Government Occupied at December 31,
Property (Number of Units) Assistance(a) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Triangle/Oaks
Limited Partnership Tax exempt
Jacksonville, FL (520) financing 92% 83.9% 84% 91% 93%
Sheridan Square
Associates of Lawton Conventional
Lawton, OK (276) financing 92% 93.4% 87% 88% 96%
Apple Creek
Associates of Denton, Ltd Tax exempt
Denton, TX (308) financing 96% 87.7% 96% 97% 93%
Galveston-Stewart's
Landing, Ltd
Galveston, TX (216) Sec.221(d)(4) (c) (c) 88% 96% 88%
Woodridge, Ltd Tax exempt
Lenexa, KS (248) financing 98% 98% 99% 95% 96%
Players Club
at Fort Myers, Ltd Tax exempt
Ft. Myers, FL (288) financing 77% 83.1% 79% 90% 92%
Suntree at Fort Myers, Ltd Tax exempt
Ft. Myers, FL (240) financing 97% 97.9% 90% 94% 95%
The Harbours Associates Tax exempt
Newport News, VA (396) financing 99% 91.5% 95% 92% 92%
Brookwood
Apartments L.P.
Wichita, KS (216) Sec.221(d)(4) 94% 97.2% 97% 97% 95%
Westwind II Associates Tax exempt
Roanoke, VA (156) financing 95% 98% 98% 97% 98%
McAdam Park-336, Ltd Tax exempt
Palmdale, CA (336) financing (b) (b) (b) 50% 62%
Suncreek-268, Ltd Tax exempt
Sacramento, CA (268) financing 95% 96.2% 96% 93% 94%
</TABLE>
(a) The Partnership invested in Local Partnerships owning
existing Apartment Complexes which receive either federal or
state subsidies. HUD, through FHA, administers a variety of
subsidies for low and moderate-income housing. FHA administers
similar housing programs for nonurban areas. The federal
programs generally provide one or a combination of the following
forms of assistance: (1) mortgage loan insurance and (2) rental
subsidies.
1) Mortgage Loan Insurance. HUD provides mortgage insurance
for rental housing projects pursuant to a number of sections of
Title II of the National Housing Act ("NHA"), including Section
236, Section 221(d)(4), Section 221(d)(3) and Section 220.
Under all of these programs, HUD will generally provide
insurance equal to 100% of the total replacement cost of the
project to nonprofit owners and 90% of the total replacement
cost to limited-distribution owners. Mortgages are provided by
institutions approved by HUD, including banks, savings and loan
companies and local housing authorities. Section 221(d)(4) of
NHA provides for federal insurance of private construction and
permanent mortgage loans to finance new construction of rental
apartment complexes containing five or more units. The most
significant difference between the 221(d)(4) program and the
221(d)(3) program is the maximum amount of the loan which may be
obtained. Under the 221(d)(3) program, nonprofit sponsors may
obtain a permanent mortgage equal to 100% of the total
replacement cost; no equity contribution is required of a
nonprofit sponsor. In all other respects the 221(d)(3) program
is substantially similar to the 221(d)(4) program.
2) Rental Subsidies. Many of the tenants in HUD insured
projects receive some form of rental assistance payments,
primarily through the Section 8 Housing Assistance Payments
Program (the "Section 8 Program"). Apartment Complexes not
receiving assistance through the Section 8 Program ("Section 8
Payments") will generally have limitations on the amounts of
rent which may be charged. One requirement imposed by HUD
regulations effective for apartment complexes initially approved
for Section 8 payments on or after November 5, 1979 is to limit
the amount of the owner's annual cash distributions from
operations to 10% of the owner's equity investment in an
apartment complex if the apartment complex is intended for
occupancy by families and to 6% of the owner's equity investment
in an apartment complex intended for occupancy by elderly
persons. The owner's equity investment in the apartment complex
is 10% of the project's replacement cost as determined by HUD.
All leases are generally for periods not exceeding one to two
years and no tenant occupies more than 10% of the rentable
square footage.
Rents from commercial tenants (to which average rental per
square foot applies) comprised less than 5% of the rental
revenues of the Local Partnerships. Rents for the residential
units are determined annually by HUD and reflect increases in
consumer price indices in various geographic areas.
Management continuously reviews the physical state of the
properties and budgets improvements when required, which are
generally funded from cash flows from operations or release of
replacement reserve escrows.
Management continuously reviews the insurance coverage of the
properties and believes such coverage is adequate.
See Item 1, Business, above for the general competitive
conditions to which the properties described above are subject.
Real estate taxes are calculated using rates and assessed
valuations determined by the township or city in which the
property is located. Such taxes have approximated 1% of the
aggregate cost of the properties as shown in Schedule III to the
financial statements included herein.
(b) On May 31, 1996, the property and the related assets and
liabilities of McAdam were sold to an unaffiliated third party
(see Item 7, below).
(c) On November 12, 1997, the property and the related assets
and liabilities of Galveston were sold to an unaffiliated third
party (see Item 7, below).
Item 3. Legal Proceedings.
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during
the fiscal year covered by this report through the solicitation
of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Security Holder Matters.
As of March 25, 1999, the Partnership had issued and outstanding
7,150 Limited Partnership Interests, each representing a $5,000
capital contribution per unit to the Partnership, for aggregate
gross proceeds of $35,750,000.
Limited Partnership Interests are not traded in any organized
market. It is not anticipated that any public market will
develop for the purchase and sale of the Limited Partnership
Interests. Limited Partnership Interests may be transferred
only if certain requirements are satisfied, including an opinion
of counsel to the Partnership that such transfer would not cause
a termination of the Partnership under Section 708 of the
Internal Revenue Code and would not violate any federal or state
securities laws.
As of May 1, 1999, there were 2,943 registered holders of
Limited Partnership Interests.
The Partnership has made no distributions to its Limited
Partners since its inception on June 25, 1985. There are no
material restrictions upon the Partnership's present or future
ability to make distributions in accordance with the provisions
of the Partnership's Amended and Restated Agreement and
Certificate of Limited Partnership. The Partnership has
invested as a limited partner in Local Partnerships owning
Apartment Complexes which receive Governmental Assistance under
programs which in some instances restrict the cash return
available to owners (see Item 8). Therefore, the Partnership
does not anticipate providing significant cash distributions
from operations to its Limited Partners.
There continues to be a number of requests for the list of
holders of limited partnership interests in limited partnerships
such as the Partnership. Often these requests are made by a
person who, only a short time before making the request,
acquired merely a small number of Limited Partnership Interests
in the Partnership and seeks the list for an improper purpose, a
purpose that is not in the best interest of the Partnership or
is harmful to the Partnership. In order to best serve and
protect the interests of the Partnership and all of its
investors, the General Partners have adopted a policy with
respect to requests for the Partnership's list of holders of
Limited Partnership Interests. This policy is intended to
protect investors from unsolicited and coercive offers to
acquire the interests of holders of Limited Partnership
Interests and does not limit any other rights the General
Partners may have under the Partnership Agreement or applicable
law.
<TABLE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data
of the Partnership. Additional detailed financial information
is set forth in the audited financial statements and footnotes
contained in Item 8 hereof and in Schedules contained in Item 14
hereof.
<CAPTION>
Year Ended March 25,
OPERATIONS 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Revenues $17,669,485 $19,260,738 $ 24,916,993 $ 19,483,652 $ 19,418,028
Operating
expenses (21,861,271) (21,939,186) (23,746,261) (25,288,830) (24,345,121)
Loss on
impairment of
assets 0 0 0 (1,116,378) 0
Minority
interest 41,717 (44,781) (124,886) (42,752) (15,637)
(Loss) income
before
extraordinary
item (4,150,069) (2,723,229) 1,045,846 (6,964,308) (4,942,730)
Extraordinary item -
forgiveness of
indebtedness 501,769 3,629,807 5,161,583 6,416,231 3,494,274
Net (loss)
income $ (3,648,300) $ 906,578 $ 6,207,429 $ (548,077) $ (1,448,456)
Number of
limited
partnership
units
outstanding 7,150 7,150 7,150 7,150 7,150
Per Limited
Partnership Unit:
(Loss) income before
extraordinary
item $ (575) $ (377) $ 145 $ (964) $ (684)
Extraordinary
item 69 502 715 888 484
Net (loss)
income $ (506) $ 125 $ 860 $ (76) $ (200)
<CAPTION>
Year Ended March 25,
FINANCIAL POSITION 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total
assets $ 74,705,306 $ 76,840,906 $ 84,212,602 $ 94,239,730 $ 97,393,817
Long-term
obligations $ 89,892,922 $ 91,209,333 $ 98,340,680 $116,955,198 $120,109,587
Total
liabilities $106,041,794 $104,244,079 $112,321,944 $130,038,490 $132,687,043
Minority
interest $ 4,626,130 $ 4,911,145 $ 5,111,554 $ 3,629,565 $ 3,587,022
</TABLE>
During the years ended March 25, 1995 through 1999, total assets
decreased primarily due to depreciation, partially offset by net
additions to property and equipment. There was a decrease in
long-term obligations and total liabilities in both 1996 and
1995 due to forgiveness of indebtedness at Harbours, Westwind
II, Woodbridge and at Triangle/Oaks Partnerships, respectively.
For the year ended March 25, 1996, there was also a decrease in
assets due to a loss on impairment of assets. During the years
ended March 25, 1997 and 1998 total assets decreased primarily
due to depreciation and the sale of properties (see Note 10 in
Item 8, Financial Statements and Supplementary Data), partially
offset by net additions to property and equipment. Long-term
obligations and total liabilities decreased for the years ended
March 25, 1997 and 1998 primarily due to the decrease in
mortgage notes payable satisfied by the sales price of the
properties which were sold and the forgiveness of indebtedness
of mortgage debt and payments to the note holders. Long-term
obligations decreased for the year ended March 25, 1999
primarily due to the forgiveness of indebtedness related to the
mortgage refinancing at Sheridan Square (See Note 7 in Item 8,
Financial Statements and Supplementary Data). Total liabilities
increased for the year ended March 25, 1999 primarily due to the
advances made by the Related General Partners to meet third
party obligations and the accrual of certain fees and expense
reimbursements owed to the General Partners.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
General
The Partnership's capital has been invested primarily in 12
Local Partnerships in which the Partnership made an initial
investment of $29,354,485 (including acquisition expenses) in
the Local Partnerships. These investments are highly illiquid.
