<PAGE>
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, 2000
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 MADISON AVENUE, NEW YORK, NEW YORK 10022
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(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 65
Page 1 of 72
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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, another General Par
tner 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 (the "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 passive 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.
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The Partnership is in the process of winding up its operations as it continues
to sell its assets; therefore investment objectives (1), (2) and (4) are no
longer applicable. The Partnership will no longer be generating passive losses
due to the sale of properties. However, passive losses previously allocated to
limited partners (to the extent unused) are available to offset the income
expected to be generated from the sales effort.
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, below.
Further information concerning the Advantaged Financing programs in which the
Local Partnerships participate can be found in Item 2, Properties, below.
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 25% 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, 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 "Limited Partners").
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%
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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, 2000, one Local Partnership is 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, below, for further discussion.
SALES OF UNDERLYING PROPERTIES/LOCAL PARTNERSHIP INTERESTS
GENERAL
The Partnership is currently in the process of winding up its operations and
disposing of its investments. It is anticipated that this process will take a
number of years. As of March 25, 2000, the Partnership has disposed of five of
its twelve original investments. One additional investment is listed for sale
and the General Partner anticipates that the six remaining investments will be
listed for sale by December 31, 2001. There can be no assurance as to when the
Partnership will dispose of its last remaining investments or the amount of
proceeds which may be received. However, based on the historical operating
results of the Local Partnership and the current economic conditions including
changes in tax laws, it is unlikely that the proceeds from such sales will be
sufficient to return the limited partners original investment.
PLAYERS CLUB AT FORT MYERS, LTD. AND SUNTREE AT FORT MYERS, LTD.
On December 29, 1999, the property and related assets and liabilities of Players
and Suntree were sold to an unaffiliated third party for approximately
$19,350,000 resulting in a gain of approximately $5,642,000 and forgiveness of
indebtedness income of approximately $2,929,000 as a result of forgiveness of
interest on mortgage debt and advances from the General Partners.
GALVESTON-STEWART'S 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 approximately $1,379,000. Galveston used $5,000,000 of the
net proceeds to settle the mortgage indebtedness and accrued interest thereon
which amounted to approximately $8,630,000, resulting in forgiveness of
indebtedness income of approximately $3,630,000.
BROOKWOOD APARTMENTS L.P.
On March 24, 2000, the property and related assets and liabilities of Brookwood
were sold to an unaffiliated third party for $7,300,000, resulting in a gain of
approximately $3,189,000.
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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 of the Partnership (the "Partnership Agreement").
Item 2. Properties.
As of March 25, 2000, the Partnership holds a 98% Limited Partnership Interest
in 7 Local Partnerships each of which owns an Apartment Complex. The original
underlying properties in five of the Local Partnerships in which the Partnership
had an interest have been sold. See Item 1, Business-Sales of Underlying
Properties, below. 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 (1), Kansas (1), 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 2,172. 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 to the financial
statements included herein.
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<TABLE>
<CAPTION>
LOCAL PARTNERSHIP SCHEDULE
Percentage of Units
Occupied At December 31,
Name and Location of Government --------------------------------
Property (Number of Units) Assistance(a) 1999 1998 1997 1996 1995
-------------------------- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Triangle/Oaks Limited Partnership Tax exempt
Jacksonville, FL (520) financing 97% 92% 84% 84% 91%
Sheridan Square Associates of Lawton Conventional
Lawton, OK (276) financing 92% 92% 93% 87% 88%
Apple Creek Associates of Denton, Ltd Tax exempt
Denton, TX (308) financing 93% 96% 88% 96% 97%
Galveston-Stewart's Landing, Ltd
Galveston, TX (216) Sec.221(d)(4) (c) (c) (c) 88% 96%
Woodridge, Ltd Tax exempt
Lenexa, KS (248) financing 94% 98% 98% 99% 95%
Players Club at Fort Myers, Ltd Tax exempt
Ft. Myers, FL (288) financing (d) 77% 83% 79% 90%
Suntree at Fort Myers, Ltd Tax exempt
Ft. Myers, FL (240) financing (d) 97% 98% 90% 94%
The Harbours Associates Tax exempt
Newport News, VA (396) financing 97% 99% 92% 95% 92%
Brookwood Apartments L.P.
Wichita, KS (216) (e) Sec.221(d)(4) 80% 94% 97% 97% 97%
Westwind II Associates Tax exempt (c)
Roanoke, VA (156) financing 90% 95% 98% 98% 97%
McAdam Park-336, Ltd Tax exempt
Palmdale, CA (336) financing (b) (b) (b) (b) 50%
Suncreek-268, Ltd Tax exempt
Sacramento, CA (268) financing 97% 95% 96% 96% 93%
</TABLE>
(a) The Partnership invested in Local Partnerships owning existing Apartment
Complexes which receive either Federal or State subsidies. HUD, through Federal
Housing Administration ("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.
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2) RENTAL SUBSIDIES. Many of the tenants in HUD insured projects receive some
form of rental assistance payments.
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).
(d) On December 28, 1999, the property and the related assets and liabilities of
Players Club at Fort Myers, Ltd. (the "Players Club") and Suntree at Fort Myers,
Ltd. (the "Suntree") were sold to an unaffiliated third party (see Item 7,
below).
(e) On March 24, 2000, the property and the related assets and liabilities of
Brookwood Apartments, L.P. (the "Brookwood") 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.
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PART II
Item 5. Market for the Registrant's Limited Partnership Interests and Related
Security Holder Matters.
As of March 25, 2000, 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, 2000, 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 Agreement. 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, below). 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.
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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.
<TABLE>
<CAPTION>
Year Ended March 25,
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OPERATIONS 2000 1999 1998 1997 1996
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<S> <C> <C> <C> <C> <C>
Revenues $ 23,781,306 $ 17,669,485 $ 19,260,738 $ 24,916,993 $ 19,483,652
Operating expenses (21,081,216) (21,861,271) (21,939,186) (23,746,261) (25,288,830)
Loss on impairment of 0 0 0 0 (1,116,378)
Minority interest 833,691 41,717 (44,781) (124,886) (42,752)
----------- ----------- ----------- ----------- -----------
Income (loss) before ex- 3,533,781 (4,150,069) (2,723,229) 1,045,846 (6,964,308)
traordinary item
Extraordinary item -
forgiveness of indebtedness 2,929,229 501,769 3,629,807 5,161,583 6,416,231
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 6,463,010 $ (3,648,300) $ 906,578 $ 6,207,429 $ (548,077)
=========== =========== =========== =========== ===========
Number of limited partner-
ship units outstanding 7,150 7,150 7,150 7,150 7,150
=========== =========== =========== =========== ===========
Per Limited Partnership Unit:
Income (loss) before ex- $ 489 $ (575) $ (377) $ 145 $ (964)
traordinary item
Extraordinary item 406 69 502 715 888
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 895 $ (506) $ 125 $ 860 $ (76)
=========== =========== =========== =========== ===========
<CAPTION>
Year Ended March 25,
------------------------------------------------------------------------
FINANCIAL POSITION 2000 1999 1998 1997 1996
------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total assets $ 58,450,241 $ 74,705,306 $ 76,840,906 $ 84,212,602 $ 94,239,730
=========== =========== =========== =========== ===========
Long-term obligations $ 71,887,945 $ 89,892,922 $ 91,209,333 $ 98,340,680 $116,955,198
=========== =========== =========== =========== ===========
Total liabilities $ 83,712,700 $106,041,794 $104,244,079 $112,321,944 $130,038,490
=========== =========== =========== =========== ===========
Minority interest $ 4,237,149 $ 4,626,130 $ 4,911,145 $ 5,111,554 $ 3,629,565
=========== =========== =========== =========== ===========
</TABLE>
During the years ended March 25, 1996 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 1996 and 2000 due to forgiveness of indebtedness at Harbours, Westwind II,
Woodbridge, Triangle/Oaks Partnerships, Players Club and Suntree. 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, 1998 and 2000,
total assets decreased primarily due to depreciation and the sale of properties
(see Note 10 in Item 8, Financial Statements and Supplementary Data, below),
partially offset by net additions to property and equipment. Long-term
obligations and total liabilities decreased for the years ended March 25, 1997,
1998 and 2000 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,
below). Total liabilities increased for the year ended March 25, 1999 primarily
due to the ad-
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vances 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.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
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, 2000, the properties and the
related assets and liabilities owned by five 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 $1,139,000 of such advances to Local Partnerships were forgiven as
a result of the above sales. As of March 25, 2000, the Partnership owned
interests in 7 Local Partnerships.
Cash of the Partnership and its consolidated subsidiaries increased by
approximately $55,000 during the fiscal year ended March 25, 2000 (the "1999
Fiscal Year"). This increase is attributable to net proceeds from the sale of
properties ($19,064,000), a decrease in mortgage escrow deposits-replacement
reserves ($68,000) and an increase in minority interest ($445,000) which
exceeded cash used by operating activities ($2,180,000), principal payments of
mortgage notes payable ($17,095,000), acquisition of property and equipment
($223,000) and an increase in deferred costs ($25,000). Included in the
adjustments to reconcile the net income to cash flow used in operating
activities is forgiveness of indebtedness income ($2,929,000), gain on sale of
property ($5,642,000) and depreciation and amortization ($3,334,000).
The Partnership's primary source of funds are the cash distributions from
operations and cash distributions from sales 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 1999 Fiscal Year, the year ended March 25, 1999 (the
"1998 Fiscal Year") and the year ended March 25, 1998 (the "1997 Fiscal Year"),
such distributions amounted to approximately $596,000, $192,000 and $150,000,
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 $2,950,000, $2,859,000 and $2,060,000 as
of March 25, 2000, 1999 and 1998, respectively. In addition, certain fees and
expense reimbursements owed to the General Partners amounting to approximately
$3,745,000, $3,122,000 and $2,414,000 were accrued and unpaid as of March 25,
2000, 1999 and 1998, respectively. Without the General Partners' advances and
continued accrual and without payment of certain fees and expense
reimbursements, the Partnership will not be in the position to meet its
obligations. The General Partner, have continued advancing and allowing the
accrual without payment of these amounts, but are under no obligation to do so.
INFORMATION REGARDING DISPOSITION
For a discussion of the sale of properties in which the Partnership owns direct
and indirect interest, see Note 10 to the Financial Statements.
For a discussion of contingencies affecting certain Local Partnerships, see
Results of Operations of Certain Local Partnerships, below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
Local Partnerships, the resolution of the existing contingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way except the Partnership would lose its investment in
the properties and any potential proceeds from the sale or refinancing of the
properties.
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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 and 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, 2000, 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 1999, 1998 and 1997 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 1999, 1998 and 1997 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 income (loss) for the 1999, 1998 and 1997 Fiscal Years totaled $6,463,010,
$(3,648,300) and $906,578, respectively.
Excluding 1999 and 1997 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.
-12-
<PAGE>
1999 VS. 1998
Rental income increased approximately 2% for the 1999 Fiscal Year as compared to
the 1998 Fiscal Year. Excluding Suntree and Players Club which sold their
properties on December 28, 1999, rental income increased approximately 4%
primarily due to rental sale increases.
Other income increased by approximately 24% for the 1999 Fiscal Year as compared
to 1998. Excluding Suntree and Players Club, other income increased
approximately 20% primarily due to an increase in application, laundry and pet
fees at two Local Partnerships.
Total expenses, excluding Suntree and Players Club, remained fairly consistent
with a decrease of approximately 2% for the 1999 Fiscal Year as compared to the
1998 Fiscal Year.
Taxes and insurance decreased approximately $389,000 for the 1999 Fiscal Year as
compared to the 1998 Fiscal Year. Excluding Suntree and Players Club, taxes and
insurance decreased approximately $76,000.
A gain on sale of properties of approximately $5,642,000 and forgiveness of
indebtedness income of approximately $2,929,000 was recorded in the 1999 Fiscal
Year (see Notes 10 and 11, respectively, in Item 8, Financial Statements and
Supplemental Data, below).
1998 VS. 1997
Rental income decreased approximately 2% for the 1998 Fiscal Year as compared to
the 1997 Fiscal Year. Excluding Galveston, 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,
below).