Through the fiscal year ended March 25, 1999, the properties and
the related assets and liabilities owned by two Local
Partnerships were sold to unaffiliated third parties. In
addition, the Partnership has obtained loans from an affiliate
of the Related General Partner, which together with Partnership
funds, have been advanced to four Local Partnerships.
Cumulatively, approximately $994,000 of such advances were
forgiven as a result of the above sales. As of March 25, 1999,
the Partnership owned interests in 10 Local Partnerships.
Cash of the Partnership and its consolidated subsidiaries
increased by approximately $438,000 during the 1998 Fiscal Year.
This increase is attributable to cash provided by operating
activities ($1,583,000) which exceeded net principal payments of
mortgage notes payable ($815,000), acquisition of property and
equipment ($85,000), a decrease in capitalization of
consolidated subsidiaries attributable to minority interest
($187,000) and an increase in deferred costs ($89,000).
Included in the adjustments to reconcile the net loss to cash
flow provided by operating activities forgiveness of
indebtedness income ($502,000) and depreciation and amortization
($3,255,000).
The Partnership's primary source 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 years ended March 25, 1999 (the "1998
Fiscal Year"), March 25, 1998 (the "1997 Fiscal Year") and 1997
(the "1996 Fiscal Year"), such distributions amounted to
approximately $192,000, $150,000 and $13,000, respectively.
Accordingly, the Related General Partner advanced funds to meet
the Partnership's third party obligations with the remaining
unpaid balance of advanced funds equaling approximately
$2,859,000, $2,060,000 and $2,067,000 as of March 25, 1999, 1998
and 1997, respectively. In addition, certain fees and expense
reimbursements owed to the General Partners amounting to
approximately $3,122,000, $2,414,000 and $1,680,000 were accrued
and unpaid as of March 25, 1999, 1998 and 1997, respectively.
Without the General Partners' advances and continued accrual
without payment of certain fees and expense reimbursements, the
Partnership will not be in the 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.
For a discussion of contingencies affecting certain Local
Partnerships, see Results of Operations of Certain Local
Partnerships below.
Except as described above, 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 for 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 United
States 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
Property and equipment to be held and used are carried at cost
which includes the purchase price, acquisition fees and
expenses, construction period interest and any other costs
incurred in acquiring the properties. The cost of property and
equipment is depreciated over their estimated useful lives using
accelerated and straight-line methods. Expenditures for repairs
and maintenance are charged to expense as incurred; major
renewals and betterments are capitalized. At the time property
and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and
accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings. A loss on impairment of
assets is recorded when management estimates amounts recoverable
through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time,
property investments themselves are reduced to estimated fair
value (generally using discounted cash flows) when the property
is considered to be impaired and the depreciated cost exceeds
estimated fair value.
At the time management commits to a plan to dispose of assets,
said assets are adjusted to the lower of carrying amount or fair
value less costs to sell. These assets are classified as
property and equipment-held for sale and are not depreciated.
Through March 25, 1999, the Partnership has recorded
approximately $1,116,000 as a loss on impairment of assets.
The following is a summary of the results of operations of the
Partnership for the 1998, 1997 and 1996 Fiscal Years.
The results of operations of the Partnership, as well as the
Local Partnerships, excluding gain on sale of property,
administrative and management-related parties, repairs and
maintenance, and forgiveness of indebtedness income, remained
fairly consistent for the 1998, 1997 and 1996 Fiscal Years. The
Partnership's primary source of income continues to be its
portion of the Local Partnerships' operating results. The
majority of Local Partnership income continues to be in the form
of rental income with the corresponding expenses being divided
among operations, depreciation and amortization, and mortgage
interest.
Net (loss) income for the 1998, 1997 and 1996 Fiscal Years
totaled $(3,648,300), $906,578 and $6,207,429, respectively.
Excluding 1997 and 1996, in which the Partnership generated
passive income, the Partnership has met the investment objective
of generating tax benefits in the form of passive losses (which
Limited Partners may use to offset passive income from other
sources ). This passive income may be offset by the
carryforward of any unused passive losses from prior years;
however, the sale or refinancing transactions of the Local
Partnerships to date have been insufficient to provide cash
distributions to the Limited Partners.
1998 vs. 1997
Rental income decreased approximately 2% for the 1998 Fiscal
Year as compared to the 1997 Fiscal Year. Excluding Galveston
which sold its property on November 12, 1997, rental income
increased approximately 4% primarily due to rental sale
increases.
Other income increased approximately 32% for 1998 Fiscal Year as
compared to the 1997 Fiscal Year. Excluding Galveston which
sold its property on November 12, 1997, other income increased
approximately 36% primarily due to an increase in late charges
at two Local Partnerships.
Total expenses, excluding Galveston and repairs and maintenance,
remained fairly consistent with an increase of approximately 1%
for the 1998 Fiscal Year as compared to the 1997 Fiscal Year.
Repairs and maintenance increased approximately $194,000 for the
1998 Fiscal Year as compared to the 1997 Fiscal Year. Excluding
Galveston, such expenses increased approximately $400,000
primarily due to plumbing repairs, painting and cabinet and door
replacements at two Local Partnerships.
Forgiveness of indebtedness income of approximately $502,000 was
recorded in the 1998 Fiscal year. (See Note 11 Financial
Statements and Supplemental Data).
1997 vs 1996
Rental income decreased approximately 4% for the 1997 Fiscal
Year as compared to the 1996 Fiscal Year. Excluding McAdam
which sold its property on May 31, 1996 and Galveston which sold
its property on November 12, 1997, rental income increased less
than 1% primarily due to increases in occupancy at Sheridan.
Other income decreased approximately $271,000 for the 1997
Fiscal Year as compared to the 1996 Fiscal Year. Excluding
McAdam and Galveston, such income decreased approximately
$222,000 due to a decrease in income from funding of the
Breakeven Guarantee by the Local General Partner of Suncreek and
an overaccrual in 1996 of fire insurance proceeds at Triangle
Oaks.
A gain on sale of property in the amount of approximately
$1,379,000 was recorded in the 1997 Fiscal Year and forgiveness
of indebtedness income in the amounts of approximately
$3,630,000 was recorded in the 1997 Fiscal Year (see Notes 10
and 11 in Item 8. Financial Statements and Supplemental Data).
Total expenses, excluding McAdam and Galveston, and repairs and
maintenance, remained fairly consistent with a decrease of
approximately 1% for the 1997 Fiscal Year as compared to the
1996 Fiscal Year.
Repairs and maintenance increased approximately $136,000 for the
1997 Fiscal Year as compared to the 1996 Fiscal Year. Excluding
McAdam and Galveston, such expenses increased approximately
$350,000 primarily due to carpet replacement, roof repairs and
painting at two Local Partnerships, parking lot resurfacing at a
third Local Partnership and roof repairs, sidewalk paving and
general repairs at a fourth Local Partnership.
Administrative and management and interest expense decreased
approximately $402,000 and $1,049,000 for the 1997 Fiscal Year
as compared to the 1996 Fiscal Year. Excluding McAdam and
Galveston, such expenses remained fairly consistent with an
increase of approximately $109,000 and a decrease of
approximately $324,000, respectively.
Results of Operations of Certain Local Partnerships
Players Club at Fort Myers, Ltd. and Suntree at Fort Myers, Ltd.
Players Club at Fort Myers, Ltd. ("Players Club") and Suntree at
Fort Myers, Ltd. ("Suntree") have incurred operating losses and
cash flow deficits due to soft market conditions and reduced
occupancy levels. At March 25, 1999, Players Club and Suntree
have partners' deficiencies of approximately $5,011,000 and
$3,336,000, 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 Partnerships 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 unless an
agreement can be reached as discussed below. 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. 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 and the issuer with
regard to a permanent modification of the terms of the bonds,
including an extension of maturity of the bonds. Based on the
schedule and issuer approvals, it is now expected that such
modifications will close in the second quarter of 1999. The
forbearance agreement and its terms have been temporarily
extended pending closing of this permanent modification.
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. As of year-end 1998, 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 $0 and
$3,000 at March 25, 1999 and 1998, respectively. In the case of
Suntree, the minority interest balance was approximately $0 and
$7,000 at March 25, 1999 and 1998, respectively. Players Club's
net loss after minority interest amounted to approximately
$877,000, $829,000 and $559,000 for the 1998, 1997 and 1996
Fiscal Years, respectively. Suntree's net loss after minority
interest amounted to approximately $350,000, $567,000 and
$350,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Triangle/Oaks Limited Partnership
During the years ended December 31, 1998, 1997 and 1996, the
Local Partnership incurred losses of $1,035,346, $915,330 and
$551,907, respectively. In addition, at December 31, 1998,
accounts payable and accrued expenses excluding mortgage notes
payable exceed available cash by $660,343 and total liabilities
exceed total assets by $8,033,058. These factors among others
may indicate that the Local Partnership will be unable to
continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating
to the recoverability that might be necessary should the Local
Partnership be unable to continue as a going concern. The
Partnership has received a commitment from affiliates of the
Local General Partner to provide additional cash funding
anticipated to be $25,000 per month. During the 1998 Fiscal
Year, the Partnership advanced approximately $540,000 to the
Local Partnership. Approximately $3,325,000 and $2,735,000 was
outstanding at March 25, 1999 and 1998. Such amounts will be
voluntary loans.
The cash funds provided will assist the Local Partnership in
reducing accounts payable and accrued liabilities. In addition,
the cash funds will provide the Partnership an opportunity to
improve the property; thereby increasing occupancy and improving
performance.
The Partnership's investments in Triangle/Oaks Limited
Partnership ("Triangle/Oates") has been reduced to zero by prior
years' losses. The minority interest balance for Triangle/Oaks
was approximately $375,000 and $396,000 at March 25, 1999 and
1998, respectively. Triangle/Oaks net loss after minority
interest amounted to approximately $1,015,000, $897,000 and
$588,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Galveston - Stewarts Landing, Ltd.
On November 12, 1997, the property and the related assets and
liabilities of Galveston were sold to an unaffiliated third
party for $5,030,000 resulting in a gain in the amount of
$1,378,652. Galveston used $5,000,000 of the net proceeds to
settle the mortgage indebtedness and accrued interest thereon
which amounted to $8,629,807, resulting in forgiveness of
indebtedness income of $3,629,807.