RESULTS OF OPERATIONS OF CERTAIN LOCAL PARTNERSHIPS
TRIANGLE/OAKS LIMITED PARTNERSHIP
During the years ended December 31, 1999, 1998 and 1997, the Local Partnership
incurred losses of $291,361, $1,035,346 and $915,330, respectively. In addition,
at December 31, 1999, accounts payable and accrued expenses excluding mortgage
notes payable exceed available cash by $143,163 and total liabilities exceed
total assets by $8,365,625. 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. Management's intent is to dispose of all
the property and equipment of the Local Partnership by the end of the year 2000.
During the 1999 Fiscal Year, the Partnership advanced approximately $240,000 to
the Local Partnership. Approximately $3,565,000 and
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<PAGE>
$3,325,000 was outstanding at March 25, 2000 and 1999, respectively. Such
amounts will be voluntary loans.
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 $369,000 and $375,000 at
March 25, 2000 and 1999, respectively. Triangle/Oaks net loss after minority
interest amounted to approximately $301,000, $1,015,000 and $897,000 for the
1999, 1998 and 1997 Fiscal Years, respectively.
PLAYERS CLUB AT FORT MYERS, LTD. AND SUNTREE AT FORT MYERS, LTD.
On December 28, 1999, the property and related assets and liabilities of Players
and Suntree were sold to an unaffiliated third party for approximately
$19,350,000 resulting in a gain of approximately $5,642,000 and forgiveness of
indebtedness income of approximately $2,900,000 as a result of forgiveness of
interest on mortgage debt and advances from the General Partners.
GALVESTON-STEWART'S 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 approximately $1,379,000. Galveston used $5,000,000 of the
net proceeds to settle the mortgage indebtedness and accrued interest thereon
which amounted to approximately $8,630,000, resulting in forgiveness of
indebtedness income of approximately $3,630,000.
BROOKWOOD APARTMENTS L.P.
On March 24, 2000, the property and related assets and liabilities of Brookwood
were sold to an unaffiliated third party for $7,300,000, resulting in a gain of
approximately $3,189,000.
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.
-14-
<PAGE>
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
-15-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Sequential
Page
----------
(a) 1. Financial Statements
Independent Auditors' Report 17
Consolidated Balance Sheets at March 25, 2000 and 1999 44
Consolidated Statements of Operations for the Years Ended
March 25, 2000, 1999 and 1998 45
Consolidated Statements of Changes in Partners' Deficit for the
Years Ended March 25, 2000, 1999 and 1998 46
Consolidated Statements of Cash Flows for the Years Ended
March 25, 2000, 1999 and 1998 47
Notes to Consolidated Financial Statements 49
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<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, 2000 and
1999, and the related consolidated statements of operations, changes in
partners' deficit, and cash flows for the years ended March 25, 2000, 1999 and
1998 (the 1999, 1998 and 1997 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 10 subsidiary
partnerships whose income (losses) aggregated $7,164,359, ($2,845,749) and
$2,252,981 during the 1999, 1998 and 1997 Fiscal Years, respectively, and whose
assets constituted 99% of the Partnership's assets at March 25, 2000 and 1999,
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, 2000 and 1999,
and the results of their operations, and their cash flows for the years ended
March 25, 2000, 1999 and 1998, in conformity with generally accepted accounting
principles.
-17-
<PAGE>
The Partnership is currently in the process of winding up its operations and
disposing of its investments. It is anticipated that this process will take a
number of years.
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 one (Fiscal 1999) subsidiary partnership have
modified their report due to the uncertainty of the subsidiary partnership's
ability to continue as a going concern. This subsidiary partnership's loss
aggregated $306,986, $1,035,345 and $915,330 for the 1999, 1998 and 1997 Fiscal
Years, respectively, and their assets constituted 26% and 21% of the
Partnership's assets at March 25, 2000 and 1999, respectively. These matters
raise substantial doubt about Cambridge Advantaged Properties II Limited
Partnership and Subsidiaries' ability 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
June 2, 2000
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<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Triangle/Oaks Limited Partnership
We have audited the accompanying balance sheets of TRIANGLE/OAKS LIMITED
PARTNERSHIP (a Massachusetts Limited Partnership) as of December 31, 1999 and
1998, and the related statement of operations, partners' equity/(deficit) and
cash flows for the years then ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of TRIANGLE/OAKS LIMITED
PARTNERSHIP as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 9, the
Partnership is experiencing difficulty in generating sufficient cash flow to
meet its obligations and sustain its operations, which raises substantial doubt
about its ability to continue as a going concern at December 31, 1999.
Management's plans in regard to these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, Missouri
January 29, 2000
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<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Triangle/Oaks Limited Partnership
We have audited the accompanying balance sheets of TRIANGLE/OAKS LIMITED
PARTNERSHIP (a Massachusetts Limited Partnership) as of December 31, 1998 and
1997, and the related statement of operations, partners' equity/(deficit) and
cash flows for the years then ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of TRIANGLE/OAKS LIMITED
PARTNERSHIP as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 9, the
Partnership is experiencing difficulty in generating sufficient cash flow to
meet its obligations and sustain its operations, which raises substantial doubt
about its ability to continue as a going concern at December 31, 1998.
Management's plans in regard to these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, Missouri
January 31, 1999
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<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Sheridan Square Associates of Lawton,
We have audited the accompanying balance sheets of SHERIDAN SQUARE ASSOCIATES OF
LAWTON, (a Oklahoma Limited Partnership) as of December 31, 1999 and 1998, and
the related statements of operations, changes in partners' equity (deficit), and
cash flows for the years then ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of SHERIDAN SQUARE ASSOCIATES OF
LAWTON as of December 31, 1999 and 1998, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, MO
January 21, 2000
-21-
<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Sheridan Square Associates of Lawton
We have audited the accompanying balance sheets of SHERIDAN SQUARE ASSOCIATES OF
LAWTON, (a Oklahoma Limited Partnership) as of December 31, 1998 and 1997, and
the related statements of operations, changes in partners' equity/(deficit), and
cash flows for the years then ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of SHERIDAN SQUARE ASSOCIATES OF
LAWTON as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, MO
January 25, 1999
-22-
<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Apple Creek Associates of Denton, Ltd.
We have audited the accompanying balance sheets of APPLE CREEK ASSOCIATES OF
DENTON, LTD., (a Texas Limited Partnership) as of December 31, 1999 and 1998,
and the related statements of operations, statements of changes in partners'
equity/(deficit), and statements of cash flows for the years then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
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, the financial statements referred to above present fairly, in
all material respects, the financial position of APPLE CREEK ASSOCIATES OF
DENTON, LTD. as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, MO
January 21, 2000
-23-
<PAGE>
[DICKEY & WOLF, LLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Apple Creek Associates of Denton, Ltd.
We have audited the accompanying balance sheets of APPLE CREEK ASSOCIATES OF
DENTON, LTD., (a Texas Limited Partnership) as of December 31, 1998 and 1997,
and the related statements of operations, statements of changes in partners'
equity/(deficit), and statements of cash flows for the years then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
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, the financial statements referred to above present fairly, in
all material respects, the financial position of APPLE CREEK ASSOCIATES OF
DENTON, LTD. as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
/S/ DICKEY & WOLF, LLC
Certified Public Accountants
Harrisonville, MO
January 25, 1999
-24-
<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Galveston-Stewart's Landing, Ltd.
We have audited the accompanying balance sheet of GALVESTON-STEWART'S LANDING,
LTD. (a Texas Limited Partnership) as of December 31, 1997, and the related
statements of operations, changes in partners' equity/(deficit) and cash flows
for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GALVESTON STEWART'S LANDING,
LTD. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity to generally accepted accounting
principles.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, MO
January 28, 1998
-25-
<PAGE>
[DICKEY & WOLF, LLC letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Woodridge, Ltd.
We have audited the accompanying balance sheets of WOODRIDGE, LTD. (a California
Limited Partnership) as of December 31, 1999 and 1998, and the related
statements of operations, statements of changes in partners' equity/(deficit),
and statements of cash flows for the years then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audits.
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, the financial statements referred to above present fairly, in
all material respects, the financial position of WOODRIDGE, LTD. as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, MO
January 21, 2000
-26-
<PAGE>
[DICKEY & WOLF, LLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Woodridge, Ltd.
We have audited the accompanying balance sheet of WOODRIDGE, LTD., (a California
Limited Partnership) as of December 31, 1998 and 1997, and the related
statements of operations, partners' equity/(deficit) and cash flows for the year
then ended. 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 audit.
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, the financial statements referred to above present fairly, in
all material respects, the financial position of WOODRIDGE, LTD. as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Dickey & Wolf, LLC
Certified Public Accountants
Harrisonville, MO
January 25, 1999
-27-
<PAGE>
[Reznick Fedder & Silverman letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Players Club at Fort Myers, Ltd.
We have audited the accompanying balance sheet of Players Club at Fort Myers,
Ltd. as of December 31, 1998, and the related statements of operations,
partners' deficit and cash flows for each of the two years ended December 31,
1999. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Players Club at Fort Myers,
Ltd. as of December 31, 1999 and 1998, and the results of its operations, the
changes in partners' deficit and its cash flows for each of the two years ended
December 31, 1999 in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Boston, Massachusetts
February 14, 2000
-28-
<PAGE>
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Players Club at Fort Myers, Ltd.
We have audited the accompanying balance sheets of Players Club at Fort Myers,
Ltd. as of December 31, 1998 and 1997, and the related statements of operations,
partners' deficit and cash flows for the years then ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Players Club at Fort Myers,
Ltd. as of December 31, 1998 and 1997, and the results of its operations,
changes in partners' deficit and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has incurred operating losses, cash flow
deficits and low occupancy levels which raises substantial doubt about the
Partnership's ability to continue as a going concern. In addition, the general
partner's operating deficit guarantee has expired and there is no further
obligation to continue to fund operating deficits. Management's plans in regard
to these matters are also described in Note B. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets or amounts and classifications of liabilities that might be
necessary should the Partnership be unable to continue in existence.
/s/ Reznick Fedder & Silverman
Boston, Massachusetts
February 4, 1999
-29-
<PAGE>
[Reznick Fedder & Silverman letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners
Suntree at Fort Myers, Ltd.
We have audited the accompanying balance sheet of Suntree at Fort Myers, Ltd. as
of December 31, 1998, and the related statements of operations, partners'
deficit and cash flows for each of the years ended December 31, 1999 and 1998.
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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Suntree at Fort Myers, Ltd. as
of December 31, 1998, and the results of its operations, and its cash flows for
each of the years ended December 31, 1999 and 1998 in conformity with generally
accepted accounting principles.
/s/ Reznick Fedder & Silverman
Boston, Massachusetts
February 4, 2000
-30-
<PAGE>
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Suntree at Fort Myers, Ltd.
We have audited the accompanying balance sheets of Suntree at Fort Myers, Ltd.
as of December 31, 1998 and 1997, and the related statements of operations,
partners' deficit and cash flows for the years then ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Suntree at Fort Myers, Ltd. as
of December 31, 1998 and 1997, and the results of its operations, and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has incurred operating losses, cash flow
deficits and low occupancy levels which raises substantial doubt about the
Partnership's ability to continue as a going concern. In addition, the general
partner's operating deficit guarantee has expired and there is no further
obligation to continue to fund operating deficits. Management's plans in regard
to these matters are also described in Note B. The financial statements do not
include any adjustments relating the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Partnership be unable to continue in existence.
/s/ Reznick Fedder & Silverman
Boston, Massachusetts
February 4, 1999
-31-
<PAGE>
[BDO SEIDMAN, LLP LETTERHEAD]
Independent Auditors' Report
To the Partners of
The Harbours Associates
We have audited the accompanying balance sheet of The Harbours Associates, VHDA
Project No. 95-0759, (a limited partnership) as of December 31, 1999, and the
related statements of profit and loss, partners' deficit and cash flows for the
year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Harbours Associates as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Richmond, Virginia
February 7, 2000
-32-
<PAGE>
[BDO SEIDMAN, LLP LETTERHEAD]
Independent Auditors' Report
To the Partners of
The Harbours Associates
We have audited the accompanying balance sheet of The Harbours Associates, VHDA
Project No. 95-0759 (a limited partnership), as of December 31, 1998, and the
related statements of profit and losses, partners' deficit and cash flows for
the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Harbours Associates at
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Richmond, Virginia
February 11, 1999
-33-
<PAGE>
[BDO SEIDMAN, LLP LETTERHEAD]
Report of Independent Certified Public Accountants'
To the Partners of
The Harbours Associates
We have audited the accompanying balance sheet of The Harbours Associates, VHDA
Project No. 95-0759 (a limited partnership), as of December 31, 1997, and the
related statements of profit and loss, partners' deficit and cash flows for the
year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Harbours Associates at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Richmond, Virginia
February 11, 1998
-34-
<PAGE>
[GEORGE, BOWERMAN & NOEL, P.A. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Partners
Brookwood Apartments, L.P.