McAdam Park - 336, Ltd.
On May 31, 1996, the property and the related assets and
liabilities of McAdam were sold to an unaffiliated third party
for $14,735,000 resulting in a gain in the amount of $6,108,426
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.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of
the General Partners. The affiliate of the General Partners have
upgraded their computer information systems to be year 2000
compliant and beyond. The year 2000 compliance issue concerns
the inability of a computerized system to accurately record dates
after December 31, 1999. The affiliate of the General Partners
recently underwent a conversion of their financial systems
applications and upgraded all of their non-compliant in-house
software and hardware inventory. The work stations that
experienced problems from the testing process were corrected with
an upgrade patch. The costs incurred by the affiliates of the
General Partner are not being charged to the Partnership. The
most likely worst case scenario that the General Partners face is
that computer operations will be suspended for a few days to a
week commencing on January 1, 2000. The Partnership contingency
plan is to have (i) a complete backup done on December 31, 1999
and (ii) both electronic and printed reports generated for all
critical data up to and including December 31, 1999.
In regard to third parties, the General Partners are in the
process of evaluating the potential adverse impact that could
result from the failure of material service providers to be year
2000 compliant. A detailed survey and assessment was sent to
material third parties in the fourth quarter of 1998. The
Partnership has received assurances from a majority of the
material service providers with which it interacts that they have
addressed the year 2000 issues and is evaluating these assurances
for their adequacy and accuracy. In cases where the Partnership
has not received assurances from third parties, it is initiating
further mail and/or phone correspondence. The Partnership relies
heavily on third parties and is vulnerable to the failures of
third parties to address their year 2000 issues. There can be no
assurance given that the third parties will adequately address
their issues.
Other
Management's Intentions
In view of the matters described in the preceding paragraphs,
recoverability of the Partnership's investment in the subsidiary
partnerships is dependent upon continued operations of the
subsidiary partnerships, which in turn is dependent upon the
subsidiary partnership's ability to meet financing requirements
on a continuing basis and to succeed in future operations.
Management of the Partnership intends to continue to support the
efforts of the Local General Partners of these subsidiary
partnerships to refinance or restructure mortgage indebtedness
and to provide consultation and advice in such matters as
required, however, there can be no assurance that such efforts
will be successful.
General
The Partnership's investment as a limited partner in the Local
Partnerships is subject to the risks incident to the management
and ownership of improved real estate. The Partnership's
investments also could be adversely affected by poor future
economic conditions generally, which, could increase vacancy
levels, rental payment defaults, and increased operating
expenses, any or all of which could threaten the financial
viability of one or more of the Local Limited Partnerships.
There are substantial risks associated with the operation of
Apartment Complexes benefiting from Advantaged Financing. These
include governmental regulations concerning tenant eligibility,
which may make it more difficult to rent apartments in the
complexes; difficulties in obtaining government approval for
rent increases; and limitations on the percentage of income
which low and moderate-income tenants may pay as rent.
The Local Partnerships are impacted by inflation in several
ways. Inflation allows for increases in rental rates generally
to reflect the impact of higher operating and replacement costs.
Inflation also affects the Local Partnerships adversely by
increasing operating costs, for example, for such items as fuel,
utilities and labor.
In view of the adverse operating results of certain of the Local
Partnerships as discussed above in this Item 7, recoverability
of a major portion of the Partnership's recorded assets is
dependent upon continued operations of the various Local
Partnerships, which in turn is dependent upon their ability to
meet financing requirements on a continued basis. This must be
achieved through continued work-out agreements and/or through
improved operations of the Local Partnerships.
There continues to be a number of requests for the list of
holders of limited partnership interests in limited partnerships
such as the Partnership. Often these requests are made by a
person who, only a short time before making the request,
acquired merely a small number of Limited Partnership Interests
in the Partnership and seeks the list for an improper purpose, a
purpose that is not in the best interest of the Partnership or
is harmful to the Partnership. In order to best serve and
protect the interests of the Partnership and all of its
investors, the General Partners have adopted a policy with
respect to requests for the Partnership's list of holders of
Limited Partnership Interests. This policy is intended to
protect investors from unsolicited and coercive offers to
acquire the interests of holders of Limited Partnership
Interests and does not limit any other rights the General
Partners may have under the Partnership Agreement or applicable
law.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Sequential
Page
(a) 1. Financial Statements
Independent Auditors' Report 18
Consolidated Balance Sheets at March 25, 1999
and 1998 45
Consolidated Statements of Operations for the Years
Ended March 25, 1999, 1998 and 1997 46
Consolidated Statements of Changes in Partners'
Deficit for the Years Ended March 25, 1999, 1998
and 1997 47
Consolidated Statements of Cash Flows for the Years
Ended March 25, 1999, 1998 and 1997 48
Notes to Consolidated Financial Statements 50
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Cambridge Advantaged Properties II
Limited Partnership and Subsidiaries
We have audited the consolidated balance sheets of Cambridge
Advantaged Properties II Limited Partnership and Subsidiaries as
of March 25, 1999 and 1998, and the related consolidated
statements of operations, changes in partners' deficit, and cash
flows for the years ended March 25, 1999, 1998 and 1997 (the
1998, 1997 and 1996 Fiscal Years, respectively). These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not
audit the financial statements for 11 subsidiary partnerships
whose (losses) income aggregated ($2,845,749), $2,252,981 and
($14,557) during the 1998, 1997 and 1996 Fiscal Years,
respectively, and whose assets constituted 99% of the
Partnership's assets at March 25, 1999 and 1998, presented in
the accompanying consolidated financial statements. The
financial statements of these subsidiary partnerships were
audited by other auditors whose reports thereon have been
furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for these subsidiary
partnerships, is based solely upon the reports of the other
auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits, and the reports of the
other auditors, the accompanying consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Cambridge Advantaged
Properties II Limited Partnership and Subsidiaries at March 25,
1999 and 1998, and the results of their operations, and their
cash flows for the years ended March 25, 1999, 1998 and 1997, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements of Cambridge
Advantaged Properties II Limited Partnership and Subsidiaries
have been prepared assuming that the consolidated entity will
continue as a going concern. As discussed in Notes 2 and 12,
the auditors of three (Fiscal 1998) subsidiary partnerships have
modified their reports due to the uncertainties of the
subsidiary partnerships' abilities to continue as going
concerns. These subsidiary partnerships' losses aggregated
$2,271,589, $2,340,047 and $1,478,861 for the 1998, 1997 and
1996 Fiscal Years, respectively, and their assets constituted
39% of the Partnership's assets at March 25, 1999 and 1998,
respectively. These matters raise substantial doubt about
Cambridge Advantaged Properties II Limited Partnership and
Subsidiaries' abilities to continue as a going concern.
Management's plans in regard to these matters are also described
in Note 12. The consolidated financial statements do not
include any adjustments that might result from the outcome of
these uncertainties.
TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI, LLP
New York, New York
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
March 25,
1999 1998
<S> <C> <C>
Property and equipment -
at cost, less accumulated
depreciation (Notes 2, 4 and 7) $ 67,909,812 $ 70,875,621
Cash and cash equivalents
(Notes 2 and 12) 1,449,846 1,011,604
Cash - restricted for tenants'
security deposits 583,583 563,247
Mortgage escrow deposits
(Notes 5 and 7) 2,476,406 1,815,521
Deferred costs, net of
accumulated amortization
(Notes 2 and 6) 2,027,363 2,142,743
Prepaid expenses and
other assets 258,296 432,170
Total assets $ 74,705,306 $ 76,840,906
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable
(Notes 7 and 10) $ 89,892,922 $ 91,209,333
Accounts payable,
accrued expenses and other
liabilities 7,434,059 6,179,587
Tenants' security deposits
payable 583,583 563,247
Due to general partners of
subsidiaries and their
affiliates 1,581,637 1,631,151
Due to general partners
and affiliates
(Note 8) 6,549,593 4,660,761
106,041,794 104,244,079
Minority interest
(Note 2) 4,626,130 4,911,145
Commitments and contingencies (Note 12)
Partners' deficit:
Limited Partner (35,285,445) (31,673,628)
General Partner (677,173) (640,690)
Total partners'
deficit (35,962,618) (32,314,318)
Total liabilities and
partners' deficit $ 74,705,306 $ 76,840,906
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended March 25,
1999 1998 1997*
<S> <C> <C> <C>
Revenues
Rental, net $16,886,576 $17,286,847 $17,942,395
Other 782,909 595,239 866,172
Gain on sale
of property
(Note 10) 0 1,378,652 6,108,426
Total revenues 17,669,485 19,260,738 24,916,993
Expenses
Administrative and
management 2,568,878 2,552,217 2,936,910
Administrative and
management-related
parties (Note 8) 1,517,990 1,515,834 1,661,940
Operating 1,636,671 1,698,501 1,700,813
Repairs and
maintenance 3,696,346 3,501,972 3,366,076
Taxes and
insurance 1,968,689 2,105,144 2,198,318
Interest 7,217,812 7,109,841 8,158,391
Depreciation and
amortization 3,254,885 3,455,677 3,723,813
Total expenses 21,861,271 21,939,186 23,746,261
(Loss) income before
minority interest and
extraordinary item (4,191,786) (2,678,448) 1,170,732
Minority interest in
(income) loss of
subsidiaries 41,717 (44,781) (124,886)
(Loss) income before
extraordinary item (4,150,069) (2,723,229) 1,045,846
Extraordinary item -
forgiveness of
indebtedness
income (Note 11) 501,769 3,629,807 5,161,583
Net (loss) income $ (3,648,300) $ 906,578 $ 6,207,429
(Loss) income before
extraordinary item -
limited partners $ (4,108,568) $ (2,695,997) $ 1,035,388
Extraordinary item -
limited partners 496,751 3,593,509 5,109,967
Net (loss) income -
limited partners $ (3,611,817) $ 897,512 $ 6,145,355
Number of limited
partnership units outstanding 7,150 7,150 7,150
Per limited partnership unit:
(Loss) income before
extraordinary item $ (575) $ (377) $ 145
Extraordinary item 69 502 715
Net (loss) income $ (506) $ 125 $ 860
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<CAPTION>
Limited General
Total Partners Partners
<S> <C> <C> <C>
Balance -
March 26, 1996 $(39,428,325) $(38,716,495) $(711,830)
Net income 6,207,429 6,145,355 62,074
Balance -
March 25, 1997 (33,220,896) (32,571,140) (649,756)
Net income 906,578 897,512 9,066
Balance -
March 25, 1998 (32,314,318) (31,673,628) (640,690)
Net loss (3,648,300) (3,611,817) (36,483)
Balance -
March 25, 1999 $(35,962,618) $(35,285,445) $(677,173)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Year Ended March 25,
1999 1998 1997
<S> <C> <C> <C>
Cash flows from
operating activities:
Net (loss) income $(3,648,300) $ 906,578 $ 6,207,429
Adjustments to
reconcile net (loss) income
to net cash provided by
operating activities:
Gain on sale of property 0 (1,378,652) (6,108,426)
Extraordinary item -
forgiveness of indebtedness (501,769) (3,629,807) (5,161,583)
Depreciation and amortization 3,254,885 3,455,677 3,723,813
Minority interest in
(loss) income of subsidiaries (41,717) 44,781 124,886
(Increase) decrease
in assets:
Cash-restricted for
tenants' security deposits (20,336) 9,377 (29,412)
Mortgage escrow deposits (690,945) 248,861 (664,035)
Prepaid expenses
and other assets 173,874 (5,279) (100,225)
Increase (decrease)
in liabilities:
Accounts payable,
accrued expenses and
other liabilities 1,254,472 396,554 2,017,692
Tenants' security
deposits payable 20,336 (9,377) 29,142
Increase in due to
general partners of
subsidiaries and
their affiliates 40,000 48,277 248
Decrease in due to
general partners
of subsidiaries
and their affiliates (146,013) (148,366) (29,377)
Due to general partners
and affiliates 1,888,832 856,112 979,087
Total adjustments 5,231,619 (111,842) (5,218,190)
Net cash provided by
operating activities 1,583,319 794,736 989,239
Cash flows from
investing activities:
Proceeds from the
sale of property 0 5,030,000 0
Acquisition of property
and equipment (84,876) (157,112) (436,268)
(Increase) decrease in
mortgage escrow deposits -
replacement reserves 30,060 (168,813) 520,459
Net cash (used in) provided by
investing activities (54,816) 4,704,075 84,191
Cash flows from
financing activities:
Proceeds from
mortgage notes payable 5,200,000 0 0
Principal payments of
mortgage notes payable (6,014,642) (5,591,258) (729,518)
(Decrease) increase in
minority interest (186,799) (129,885) 410,202
(Increase) decrease in
deferred costs (88,820) 8,567 (551,267)
Net cash used in
financing activities (1,090,261) (5,712,576) (870,583)
Net increase (decrease)
in cash and cash equivalents 438,242 (213,765) 202,847
Cash and cash equivalents
at beginning of year 1,011,604 1,225,369 1,022,522
Cash and cash equivalents
at end of year $ 1,449,846 $ 1,011,604 $ 1,225,369
Supplemental disclosure
of cash flows information:
Cash paid during the year
for interest $ 6,094,273 $ 6,866,054 $ 6,511,044
Supplemental disclosures
of noncash investing
and financing activities:
Acquisition of property and equipment
contributed by minority interest
shareholders $ 0 $ 0 $(2,000,000)
Increase in minority interest attributable
to accrued distributions to general partners
of subsidiaries 56,499 0 0
Forgiveness of indebtedness:
Decrease in mortgage
notes payable (501,769) (1,540,089) (10,000,000)
Issuance of mortgage
notes payable 0 0 6,800,000
Decrease in accounts
payable, accrued
expenses and other liabilities 0 (1,790,717) (1,320,280)
Decrease in due to selling partners 0 0 (641,303)
Decrease in due to general partners and
affiliates 0 (299,001) 0
Summarized below are the components
of the gain on sale of property:
Decrease in mortgage notes payable
satisfied by sales price 0 0 (14,685,000)
Decrease in property and equipment,
net of accumulated depreciation 0 3,769,541 9,522,260
Decrease in cash - restricted for tenants'
security deposits 0 0 58,386
Decrease in mortgage escrow deposits 0 0 123,873
(Increase) decrease in prepaid expenses
and other assets 0 (2,888) 62,391
Decrease in accounts payable, accrued
expenses and other liabilities 0 0 (85,456)
Decrease in tenants' security
deposits payable 0 0 (51,781)
Decrease in minority interest 0 (115,305) (1,053,099)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 1999
NOTE 1 - Organization
Cambridge Advantaged Properties II Limited Partnership (formerly
Hutton Advantaged Properties II Limited Partnership) ("the
Partnership") was formed pursuant to the laws of the State of
Delaware on June 25, 1985. The Partnership invests, as a
limited partner, in limited partnerships ("Local Partnerships",
"subsidiaries" and "subsidiary partnerships"), each of which
owns and operates residential housing developments, which
benefit from financing at rates below those otherwise available
from conventional lenders, made available through various
federal and state government programs or through the issuance of
tax-exempt bonds ("Advantaged Financings").
As of March 25, 1999, the Partnership holds an interest in 10
Local Partnerships which own 10 Apartment Complexes. Through
the fiscal year ended March 25, 1999, the properties and related
assets and liabilities owned by two Local Partnerships were sold
to unaffiliated third parties (see Note 10).
The general partners of the Partnership are Related Advantaged
Residential Associates Inc. (the "Related General Partner"), a
Delaware corporation and an affiliate of The Related Companies,
L.P. ("Related"), a New York limited partnership and Related and
Cambridge Associates Limited Partnership, a Delaware limited
partnership ("Related and Cambridge Associates" and together
with the Related General Partner, the "General Partners"). The
general partner of Related and Cambridge Associates is the
Related General Partner.
Pursuant to the public offering, which occurred from 1985
through 1986, the Partnership received $35,750,000 of gross
proceeds from 7,150 Limited Partnership Interests. No further
issuance of Limited Partnership Interests is anticipated.
The terms of the Partnership's Restated Agreement of Limited
Partnership (the "Limited Partnership Agreement") provide, among
other things, that, subject to certain exceptions, profits and
losses be shared 99% by the limited partners and 1% by the
general partners.
Effective May 19, 1995, the Partnership's name was changed from
Hutton Advantaged Properties II Limited Partnership to Cambridge
Advantaged Properties II Limited Partnership.
NOTE 2 - Summary of Significant Accounting Policies
a) Going Concern
As of March 25, 1999, several Local Partnerships are
experiencing financial difficulties. There is substantial doubt
about the Partnership's ability to continue as a going concern.
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 Local 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. There can be no assurance
that the Partnership will be successful in obtaining such
financing. The consolidated financial statements do not include
any adjustments that might result from the outcome of these
uncertainties. See Note 12 for management's intentions.
b) Basis of Consolidation
The consolidated financial statements include the accounts of
the Partnership and ten subsidiary partnerships (1998 Fiscal
Year), eleven subsidiary partnerships (1997 Fiscal Year) one of
which only has activity through the date of sale of its property
and the related assets and liabilities which occurred on
November 12, 1997 and twelve subsidiary partnerships (1996
Fiscal Year), one of which only has activity through the date of
sale of its property and the related assets and liabilities
which occurred on May 31, 1996. 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.
For financial reporting purposes, the Partnership's fiscal year
ends March 25. The Partnership's fiscal year ends March 25 in
order to allow adequate time for the subsidiaries' financial
statements to be prepared and consolidated. The books and
records of the Partnership are maintained on the accrual basis
of accounting, in accordance with generally accepted accounting
principles ("GAAP"). All subsidiaries have fiscal years ending
December 31. Accounts of subsidiaries have been adjusted for
intercompany transactions from January 1 through March 25.
All intercompany accounts and transactions have been eliminated
in consolidation.
Increases (decreases) in the capitalization of consolidated
subsidiaries attributable to minority interest arise from cash
contributions and cash distributions to the minority interest
partners.
The Partnership's investment in each subsidiary is equal to the
respective subsidiary partners' equity less minority interest
capital, if any. Losses attributable to minority interests
which exceed the minority interests' investment in a subsidiary
have been charged to the Partnership. Such losses aggregated
$15,000, $0 and $2,200, for the years ended March 25, 1999, 1998
and 1997 (the 1998, 1997 and 1996 Fiscal Years, respectively).
In consolidation, all subsidiary partnership losses are included
in the Partnership's capital account except for losses allocated
to minority interest capital.
c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks
and investments in short-term highly liquid instruments
purchased with original maturities of less than three months.
d) Property and Equipment
Property and equipment to be held and used are carried at cost
which includes the purchase price, acquisition fees and
expenses, construction period interest and any other costs
incurred in acquiring the properties. The cost of property and
equipment is depreciated over their estimated useful lives using
accelerated and straight-line methods. Expenditures for repairs
and maintenance are charged to expense as incurred; major
renewals and betterments are capitalized. At the time property
and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and
accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings. A loss on impairment of
assets is recorded when management estimates amounts recoverable
through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time,
property investments themselves are reduced to estimated fair
value (generally using discounted cash flows) when the property
is considered to be impaired and the depreciated cost exceeds
estimated fair value.
At the time management commits to a plan to dispose of assets,
said assets are adjusted to the lower of carrying amount or fair
value less costs to sell. These assets are classified as
property and equipment-held for sale and are not depreciated.
Through March 25, 1999, the Partnership has recorded
approximately $1,116,000 as a loss on impairment of assets.
e) Amortization
Deferred costs are being amortized over their respective periods
of benefit.
f) Income Taxes
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the
responsibility of the individual partners. For income tax
purposes, the Partnership has a fiscal year ending December 31
(Note 9).
g) Loss Contingencies
The Partnership records loss contingencies as a charge to income
when information becomes available which indicates that it is
probable that an asset has been impaired or a liability has been
incurred as of the date of the financial statements and the
amount of loss can be reasonably estimated.
h) Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 3 -Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments (all of which
are held for non-trading purposes) for which it is practicable
to estimate that value:
Cash and Cash Equivalents, Mortgage Escrow Deposits and Cash-
Restricted for Tenants' Security Deposits
The carrying amount approximates fair value.
Mortgage Notes Payable
The fair value of mortgage notes payable is estimated, where
practicable, based on the borrowing rate currently available for
similar loans.