(A Kansas Limited Partnership)
Wichita, Kansas
We have audited the accompanying balance sheet of Brookwood Apartments, L.P. (A
Kansas Limited Partnership) as of December 31, 1999, and the related statements
of operations, partners' capital (deficit) and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements reflect certain
reorganization adjustments of the Partnership on a "push-down" basis. However,
in connection with the reorganization, the Partnership has not discounted
certain debt which, in our opinion, should be discounted and has capitalized
certain deferred financing costs which, in our opinion, should have been written
off in order to conform with generally accepted accounting principles. If these
additional reorganization adjustments had been made, deferred financing costs
and mortgage note payable would have been reduced by $244,708 in the
accompanying balance sheet. These departures from generally accepted accounting
principles do not have a material effect on the results of operations or cash
flows of Brookwood Apartments, L.P. (A Kansas Limited Partnership) for the year
ended December 31, 1999.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Brookwood
Apartments, L.P. (A Kansas Limited Partnership) for the year ended December 31,
1999 and its financial position at December 31, 1999 in conformity with
generally accepted accounting principles.
//s/ George, Bowerman & Noel, P.A.
Wichita, Kansas
February 11, 2000
-35-
<PAGE>
[George, Bowerman & Noel, P.A. letterhead]
INDEPENDENT AUDITORS' REPORT
The Partners
Brookwood Apartments, L.P.
(A Kansas Limited Partnership)
Wichita, Kansas
We have audited the accompanying balance sheet of Brookwood Apartments, L.P. (A
Kansas Limited Partnership) as of December 31, 1998, and the related statements
of operations, partners' capital (deficit) and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements reflect certain
reorganization adjustments of the Partnership on a "push-down" basis. However,
in connection with the reorganization, the Partnership has not discounted
certain debt which, in our opinion, should be discounted and has capitalized
certain deferred financing costs which, in our opinion, should have been written
off in order to conform with generally accepted accounting principles. If these
additional reorganization adjustments had been made, deferred financing costs
and mortgage note payable would have been reduced by $259,602 in the
accompanying balance sheet. These departures from generally accepted accounting
principles do not have a material effect on the results of operations or cash
flows of Brookwood Apartments, L.P. (A Kansas Limited Partnership) for the year
ended December 31, 1998.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Brookwood
Apartments, L.P. (A Kansas Limited Partnership) for the year ended December 31,
1998 and its financial position at December 31, 1998 in conformity with
generally accepted accounting principles.
/s/ George, Bowerman & Noel, P.A.
Wichita, Kansas
February 11, 1999
-36-
<PAGE>
[George, Bowerman & Noel, P.A. letterhead]
INDEPENDENT AUDITORS' REPORT
The Partners
Brookwood Apartments, L.P.
(A Kansas Limited Partnership)
Wichita, Kansas
We have audited the accompanying balance sheet of Brookwood Apartments, L.P. (A
Kansas Limited Partnership) as of December 31, 1997, and the related statements
of operations, partners' capital (deficit) and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements reflect certain
reorganization adjustments of the Partnership on a "push-down" basis. However,
in connection with the reorganization, the Partnership has not discounted
certain debt which, in our opinion, should be discounted and has capitalized
certain deferred financing costs which, in our opinion, should have been written
off in order to conform with generally accepted accounting principles. If these
additional reorganization adjustments had been made, deferred financing costs
and mortgage note payable would have been reduced by $274,641 in the
accompanying balance sheet. These departures from generally accepted accounting
principles do not have a material effect on the results of operations or cash
flows of Brookwood Apartments, L.P. (A Kansas Limited Partnership) for the year
ended December 31, 1997.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Brookwood
Apartments, L.P. (A Kansas Limited Partnership) for the year ended December 31,
1997 and its financial position at December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ George, Bowerman & Noel, P.A.
Wichita, Kansas
February 12, 1998
-37-
<PAGE>
[BDO SEIDMAN, LLP LETTERHEAD]
Independent Auditors' Report
To the Partners
Westwind II Associates
We have audited the accompanying balance sheet of Westwind II Associates, F.H.A.
Project No. 051-11092, (a limited partnership), as of December 31, 1999, and the
related statements of profit and loss, partners' deficit, and cash flows for the
year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the Consolidated Audit Guide for Audits of HUD Programs,
issued by the U.S. Department of Housing and Urban Development, Office of
Inspector General, in August 1997. Those standards require that we plan and
perform the audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Westwind II Associates as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated February 7, 2000 on our consideration of the Partnership's internal
control structure. Furthermore, in accordance with the Consolidated Audit Guide,
we have also issued a report dated February 7, 2000 on its compliance with
specific requirements of HUD projects.
/s/ BDO Seidman, LLP
Richmond, Virginia
February 7, 2000
-38-
<PAGE>
[BDO SEIDMAN, LLP LETTERHEAD]
Independent Auditors' Report
To the Partners
Westwind II Associates
We have audited the accompanying balance sheet of Westwind II Associates, F.H.A.
Project No. 051-11092, (a limited partnership), as of December 31, 1998, and the
related statements of profit and loss, partners' deficit and cash flows for the
years then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the Consolidated Audit Guide for Audits of HUD Programs,
issued by the U.S. Department of Housing and Urban Development, Office of
Inspector General, in August 1997. Those standards require that we plan and
perform the audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Westwind II Associates as of
December 31, 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated February 11, 1999 on our consideration of the Partnership's internal
control structure. Furthermore, in accordance with the Consolidated Audit Guide,
we have also issued a report dated February 11, 1999 on its compliance with
specific requirements of HUD projects.