<TABLE>
The estimated fair values of the Partnership's mortgage note
payable are as follows:
<CAPTION>
March 25, 1999 March 25, 1998
Carrying Carrying
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Mortgage Notes Payable for
which it is:
Practicable to estimate
fair value $87,398,061 $86,650,171 $87,892,564 $87,212,374
Not Practicable $ 2,494,861 * $ 3,316,769 *
*Management believes it is not practical to estimate the fair
value of the mortgage notes payable because mortgage programs
with similar characteristics are not currently available to the
partnerships.
</TABLE>
<TABLE>
Accounts Payable and Accrued Expenses
The estimated fair value of the Partnership's accounts payable
and accrued expenses which are different than carrying value are
as follows:
<CAPTION>
March 25, 1999 March 25, 1998
Carrying Carrying
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Accounts payable and accrued
expenses for which it is:
Practicable to estimate
fair value $2,953,097 $440,070 $2,437,624 $ 306,840
The carrying amount of other financial instruments that require
such disclosure approximates fair value.
</TABLE>
<TABLE>
NOTE 4 - Property and Equipment
The components of property and equipment and their estimated
useful lives are as follows:
<CAPTION>
March 25, Estimated
1999 1998 Useful Lives
<S> <C> <C> <C>
Land* $ 13,084,659 $ 13,084,659
Buildings and improvements 96,145,887 96,134,562 10-40 Years
Furniture and fixtures 5,395,391 5,321,840 5-10 Years
114,625,937 114,541,061
Less: Accumulated depreciation (46,716,125) (43,665,440)
$ 67,909,812 $ 70,875,621
</TABLE>
*For one subsidiary partnership, Suncreek, prior to April 1996
land was leased but no payment is required until certain cash
flow levels are achieved. No payments were required in the 1996
and 1995 Fiscal Years. In connection with Suncreek's
refinancing in April 1996, Suncreek amended the terms of its
partnership agreement with the Local General Partner to reflect
the elimination of the land lease together with all accrued and
unpaid land lease payments and the Local General Partner's
contribution to Suncreek of the underlying land. The land was
recorded at $2,000,000 which represents the estimation by
Suncreek's management of its fair market value as of the
contribution date.
Depreciation expense for the 1998, 1997 and 1996 Fiscal Years
amounted to $3,050,685, $3,276,844 and $3,557,303, respectively.
During the 1997 and 1996 Fiscal Years, there was a decrease in
accumulated depreciation in the amount of approximately
$2,736,000 and $6,173,000 due to the sale of Galveston and
McAdam, respectively (see Note 10).
<TABLE>
NOTE 5 - Mortgage Escrow Deposits
Mortgage escrow deposits consist of the following:
<CAPTION>
March 25,
1999 1998
<S> <C> <C>
Reserve for replacements $ 1,016,492 $1,046,552
Real estate taxes,
insurance and other 1,459,914 768,969
$ 2,476,406 $1,815,521
</TABLE>
<TABLE>
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of
amortization are as follows:
<CAPTION>
March 25 Period
1999 1998 (Months)
<S> <C> <C> <C>
Organization fee (a)(b) $ 102,709 $ 102,709 60
Bond and financing fees 2,995,526 3,023,626 65-240
3,098,235 3,126,335
Less: Accumulated
amortization (1,070,872) (983,592)
$2,027,363 $2,142,743
</TABLE>
(a) Represents fees to the Partnership's general partners and
affiliates.
(b) Payable from capital contributions of the Partnership to
the subsidiary partnerships.
Amortization of deferred costs for the 1998, 1997 and 1996
Fiscal Years aggregated $204,200, $178,833 and $166,510,
respectively.
During the 1998 and 1997 Fiscal Years, respectively,
approximately $117,000 and $37,000 of fully amortized deferred
costs were written off.
NOTE 7 - Mortgage Notes Payable
The mortgage notes are payable in aggregate monthly installments
of approximately $529,000, including principal and interest at
rates varying from 3.9% to 10.5% per annum, through 2030. Each
subsidiary partnership's mortgage note payable is collateralized
by the land and buildings of the respective subsidiary
partnership, the assignment of certain subsidiary partnership's
rents and leases and is without further recourse.
Annual principal payment requirements for each of the next five
fiscal years are as follows:
Year Ending December 31 Amount
1999 $ 813,962
2000 2,239,324
2001 8,573,523
2002 632,618
2003 771,902
Thereafter 76,861,593
$89,892,922
The mortgage agreements require monthly deposits to replacement
reserves of approximately $26,000 and monthly deposits to escrow
accounts for real estate taxes, hazard and mortgage insurance
and other (see Note 5).
Sheridan Square Associates of Lawton L.P.
On September 17, 1998, Sheridan Square Associates of Lawton
Limited Partnership ("Sheridan") obtained financing from
NationsBank, N.A. in the amount of $5,200,000. The new loan
bears interest at 6.820%, and requires monthly payments of
$33,969, which include interest, for a period of ten years. The
maturity date of the loan is October 1, 2008, when all remaining
principal, including accrued interest is due. The loan is
secured by a first lien on real estate, including an assignment
of rents and profits. As a condition of the new financing,
Sheridan agreed to subordinate all remaining debt, including any
payment of interest and principal, except as defined in the loan
agreement.
Proceeds of the financing were used to pay off the existing First
and Second Mortgage due to Lexington Mortgage in the amount of
$4,293,868 and $91,407, respectively. In addition, loan proceeds
were used to establish certain reserve accounts, related loan
costs and a reduction of the Promissory Note due to Whitney
Sheridan in the amount of $821,908.
During 1993, the First Mortgage Loan to Lexington Mortgage was
restructured, with the former mortgage note being amended and
restated. Since the total future cash payment of all new debt
was greater than the carrying amount of the old debt, the amount
of the original note was not adjusted and no gain was recognized.
The current interest rate was adjusted using the interest method.
The effective interest rate represented the discount rate that
equates the present value of the future cash payments with the
carrying amount of the debt. Due to the new financing and the
proceeds used to retire the First Mortgage Loan to Lexington
Mortgage, the remaining contingent payments that existed at
September 30, 1998, net of related costs, no longer existed and
was recognized as extraordinary gain-forgiveness of indebtedness
income in the amount of $501,769.
NOTE 8 - Related Party Transactions
One of the general partners of the Partnership, Related and
Cambridge Associates, has a 1% interest as a special limited
partner in each of the subsidiary partnerships.
Whitney Management Corp., an affiliate of the Related General
Partner, is the managing agent of four of the properties. On
November 12, 1997, the property and the related assets and
liabilities of Galveston, one of the properties, was sold to an
unaffiliated third party (see Note 10).
<TABLE>
Fees incurred to related parties for the years ended March 25,
1999, 1998 and 1997 were as follows:
<CAPTION>
Year Ended March 25
1999 1998 1997
<S> <C> <C> <C>
Partnership management
fees (a) $ 644,526 $ 654,750 $ 765,000
Expense reimbursement (b) 89,257 80,385 82,927
Property management
fees incurred
to affiliates of the
General Partners (c) 538,959 547,671 582,597
Local administrative fee (d) 7,500 7,500 10,000
Total general and
administrative
General Partners 1,280,242 1,290,306 1,440,524
Property management
fees incurred
to affiliates of
the subsidiary partnerships'
general partners (c) 237,748 225,528 221,416
Total general
and administrative
related parties $1,517,990 $1,515,834 $1,661,940
</TABLE>
(a) After all other expenses of the Partnership are paid, an
annual partnership management fee of up to .5% of invested
assets is payable to the Partnership's general partners and
affiliates. Partnership management fees 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 $2,497,000 and
$1,877,000 were accrued and unpaid as of March 25, 1999 and
1998, 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 approximately $626,000 and $537,000
were accrued and unpaid as of March 25, 1999 and 1998,
respectively.
(c) Property management fees paid by subsidiary partnerships
amounted to $835,445, $830,247 and $872,604 for the 1998, 1997
and 1996 Fiscal Years, respectively. Of these fees, $548,709,
$421,184 and $437,151 were incurred to affiliates of the
subsidiary partnerships. In addition, $538,959, $547,671 and
$582,597 were incurred to affiliates of the Related General
Partner for the 1998, 1997 and 1996 Fiscal Years, respectively.
Of such amounts incurred to affiliates of the Related General
Partner, $310,961, $195,656 and $215,735 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 from each subsidiary
partnership.
Related and Cambridge Associates, a General Partner of the
Partnership, is a special limited partner of each Local
Partnership, with a 1% interest in profits, losses and
distributions. Distributions aggregating $1,955 and $1,531 were
made to Related and Cambridge Associates for the 1998 and 1997
Fiscal Years.
C/R Florida Associates, L.P., a Delaware limited partnership
("C/R Florida"), is the general partner of Players Club and
Suntree, with a 1% interest in profits, losses and
distributions. Related Advantaged Residential Associates Inc.
is the general partner of C/R Florida.
During September 1988, the Partnership obtained a $793,867 loan
from an affiliate of the Related General Partner. This loan
accrues interest at the bank's prime rate plus 1% and is
repayable from all available cash sources. These funds,
together with $2,545,223 of Partnership funds, were advanced by
the Partnership to complete the Triangle/Oaks refinancing and to
provide adequate working capital for the local partnership.
During 1998 the Partnership advanced $540,000 to the Local
Partnership. Approximately $3,325,000 and $2,735,000 was
outstanding at March 25, 1999 and 1998 (see Note 12).
As of March 25, 1999, an affiliate of the Related General
Partner advanced $310,926 to the Partnership, none of which was
advanced in the 1998, 1997 or 1996 Fiscal Years. These funds
were advanced by the Partnership to Sheridan to provide working
capital. During the 1998 Fiscal Year, $115,020 was repaid and
during the 1997 Fiscal Year, $74,587 was repaid. Such note is
noninterest bearing.
As of March 25, 1997, $606,445 of advances previously made by
the Partnership and Whitney Management Corporation, an affiliate
of the Local General Partner, to Galveston was forgiven as a
result of a sale of property and the related assets and
liabilities of Galveston (see Note 10). These funds had been
advanced to provide working capital to Galveston. Such note is
noninterest bearing.
In 1996, $473,007 of advances previously made to McAdam in
connection with the restructuring of their mortgage debt was
forgiven as a result of a sale of the property and the related
assets and liabilities of McAdam (see Note 10). Although these
advances were treated as voluntary loans as defined in the
subsidiary partnership agreement, by separate agreement with the
mortgagee, these advances were noninterest bearing. The loan
was subordinate to the mortgage notes and repayment was expected
only from resale of the Property or refinancing of the mortgage
debt.