/s/ BDO Seidman, LLP
Richmond, Virginia
February 11, 1999
-39-
<PAGE>
[BDO SEIDMAN, LLP LETTERHEAD]
Report of Independent Certified Public Accountants'
To the Partners
Westwind II Associates
We have audited the accompanying balance sheets of Westwind II Associates (a
limited partnership) as of December 31, 1997 and 1996, and the related
statements of operations, partners' deficit and cash flows for the years then
ended. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Westwind II Associates as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
Richmond, Virginia
February 11, 1998
-40-
<PAGE>
[PRICEWATERHOUSECOOPERS L.L.P. LETTERHEAD]
Report of Independent Accountants
To the Partners
Suncreek - 268, Ltd.
In our opinion, the accompanying balance sheet and the related statements of
income, changes in partners' equity (deficit) and cash flows present fairly, in
all material respects, the financial position of Suncreek - 268, Ltd. (the
Partnership) at December 31, 1999, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States. 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 audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above
/s/ PricewaterhouseCoopers L.L.P.
Portland, Oregon
January 28, 2000
-41-
<PAGE>
[PRICEWATERHOUSECOOPERS L.L.P. LETTERHEAD]
Report of Independent Accountants
To the Partners
Suncreek - 268, Ltd.
In our opinion, the accompanying balance sheet and the related statements of
operations, changes in partners' equity (deficit) and cash flows present fairly,
in all material respects, the financial position of Suncreek - 268, Ltd. (the
Partnership) at December 31, 1998, and the results of its operations and its
cash flows for the year in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers L.L.P.
Portland, Oregon
February 9, 1999
-42-
<PAGE>
[Coopers & Lybrand L.L.P. letterhead]
Report of Independent Accountants
To the Partners
Suncreek - 268, Ltd.
We have audited the accompanying balance sheet of Suncreek - 268, Ltd. as of
December 31, 1997, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Suncreek - 268, Ltd. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Portland, Oregon
February 6, 1998
-43-
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
MARCH 25,
---------------------------
2000 1999
------------ -------------
<S> <C> <C>
Property and equipment - at cost, less accumulated
depreciation (Notes 2, 4 and 7) $ 34,237,818 $ 67,909,812
Property and equipment held for sale - net, less
accumulated depreciation (Notes 2, 4 and 7) 18,695,807 0
Cash and cash equivalents (Notes 2 and 12) 1,504,490 1,449,846
Cash - restricted for tenants' security deposits 435,137 583,583
Mortgage escrow deposits (Notes 5 and 7) 1,961,983 2,476,406
Deferred costs, net of accumulated amortization
(Notes 2 and 6) 1,441,913 2,027,363
Prepaid expenses and other assets 173,093 258,296
------------ -------------
Total assets $ 58,450,241 $ 74,705,306
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable (Notes 7 and 10) $ 71,887,945 $ 89,892,922
Accounts payable, accrued expenses and other
liabilities 4,100,178 7,434,059
Tenants' security deposits payable 435,137 583,583
Due to general partners of subsidiaries
and their affiliates (Note 8) 562,541 1,581,637
Due to general partners and affiliates (Note 8) 6,726,899 6,549,593
------------- -------------
83,712,700 106,041,794
------------- -------------
Minority interest (Note 2) 4,237,149 4,626,130
------------- -------------
Commitments and contingencies (Note 12)
Partners' deficit:
Limited Partner (28,887,065) (35,285,445)
General Partner (612,543) (677,173)
-------------- -------------
Total partners' deficit (29,499,608) (35,962,618)
-------------- -------------
Total liabilities and partners' deficit $ 58,450,241 $ 74,705,306
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
-44-
<PAGE>
<TABLE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
YEAR ENDED MARCH 25,
-------------------------------------------
2000 1999* 1998*
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Rental, net $17,172,048 $16,886,576 $17,286,847
Other 967,009 782,909 595,239
Gain on sale of property (Note 10) 5,642,249 0 1,378,652
----------- ----------- -----------
Total revenues 23,781,306 17,669,485 19,260,738
----------- ----------- -----------
Expenses
Administrative and management 2,568,002 2,796,876 2,607,327
Administrative and management-related
parties (Note 8) 1,197,774 1,289,992 1,460,724
Operating 1,480,735 1,636,671 1,698,501
Repairs and maintenance 3,731,093 3,696,346 3,501,972
Taxes and insurance 1,579,709 1,968,689 2,105,144
Interest 7,190,351 7,217,812 7,109,841
Depreciation and amortization 3,333,552 3,254,885 3,455,677
----------- ----------- -----------
Total expenses 21,081,216 21,861,271 21,939,186
----------- ----------- -----------
Income (loss) before minority interest and
extraordinary item 2,700,090 (4,191,786) (2,678,448)
Minority interest in loss (income) of subsidiaries 833,691 41,717 (44,781)
----------- ----------- -----------
Income (loss) before extraordinary item 3,533,781 (4,150,069) (2,723,229)
Extraordinary item - forgiveness of indebtedness
income (Note 11) 2,929,229 501,769 3,629,807
----------- ------------ -----------
Net income (loss) $ 6,463,010 $ (3,648,300) $ 906,578
=========== =========== ============
Income (loss) before extraordinary item -
limited partners $ 3,498,443 $ (4,108,568) $ (2,695,997)
Extraordinary item - limited partners 2,899,937 496,751 3,593,509
----------- ------------ -----------
Net income (loss) - limited partners $ 6,398,380 $ (3,611,817) $ 897,512
=========== =========== ============
Number of limited partnership units outstanding 7,150 7,150 7,150
=========== =========== ============
Per limited partnership unit:
Income (loss) before extraordinary item $ 489 $ (575) $ (377)
Extraordinary item 406 69 502
----------- ------------ ------------
Net income (loss) $ 895 $ (506) $ 125
=========== ============ ============
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
-45
<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, 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)
Net income 6,463,010 6,398,380 64,630
------------ ------------ ---------
Balance - March 25, 2000 $(29,499,608) $(28,887,065) $(612,543)
=========== =========== ========
See accompanying notes to consolidated financial statements.
</TABLE>
-46-
<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,
------------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,463,010 $(3,648,300) $ 906,578
---------- ---------- ----------
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Gain on sale of property (5,642,249) 0 (1,378,652)
Extraordinary item - forgiveness of indebtedness (2,929,229) (501,769) (3,629,807)
Depreciation and amortization 3,333,552 3,254,885 3,455,677
Minority interest in (loss) income of subsidiaries (833,691) (41,717) 44,781
(Increase) decrease in assets:
Cash-restricted for tenants' security deposits 190,883 (20,336) 9,377
Mortgage escrow deposits 296,375 (690,945) 248,861
Prepaid expenses and other assets (26,471) 173,874 (5,279)
Increase (decrease) in liabilities:
Accounts payable, accrued expenses and
other liabilities (2,378,636) 1,254,472 396,554
Tenants' security deposits payable (148,446) 20,336 (9,377)
Increase in due to general partners of
subsidiaries and their affiliates 0 40,000 48,277
Decrease in due to general partners of subsidiaries
and their affiliates (681,934) (146,013) (148,366)
Due to general partners and affiliates 177,306 1,888,832 856,112
----------- ---------- ----------
Total adjustments (8,642,540) 5,231,619 (111,842)
---------- ---------- ----------
Net cash (used in) provided by operating activities (2,179,530) 1,583,319 794,736
---------- ---------- ----------
Cash flows from investing activities:
Net proceeds from the sale of property 19,064,362 0 5,030,000
Acquisition of property and equipment (223,298) (84,876) (157,112)
Decrease (increase) in mortgage escrow deposits -
replacement reserves 68,040 30,060 (168,813)
------------ ----------- -----------
Net cash provided by (used in) investing activities 18,909,104 (54,816) 4,704,075
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from mortgage notes payable 0 5,200,000 0
Principal payments of mortgage notes payable (17,094,977) (6,014,642) (5,591,258)
Increase (decrease) in minority interest 444,710 (186,799) (129,885)
(Increase) decrease in deferred costs (24,663) (88,820) 8,567
----------- ------------ ------------
Net cash used in financing activities (16,674,930) (1,090,261) (5,712,576)
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents 54,644 438,242 (213,765)
Cash and cash equivalents at beginning of year 1,449,846 1,011,604 1,225,369
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,504,490 $ 1,449,846 $ 1,011,604
=========== =========== ===========
</TABLE>
-47-
<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,
----------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ 6,518,818 $ 6,094,273 $ 6,866,054
========== =========== ===========
Supplemental disclosures of noncash investing
and financing activities:
Increase in minority interest attributable
to accrued distributions to general partners
of subsidiaries $ 0 $ 56,499 $ 0
Forgiveness of indebtedness:
Decrease in mortgage notes payable (910,000) (501,769) (1,540,089)
Decrease in accounts payable, accrued
expenses and other liabilities (1,682,067) 0 (1,790,717)
Decrease in due to general partners and affiliates (337,162) 0 (299,001)
Summarized below are the components of the gain on
sale of property:
Decrease in property and equipment,
net of accumulated depreciation 12,476,046 0 3,769,541
Increase in cash - restricted for tenants'
security deposits (42,437) 0 0
Decrease in mortgage escrow deposits 150,008 0 0
Decrease in prepaid expenses
and other assets 111,674 0 (2,888)
Increase in accounts payable, accrued
expenses and other liabilities 726,822 0 0
Decrease due to general partners and affiliates 0 0 (115,305)
</TABLE>
See accompanying notes to consolidated financial statements.
-48-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
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 ("Apartment Complexes"), 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, 2000, the Partnership holds an interest in 7 Local Partnerships
which own 7 Apartment Complexes. Through the fiscal year ended March 25, 2000,
the properties and related assets and liabilities owned by five Local
Partnerships were sold to unaffiliated third parties (see Note 10, below).
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 (as defined below). No further issuance of limited
partnership interests ("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, 2000, one Local Partnership is 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 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. 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, below, for management's intentions.
-49-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
b) Basis of Consolidation
The consolidated financial statements include the accounts of the Partnership
and ten subsidiary partnerships fiscal year ended March 25, 2000 (the "1999
Fiscal Year") two of which only have activity through the date of sale of its
property and the related assets and liabilities, ten subsidiary partnerships
fiscal year ended March 25, 1999 (the "1998 Fiscal Year") and eleven subsidiary
partnerships fiscal year ended March 25, 1998 (the "1997 Fiscal Year"), one of
which only has activity through the date of sale of its property and the related
assets and liabilities. 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 $0, $15,000 and $0, for the 1999, 1998 and 1997 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
-50-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
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, 2000, 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 (see Note 9, below).
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.
(i) Adoption of New Accounting Standards
On April of 1998, the Financial Accounting Standards Board issued Statement
of Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up
Activities". This statement provides guidance on the financial reporting of
start-up costs and organization costs. This statement is effective for all
fiscal quarters beginning after December 15, 1998.
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.
-51-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
MORTGAGE NOTES PAYABLE
The fair value of mortgage notes payable is estimated, where practicable, based
on the borrowing rate currently available for similar loans.
The estimated fair values of the Partnership's mortgage note payable are as
follows:
<TABLE>
<CAPTION>
March 25, 2000 March 25, 1999
------------------------- -----------------------------
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 $69,393,084 $63,388,441 $87,398,061 $86,650,171
Not Practicable $ 2,494,861 * $ 2,494,861 *
</TABLE>
*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.
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:
<TABLE>
<CAPTION>
March 25, 2000 March 25, 1999
------------------------- -----------------------------
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 $3,193,191 $264,130 $2,953,097 $440,070
</TABLE>
The carrying amount of other financial instruments that require such disclosure
approximates fair value.
-52-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
NOTE 4 - Property and Equipment and Property and Equipment Held for Sale
The components of property and equipment and their estimated useful lives are as
follows:
<TABLE>
<CAPTION>
March 25,
---------------------------------- Estimated
2000 1999 Useful Lives
------------ ------------- ------------
<S> <C> <C> <C>
Land $ 6,497,186 $ 13,084,659
Buildings and improvements 54,543,782 96,145,887 10-40 Years
Furniture and fixtures 2,572,546 5,395,391 5-10 Years
------------ ------------
63,613,514 114,625,937
Less: Accumulated depreciation (29,375,696) (46,716,125)
------------ ------------
$ 34,237,818 $ 67,909,812
=========== ===========
</TABLE>
Depreciation expense for the 1999, 1998 and 1997 Fiscal Years amounted to
$2,723,439, $3,050,685 and $3,276,844, respectively.
During the 1999 Fiscal Year, there was a decrease in accumulated depreciation in
the amount of $7,239,340 due to the sale of Suntree, Players Club and Brookwood.