As of March 25, 1999, the Partnership had advanced Apple Creek
approximately $968,000, $115,000 of which was advanced during
the 1998 Fiscal Year.
As of March 25, 1999, the Partnership had advanced Players Club
$190,000, which was advanced during 1998 Fiscal Year.
<TABLE>
Due to local general partners and affiliates at March 25, 1999
and 1998 consists of the following:
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Operating deficit loans (*) $1,376,062 $1,522,075
Management and other
operating advances 149,076 109,076
$1,525,138 $1,631,151
</TABLE>
(*) Operating deficit loans include three and five loans
payable to local general partners and affiliates, respectively,
which are unsecured, non-interest bearing and are payable out of
available surplus cash, of the respective subsidiary
partnership, or at the time of sale or refinancing.
<TABLE>
NOTE 9 - Income Taxes
A reconciliation of the financial statement net loss to the
income tax loss for the Partnership and its consolidated
subsidiaries is as follows:
<CAPTION>
Year Ended December 31
1998 1997 1996
<S> <C> <C> <C>
Financial statement net
(loss) income $(3,648,300) $ 906,578 $6,207,429
Difference between
depreciation expense
recorded for financial
reporting purposes and
the accelerated cost
recovery system utilized
for income tax purposes (796,677) (1,159,303) (1,174,962)
Gain on sale of property 0 420,103 2,672,002
Extraordinary item -
forgiveness of indebtedness (545,532) 108,797 (64,000)
Debt restructuring (289,710) 332,796 (318,479)
Other 84,592 (213,259) 238,085
(Loss) income as shown
on the income tax return
for the calendar
year ended $(5,195,627) $ 395,712 $7,560,075
</TABLE>
NOTE 10 - Sale of Properties
On November 12, 1997, the property and the related assets and
liabilities of Galveston were sold to an unaffiliated third
party for $5,030,000 resulting in a gain in the amount of
$1,378,652. Galveston used $5,000,000 of the net proceeds to
settle the mortgage indebtedness and accrued interest thereon
which amounted to $8,629,807, resulting in forgiveness of
indebtedness income of $3,629,807.
On May 31, 1996, the property and the related assets and
liabilities of McAdam were sold to an unaffiliated third party
for $14,735,000 resulting in a gain in the amount of $6,108,426
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.
<TABLE>
NOTE 11 - Extraordinary Item - Forgiveness of Indebtedness
Income
Extraordinary items-forgiveness of indebtedness consist of the
following:
<CAPTION>
Year Ended March 25
1999 1998 1997
<S> <C> <C> <C>
Sheridan $ 501,769 $ 0 $ 0
Galveston 0 3,629,807 0
McAdam 0 0 1,320,280
Suncreek 0 0 3,841,303
$ 501,769 $3,629,807 $5,161,583
</TABLE>
Sheridan
On September 17, 1998, Sheridan obtained financing of its first
mortgage debt. As a result of the refinancing, the previous
mortgage including past due interest was discounted and
extraordinary gain of $501,769 was realized (See Note 7).
Galveston
On November 12,1997, the property and the related assets and
liabilities of Galveston were sold to an unaffiliated third
party for $5,030,000. For financing reporting purposes,
forgiveness of indebtedness income of $3,629,807 was realized
(see Note 10).
McAdam
On May 31, 1996, the property and the related assets and
liabilities of McAdam were sold to an unaffiliated third party
for $14,685,000. For financing reporting purposes, forgiveness
of indebtedness income of $1,320,280 was realized (see Note 10).
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.
NOTE 12 - Commitments and Contingencies
a) Events of Default and Going Concern
The financial statements for three subsidiary partnerships have
been prepared assuming each will continue as a going concern.
The circumstances described below, as well as matters discussed
in Note 2, raise substantial doubt about the Partnership and its
consolidated subsidiaries' ability to continue as a going
concern. The auditors for these three subsidiary partnerships
modified their reports on the 1998 Fiscal Year financial
statements due to the uncertainty of each subsidiary
partnership's ability to continue as a going concern. The
three subsidiary partnerships are Players Club, Suntree and
Triangle/Oaks.
In view of the matters described in the preceding paragraph,
recoverability of the Partnership's investment in the subsidiary
partnerships is dependent upon continued operations of the
subsidiary partnerships, which in turn are dependent upon the
ability of each subsidiary partnership to meet financing
requirements on a continuing basis and to succeed in future
operations. The financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of
liabilities that might be necessary should the subsidiary
partnerships be unable to continue in existence.
Management of the Partnership intends to continue to support the
efforts of the Local General Partners of these subsidiary
partnerships to refinance or restructure mortgage indebtedness
and to provide consultation and advice in such matters as
required.
The following is a description of each subsidiary's events of
default and going concern issues, as well as the courses of
action taken by the respective local general partners to enable
the subsidiary partnerships to achieve such goals.
Players Club at Fort Myers, Ltd. and Suntree at Fort Myers, Ltd.
Players Club at Fort Myers, Ltd. ("Players Club") and Suntree at
Fort Myers, Ltd. ("Suntree") have incurred operating losses and
cash flow deficits due to soft market conditions and reduced
occupancy levels. At March 25, 1999, Players Club and Suntree
have partners' deficiencies of approximately $5,011,000 and
$3,336,000, 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 Partnerships 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 unless an
agreement can be reached as discussed below. 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. 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 and the issuer with
regard to a permanent modification of the terms of the bonds,
including an extension of maturity of the bonds. Based on the
schedule and issuer approvals, it is now expected that such
modifications will close in the second quarter of 1999. The
forbearance agreement and its terms have been temporarily
extended pending closing of this permanent modification.
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. As of year-end 1998, 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 $0 and
$3,000 at March 25, 1999 and 1998, respectively. In the case of
Suntree, the minority interest balance was approximately $0 and
$7,000 at March 25, 1999 and 1998, respectively. Players Club's
net loss after minority interest amounted to approximately
$877,000, $829,000 and $559,000 for the 1998, 1997 and 1996
Fiscal Years, respectively. Suntree's net loss after minority
interest amounted to approximately $350,000, $567,000 and
$350,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Triangle/Oaks Limited Partnership
During the years ended December 31, 1998, 1997 and 1996, the
Local Partnership incurred losses of $1,035,346, $915,330 and
$551,907, respectively. In addition, at December 31, 1998,
accounts payable and accrued expenses excluding mortgage notes
payable exceed available cash by $660,343 and total liabilities
exceed total assets by $8,033,058. These factors among others
may indicate that the Local Partnership will be unable to
continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating
to the recoverability that might be necessary should the Local
Partnership be unable to continue as a going concern. The
partnership has received a commitment from affiliates of the
Local General Partner to provide additional cash funding
anticipated to be $25,000 per month.
The cash funds provided will assist the Local Partnership in
reducing accounts payable and accrued liabilities. In addition,
the cash funds will provide the Partnership an opportunity to
improve the property; thereby increasing occupancy and improving
performance.
The Partnership's investments in Triangle/Oaks Limited
Partnership ("Triangle/Oaks") has been reduced to zero by prior
years' losses. The minority interest balance for Triangle/Oaks
was approximately $375,000 and $396,000 at March 25, 1999 and
1998, respectively. Triangle/Oaks net loss after minority
interest amounted to approximately $1,015,000, $897,000 and
$588,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
b) Uninsured Cash and Cash Equivalents
The Partnership maintains cash and cash equivalents in various
banks. Accounts at each bank are guaranteed by the Federal
Deposit Insurance Corporation ("FDIC") up to $100,000. As of
March 25, 1999, uninsured cash and cash equivalents approximated
$887,000.
c) Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of
the General Partners. The affiliate of the General Partners have
upgraded their computer information systems to be year 2000
compliant and beyond. The year 2000 compliance issue concerns
the inability of a computerized system to accurately record dates
after December 31, 1999. The affiliate of the General Partners
recently underwent a conversion of their financial systems
applications and upgraded all of their non-compliant in-house
software and hardware inventory. The work stations that
experienced problems from the testing process were corrected with
an upgrade patch. The costs incurred by the affiliates of the
General Partner are not being charged to the Partnership. The
most likely worst case scenario that the General Partners face is
that computer operations will be suspended for a few days to a
week commencing on January 1, 2000. The Partnership contingency
plan is to have (i) a complete backup done on December 31, 1999
and (ii) both electronic and printed reports generated for all
critical data up to and including December 31, 1999.
In regard to third parties, the General Partners are in the
process of evaluating the potential adverse impact that could
result from the failure of material service providers to be year
2000 compliant. A detailed survey and assessment was sent to
material third parties in the fourth quarter of 1998. The
Partnership has received assurances from a majority of the
material service providers with which it interacts that they have
addressed the year 2000 issues and is evaluating these assurances
for their adequacy and accuracy. In cases where the Partnership
has not received assurances from third parties, it is initiating
further mail and/or phone correspondence. The Partnership relies
heavily on third parties and is vulnerable to the failures of
third parties to address their year 2000 issues. There can be no
assurance given that the third parties will adequately address
their issues.
d) Other
The Partnership is subject to risks incident to potential losses
arising from the management and ownership of improved real
estate. The Partnership can also be affected by poor economic
conditions generally, however no more than 30% of the properties
are located in any single state. There are also substantial
risks associated with owning properties receiving government
assistance, for example the possibility that Congress may not
appropriate funds to enable the U.S. Department of Housing and
Urban Development ("HUD") to make rental assistance payments.
HUD also restricts annual cash distributions to partners based
on operating results and a percentage of the owners' equity
contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the
period that the subsidy agreements are in existence, without
HUD's approval. Furthermore, there may not be market demand for
apartments at full market rents when the rental assistance
contracts expire.
Each subsidiary partnership with restricted assets had
liabilities in excess of assets at December 31, 1998.
<PAGE>
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers.
Since November 25, 1997, the General Partners of the Partnership
have been Related Advantaged Residential Associates Inc.,
("Related General Partner"), and Related and Cambridge
Associates Limited Partnership, both of which are affiliates of
The Related Companies, L.P. ("Related"). The general partner of
Related is The Related Realty Group, Inc., of which Stephen M.
Ross is president, director and a stockholder. The General
Partners will manage and control the affairs of the Partnership
directly and engage other affiliates of Related, to assist them
in connection herewith.
Certain information concerning the directors and executive
officers of the Related General Partner (which is also the
general partner of Related and Cambridge, the other General
Partner of the Partnership) is set forth below.
On November 25, 1997, the Related General Partner and one of the
then other general partners of the Partnership, Advantaged
Housing Associates, Inc. ("AHA"), consummated a Purchase
Agreement pursuant to which the Related General Partner purchased
AHA's general partner interest in the Partnership (the
"Transfer"). In addition to the Transfer, the Related General
Partner also acquired AHA's general partner interest in Related
and Cambridge Associates which is also the special limited
partner of the Partnership.
Related Advantaged Residential Associates Inc.
Related Advantaged Residential Associates Inc. was incorporated
in Delaware on January 25, 1985. The directors and executive
officers of the Related General Partner are as follows:
STEPHEN M. ROSS, 59, is president, director and a shareholder of
The Related Realty Group, Inc., the general partner of The
Related Companies, L.P. He graduated from the University of
Michigan School of Business Administration with a bachelor of
science degree and from Wayne State University School of Law
with a Juris Doctor degree. Mr. Ross then received a master of
laws degree in taxation from New York University School of Law.
He joined the accounting firm of Coopers & Lybrand in Detroit as
a tax specialist and later moved to New York, where he worked
for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed the
predecessor of The Related Companies, L.P. in 1972 to develop,
manage, finance and acquire subsidized and conventional
apartment developments.
J. MICHAEL FRIED, 55, is president, a director and a principal
shareholder of Related Capital Corporation ("Capital"), a real
estate finance and acquisition affiliate of the General Partner.
In that capacity, he is the chief executive officer of Capital,
and is responsible for initiating and directing all of Capital's
syndication, finance, acquisition and investor reporting
activities. Mr. Fried practiced corporate law in New York City
with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974
until he joined Capital in 1979. Mr. Fried graduated from
Brooklyn Law School with a Juris Doctor degree, magna cum laude;
from Long Island University Graduate School with a master of
science degree in psychology; and from Michigan State University
with a bachelor of arts degree in history.
D. GARRY MUNSON, 54, graduated from Cornell University with a
bachelor of science degree in industrial and labor relations and
from the University of Pennsylvania Wharton School of Finance
with a Masters in business administration. Mr. Munson founded
in 1977, and is currently President and part owner of, Whitney
Management Company, and Munson and Company. Whitney Management
Company manages residential real estate projects. Munson and
Company provides consulting services to the residential real
estate industry. Mr. Munson joined Capital in September 1985 as
head of the Acquisition Department.
ALAN P. HIRMES, 44, has been a Certified Public Accountant in
New York since 1978. Prior to joining Capital in October 1983,
Mr. Hirmes was employed by Weiner & Co., certified public
accountants. Mr. Hirmes is also a Vice President of Capital.
Mr. Hirmes graduated from Hofstra University with a bachelor of
arts degree.
STUART J. BOESKY, 43, practiced real estate and tax law in New
York City with the law firm of Shipley & Rothstein from 1984
until February 1986 when he joined Capital. From 1983 to 1984,
Mr. Boesky practiced law with the Boston law firm of Kaye
Fialkow Richard & Rothstein and from 1978 to 1980, was a
consultant specializing in real estate at the accounting firm of
Laventhol & Horwath. Mr. Boesky graduated from Michigan State
University with a bachelor of arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a
master of laws degree in taxation from Boston University School
of Law.
GLENN F. HOPPS, 36, joined Related in December, 1990, and prior
to that date was employed by Marks Shron & Company and
Weissbarth, Altman and Michaelson, certified public accountants.
Mr. Hopps graduated from New York State University at Albany
with a Bachelor of Science Degree in Accounting.
TERESA WICELINSKI, 33, joined Related in June 1992, and prior to
that date was employed by Friedman, Alpren & Green, certified
public accountants. Ms. Wicelinski, graduated from Pace
University with a Bachelor of Arts Degree in Accounting.
Item 11. Executive Compensation.
The Partnership has no officers or directors. The Partnership
does not pay or accrue any fees, salaries or other forms of
compensation to directors or officers of the General Partners
for their services. However, under the terms of the Amended and
Restated Agreement of Limited Partnership of the Partnership,
the General Partners and their affiliates are entitled to
receive compensation from the Partnership in consideration of
certain services rendered to the Partnership by such parties.
In addition, the General Partners collectively hold a 1%
interest in all profits, losses and distributions attributable
to sales and refinancings. Certain directors and officers of
the General Partners receive compensation from the General
Partners and their affiliates for services performed for various
affiliated entities which may include services performed for the
Partnership. See Note 9 to the Financial Statements, which is
incorporated by reference.
Tabular information concerning salaries, bonuses and other types
of compensation payable to executive officers has not been
included in this annual report. As noted above, the Partnership
has no executive officers. The levels of compensation payable
to the General Partners and/or their affiliates is limited by
the terms of the Amended and Restated Agreement of Limited
Partnership and may not be increased therefrom on a
discretionary basis.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The General Partners own all of the outstanding general
partnership interests in the Partnership. The General Partners
have a 1% interest in all profits, losses and distributions of
the Partnership from operations and a subordinated 15% interest
in such items from sale or refinancing proceeds. Except as
aforesaid, no person is known to own beneficially in excess of
5% of the outstanding partnership interests.
<TABLE>
At March 25, 1999, security ownership by the General Partners
and their affiliates is as listed:
<CAPTION
Percentage of
Outstanding
Name of General Partner
Title of Class Beneficial Ownership Amount Interest
<S> <C> <C> <C>
General Partnership Related Advantaged
Interest in the Residential $16 33.0%
Partnership Associates Inc.
Related and Cambridge
Associates
Limited Partnership 4 67.0%
100.0%
</TABLE>
Item 13. Certain Relationships and Related Transactions.
The Partnership has and will continue to have certain
relationships with the General Partners and their affiliates, as
discussed in Item 11 and also Note 8 to the Financial Statements
in Item 8 above. However, there have been no direct financial
transactions between the Partnership and the directors and
officers of the General Partners.
Related and Cambridge Associates is a special limited partner of
each Local Partnership, with a 1% interest in profits, losses
and distributions from such Local Partnerships. As discussed in
Item 1, Related and Cambridge Associates has been admitted to
the Local Partnerships for the purpose of monitoring the Local
Partnerships and exercising certain rights under the Local
Partnership Agreements on behalf of the Partnership. Related
and Cambridge Associates, an affiliate of the Related General
Partner, is also the general partner of four of the properties.
The Related General Partner and the Cambridge General Partner
are the general partners of C/R Florida, which is the Local
General Partner of Players Club and Suntree. The Cambridge
General Partner and certain officers, directors and shareholders
of the Related General Partner are the limited partners of C/R
Florida.
Related Service Group, an affiliate of the Related General
Partner, provided property management services to three Local
Partnerships through July 1997, for which it was paid its usual
and customary management fees, aggregating approximately
$168,000 and $308,000 during the 1997 and 1996 Fiscal Years,
respectively. Commencing August 1, 1997 the properties are
managed by Related Management Company, an affiliate of the
Related General Partner and were paid approximately $311,000 and
$115,000 during the 1998 and 1997 Fiscal Years, respectively.
Whitney Management Corp., an affiliate of the Related General
Partner, is the managing agent of four of the properties.
Property management fees earned by Whitney Management Corp. were
approximately $228,000, $265,000 and $275,000 for the 1998, 1997
and 1996 Fiscal Years, respectively. On November 12, 1997, the
property and the related assets and liabilities of Galveston,
one of the properties, was sold to an unaffiliated third party
for $5,030,000 (see Note 10).
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
Sequential
Page
(a) 1. Financial Statements
Independent Auditors' Report 18
Consolidated Balance Sheets at March 25, 1999
and 1998 45
Consolidated Statements of Operations
for the Years Ended March 25, 1999, 1998
and 1997 46
Consolidated Statements of Changes in Partners'
Deficit for the Years Ended March 25, 1999, 1998
and 1997 47
Consolidated Statements of Cash Flows
for the Years Ended March 25, 1999, 1998
and 1997 48
Notes to Consolidated Financial Statements 50
The financial statements of the Local Partnerships
are not included separately herein
(a) 2. Financial Statements Schedules
Independent Auditors' Report on Financial
Statement Schedules 72
Schedule III - Real Estate and Accumulated
Depreciation 74
All other schedules have been omitted because the
required information is included in the financial
statements and notes thereto, or they are not
applicable or not required.
(a) 3. Exhibits
(3A) Form of Amended and Restated Agreement and
Certificate of Limited Partnership of the
Registrant**
(3B) Amended Certificate of Limited Partnership of the
Registrant, as filed with the Secretary of State of
the State of Delaware**
(10A) Form of Escrow Agreement**
(22) Subsidiaries of the Registrant 73
(27) Financial Data Schedule (filed herewith) 76
** Incorporated by reference to exhibits filed with
Amendment No. 1 to Cambridge Advantaged Properties II
L.P.'s Registration Statement Form S-11 Registration
File No. 2-98773.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
<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
Dated: June 9, 1999
By: /s/ J. Michael Fried
J. Michael Fried,
President and Director
By: RELATED AND CAMBRIDGE ASSOCIATES,
LIMITED PARTNERSHIP,
a General Partner
By: Related Advantaged Residential
Associates Inc.,
its General Partner
Dated: June 9, 1999
By: /s/ J. Michael Fried
J. Michael Fried,
President and Director
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf by the registrant and in the capacities and on the
dates indicated.
Signature Title Date
President and Chief Executive Officer June 9, 1999
(Principal executive officer) and
/s/ J. Michael Fried Director of Related Advantaged
J. Michael Fried Residential Associates, Inc.
Senior Vice President (principal June 9, 1999
/s/ Alan P. Hirmes financial officer) of
Alan P. Hirmes Related Advantaged Residential
Associates, Inc.
Treasurer (principal accounting officer) June 9, 1999
/s/ Glenn F. Hopps of Related Advantaged Residential
Glenn F. Hopps Associates, Inc.
/s/ Stephen M. Ross Director of Related Advantaged June 9, 1999
Stephen M. Ross Residential Associates, Inc.
Chairman of the Board, President, Chief June 9, 1999
Executive Officer (principal executive
/s/J. Michael Fried officer) and Director of Advantaged
J. Michael Fried Housing Associates, Inc.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Cambridge Advantaged Properties II
Limited Partnership and Subsidiaries
In connection with our audits of the consolidated financial
statements of Cambridge Advantaged Properties II Limited
Partnership and Subsidiaries included in this Form 10-K as
presented in our opinion dated June 3, 1999 on pages 18 and 19,
which is based in part on the reports of other auditors,
we have also audited supporting Schedule III - March 25, 1999.
In our opinion, and based on the reports of other auditors
(certain of which were modified due to the uncertainty of
these subsidiary partnerships' abilities to continue in existence),
this consolidated schedule presents fairly, when read in conjunction
with the related consolidated financial statements, the
financial data required to be set forth therein.
The accompanying consolidated financial statements of Cambridge
Advantaged Properties II Limited Partnership and Subsidiaries
have been prepared assuming that the consolidated entity will
continue as a going concern. As discussed in Notes 2 and 12,
the auditors of three (Fiscal 1998) subsidiary partnerships have
modified their reports due to the uncertainties of the
subsidiary partnerships' abilities to continue as going
concerns. These subsidiary partnerships' losses aggregated
$2,271,589, $2,340,047 and $1,478,861 for the 1998, 1997 and
1996 Fiscal Years, respectively, and their assets constituted
39% of the Partnership's assets at March 25, 1999 and 1998,
respectively. These matters raise substantial doubt about
Cambridge Advantaged Properties II Limited Partnership and
Subsidiaries' abilities to continue as a going concern.
Management's plans in regard to these matters are also described
in Note 12. The consolidated financial statements do not
include any adjustments that might result from the outcome of
these uncertainties.
TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI, LLP
New York, New York
<PAGE>
Exhibit 22
Subsidiaries of Registrant State of Organization
Triangle/Oaks Limited Partnership MA
Sheridan Square Associates of Lawton OK
Apple Creek Associates of Denton, Ltd TX
Woodridge, Ltd CA
Players Club at Fort Myers, Ltd CA
Suntree at Fort Myers, Ltd CA
The Harbours Associates VA
Brookwood Apartments L.P. KS
Westwind II Associates VA
Suncreek-268, Ltd OR
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 25, 1999
<CAPTION>
Cost Capitalized
Initial Cost to Partnership Subsequent to
Subsidiary Partnership's Buildings and Acquisition:
Residential Property Encumbrances Land Improvements Improvements
<S> <C> <C> <C> <C>
(2) Triangle/Oaks
Limited Partnership $19,370,000 $1,412,511 $17,812,831 $4,964,469
(4) Sheridan Square
Associates of Lawton 7,686,994 1,093,520 8,228,192 469,491
(5) Apple Creek Associates of
Denton, Ltd 7,644,993 398,000 8,517,595 (406,171)
(5) Galveston-Stewart's
Landing, Ltd (a)(g) 0 1,112,405 6,462,225 (7,574,630)
(2) Players Club at
Fort Myers, Ltd 9,885,845 3,204,124 10,013,904 (2,178,666)
(2) Suntree at
Fort Myers, Ltd 7,500,000 2,098,029 8,748,887 (2,185,943)
(3) Woodridge, Ltd 8,100,000 1,368,929 7,072,779 541,593
(6) The Harbours
Associates 13,009,908 1,449,985 15,323,441 (255,982)
(6) Westwind II
Associates 4,432,362 322,817 4,919,687 750,207
(3) Brookwood
Apartments L.P. 5,462,820 368,827 6,803,294 111,517
(1) Suncreek-268, Ltd 6,800,000 0 (b) 9,170,112 4,487,958
(1) McAdam Park-336, Ltd (f) 0 0 (e) 11,027,615 (11,027,615)
$89,892,922 $12,829,147 $114,100,562 $(12,303,772)
<CAPTION>
Gross Amount at which Carried At Close of Period
Buildings and
Subsidiary Partnership's Residential Property Land Improvements Total
<S> <C> <C> <C>
(2) Triangle/Oaks Limited Partnership $ 1,882,423 $ 22,307,388 $ 24,189,811
(4) Sheridan Square Associates of Lawton 1,093,520 8,697,683 9,791,203
(5) Apple Creek Associates of Denton, Ltd 398,000 8,111,424 8,509,424
(5) Galveston-Stewart's Landing, Ltd (a)(g) 0 0 0
(2) Players Club at Fort Myers, Ltd 2,668,486 8,370,876 11,039,362
(2) Suntree at Fort Myers, Ltd 1,667,738 6,993,235 8,660,973
(3) Woodridge, Ltd 1,232,864 7,750,437 8,983,301
(6) The Harbours Associates 1,449,985 15,067,459 16,517,444
(6) Westwind II Associates 322,817 5,669,894 5,992,711
(3) Brookwood Apartments L.P. 368,826 6,914,812 7,283,638
(1) Suncreek-268, Ltd 2,000,000 (b) 11,658,070 13,658,070
(1) McAdam Park-336, Ltd (f) 0 (e) 0 0
$13,084,659 $101,541,278 $114,625,937
<CAPTION>
Life on which
Depreciation in
Latest Income
Subsidiary Partnership's Accumulated Year of Date Statement is
Residential Property Depreciation Construction Acquired Computed(c)(d)
<S> <C> <C> <C> <C>
(2) Triangle/Oaks
Limited Partnership $ 9,029,014 (c) 9/85 40 Years
(4) Sheridan Square
Associates of Lawton 4,070,747 (c) 10/85 30 Years
(5) Apple Creek Associates
of Denton, Ltd 3,972,473 (c) 10/85 30 Years
(5) Galveston-Stewart's
Landing, Ltd (a)(g) 0 (c) 10/85 15-30 Years
(2) Players Club at
Fort Myers, Ltd 3,886,312 (c) 10/85 27.5 Years
(2) Suntree at Fort Myers, Ltd 3,169,716 (c) 10/85 30 Years
(3) Woodridge, Ltd 3,765,977 (c) 10/85 10-30 Years
(6) The Harbours Associates 7,063,018 (c) 11/85 30 Years
(6) Westwind II Associates 2,691,130 (c) 12/85 30 Years
(3) Brookwood
Apartments L.P. 3,148,476 (c) 12/85 30 Years
(1) Suncreek-268, Ltd 5,919,262 (c) 12/85 27.5 Years
(1) McAdam Park-336, Ltd (f) 0 (c) 12/85 27.5 Years
$46,716,125
(a) The total loss on impairment of assets in the amount of $1,116,378 is included
in Costs Capitalized Subsequent to Acquisition. See Note 4 in Item 8, Financial
Statements and Supplementary Data.
(b) Property was subject to a 99 year land lease expiring 2084. In connection with
Suncreek's refinancing in April 1996, Suncreek amended the terms of its
partnership agreement with the general partner to reflect the elimination of the
land lease together with all accrued and unpaid land lease payments and the
general partner's contribution to Suncreek of the underlying land. The land was
recorded at $2,000,000 which represents the estimation by Suncreek's management of
its fair market value as of the contribution date (see Note 7 to financial
statements in Item 8).
(c) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight-line method over the estimated useful lives
determined by the Partnership date of acquisition.
(d) Furniture and fixtures, included in buildings and improvements, are depreciated
primarily by the straight-line method over the estimated useful lives ranging from
5 to 15 years.
(e) Land was leased from the former general partner. During December 1991, the
bankruptcy court approved the termination of said lease and transfer of title of
the property to McAdam Park-336.
(f) On May 31, 1996, the property and the related assets and liabilities of McAdam
Park-336 were sold to an unaffiliated third party. (See Note 10 in Item 8.
Financial Statements and Supplemental Data).
(g) On November 12, 1997, the property and the related assets and liabilities of
Galveston-Stewart Landing, Ltd. were sold to an unaffiliated third party. (See
Note 10 in Item 8. Financial Statements and Supplemental Data).
Geographic Locations: (1) California, (2) Florida, (3) Kansas, (4) Oklahoma, (5)
Texas, (6) Virginia.
<CAPTION>
Cost of Property and Equipment
Year Ended March 25,
1999 1998 1997
<S> <C> <C> <C>
Balance at beginning of period $114,541,061 $120,889,451 $134,148,347
Additions during period:
Improvements 84,876 157,112 2,436,268
Depreciation expense
Reductions during period:
Dispositions 0 (6,505,502) (15,695,164)
Balance at end of period $114,625,937 $114,541,061 $120,889,451
<CAPTION>
Accumulated Depreciation
Year Ended March 25,
1999 1998 1997
<S> <C> <C> <C>
Balance at beginning of period $43,665,440 $43,124,557 $45,740,159
Additions during period:
Improvements
Depreciation expense 3,050,685 3,276,844 3,557,303
Reductions during period:
Dispositions 0 (2,735,961) 6,172,905)
Balance at end of period $46,716,125 $43,665,440 $43,124,557
At the time the local partnerships were acquired by Cambridge Advantaged Properties
II Limited Partnership, the entire purchase price paid by Cambridge Advantaged
Properties II Limited Partnership was pushed down to the local partnerships as
property and equipment with an offsetting credit to capital. Since the projects were
in the construction phase at the time of acquisition, the capital accounts were
insignificant at the time of purchase. Therefore, there are no material differences
between the original cost basis for tax and GAAP.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted
from the financial statements for Cambridge Advantaged Properties
II Limited Partnership and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<CIK> 0000771996
<NAME> Cambridge Advantaged Properties II Limited Partnership
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-25-1999
<PERIOD-START> MAR-26-1998
<PERIOD-END> MAR-25-1999
<CASH> 1,449,846
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,318,285
<PP&E> 114,625,937
<DEPRECIATION> 46,716,125
<TOTAL-ASSETS> 74,705,306
<CURRENT-LIABILITIES> 16,148,872
<BONDS> 89,892,922
0
0
<COMMON> 0
<OTHER-SE> (31,336,488)
<TOTAL-LIABILITY-AND-EQUITY> 74,705,306
<SALES> 0
<TOTAL-REVENUES> 17,669,485
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,643,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,217,812
<INCOME-PRETAX> (4,150,069)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 501,769
<CHANGES> 0
<NET-INCOME> (3,648,300)
<EPS-BASIC> (506)
<EPS-DILUTED> 0
</TABLE>