The components of property and equipment held for sale and their estimated
useful lives are as follows:
<TABLE>
<CAPTION>
March 25,
----------------------------------
2000 1999
------------ -------------
<S> <C> <C>
Land $ 2,251,249 $ 0
Buildings and improvements 26,257,945 0
Furniture and fixtures 3,011,141 0
------------ ------------------
31,520,335 0
Less: Accumulated depreciation (12,824,528) 0
------------ -----------------
$ 18,695,807 $ 0
=========== ==================
</TABLE>
-53-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
NOTE 5 - Mortgage Escrow Deposits
Mortgage escrow deposits consist of the following:
<TABLE>
<CAPTION>
March 25,
----------------------------------
2000 1999
------------ -------------
<S> <C> <C>
Reserve for replacements $ 1,075,120 $ 1,016,492
Real estate taxes, insurance and other 886,863 1,459,914
----------- -----------
$ 1,961,983 $ 2,476,406
=========== ===========
</TABLE>
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of amortization are as
follows:
<TABLE>
<CAPTION>
March 25
--------------------------------------- Period
2000 1999 (Months)
------------------ ------------------ --------
<S> <C> <C> <C>
Organization fee (a)(b) $ 0 $ 102,709 60
Bond and financing fees 1,895,150 2,995,526 65-240
--------- ---------
1,895,150 3,098,235
Less: Accumulated amortization (453,237) (1,070,872)
---------- ----------
$1,441,913 $2,027,363
========= =========
</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 1999, 1998 and 1997 Fiscal Years
aggregated $610,113, $204,200 and $178,833, respectively.
During the 1999 and 1998 Fiscal Years, respectively, approximately $1,228,000
and $117,000 of fully amortized deferred costs were written off.
NOTE 7 - Mortgage Notes Payable
The mortgage notes are payable in aggregate monthly installments of
approximately $402,000, 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.
-54-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
Annual principal payment requirements for each of the next five fiscal years are
as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Amount
----------------------- -------------
<S> <C>
2000 $ 3,180,583
2001 7,516,142
2002 632,618
2003 1,360,260
2004 9,639,208
Thereafter 49,559,134
----------
$71,887,945
==============
</TABLE>
The mortgage agreements require monthly deposits to replacement reserves of
approximately $22,000 and monthly deposits to escrow accounts for real estate
taxes, hazard and mortgage insurance and other (see Note 5, below).
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., which was an affiliate of the Related General Partner
through October 1997, is the managing agent of three of the properties.
Fees incurred to related parties for the years ended March 25, 2000, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
Year Ended March 25
---------------------------------------------
2000 1999* 1998*
------------ ----------- -----------
<S> <C> <C> <C>
Partnership management fees (a) $ 505,171 $ 644,526 $ 654,750
Expense reimbursement (b) 116,470 89,257 80,385
Property management fees incurred
to affiliates of the General Partners (c) 321,505 310,961 492,561
Local administrative fee (d) 7,500 7,500 7,500
---------- --------- ---------
Total general and administrative
General Partners 950,646 1,052,244 1,235,196
---------- --------- ---------
Property management fees incurred
to affiliates of the subsidiary partnerships'
general partners (c) 247,128 237,748 225,528
---------- --------- ---------
Total general and administrative
related parties $1,197,774 $1,289,992 $1,460,724
========= ========= =========
</TABLE>
*Reclassified for comparative purposes
(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
-55-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
approximately $3,002,000 and $2,497,000 were accrued and unpaid as of March 25,
2000 and 1999, respectively. Without the General Partners' advances and
continued accrual and 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.
(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 $743,000 and $626,000 were accrued and unpaid as of March 25, 2000
and 1999, respectively.
(c) Property management fees paid by subsidiary partnerships amounted to
$857,710, $835,445 and $830,247 for the 1999, 1998 and 1997 Fiscal Years,
respectively. Of these fees, $568,633, $548,709 and $421,184 were incurred to
affiliates of the subsidiary partnerships. In addition, $321,505, $310,961 and
$492,561 was incurred to affiliates of the Related General Partner for the 1999,
1998 and 1997 Fiscal Years, respectively. Of such amounts incurred to affiliates
of the Related General Partner, $321,505, $310,961 and $195,656 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 $4,739 and $1,955
were made to Related and Cambridge Associates for the 1999 and 1998 Fiscal
Years, respectively.
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 the 1999 Fiscal Year the
Partnership advanced $240,000 to the Local Partnership. Approximately $3,565,000
and $3,325,000 was outstanding at March 25, 2000 and 1999 (see Note 12, below).
As of March 25, 2000, an affiliate of the Related General Partner advanced
$310,926 to the Partnership, none of which was advanced in the 1999, 1998 or
1997 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 non-interest
bearing.
-56-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
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 was noninterest bearing.
As of March 25, 2000, the Partnership had advanced Apple Creek approximately
$996,000, $27,500 of which was advanced during the 1999 Fiscal Year.
Due to local general partners and affiliates at March 25, 2000 and 1999 consists
of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
--------- ----------
<S> <C> <C>
Operating deficit loans (*) $549,118 $1,376,062
Management and other operating advances 13,423 149,076
-------- ----------
$562,541 $1,525,138
======== ==========
</TABLE>
(*) Operating deficit loans include one and three 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.
-57-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
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:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Financial statement net income (loss) $ 6,463,010 $(3,648,300) $ 906,578
Difference between depreciation expense
recorded for financial reporting
purposes and the accelerated cost
recovery system utilized for income
tax purposes 1,670,055 (796,677) (1,159,303)
Gain on sale of property 5,335,164 0 420,103
Extraordinary item - forgiveness of indebtedness (2,786,768) (545,532) 108,797
Debt restructuring 0 (289,710) 332,796
Other (466,431) 84,592 (213,259)
------------ ------------ -----------
Income (loss) as shown on the income tax return
for the calendar year ended $10,215,030 $(5,195,627) $ 395,712
========== ========== ===========
</TABLE>
NOTE 10 - Sale of Properties
GENERAL
The Partnership is currently in the process of winding up its operations and
disposing of its investments. It is anticipated that this process will take a
number of years. As of March 25, 2000, the Partnership has disposed of five of
its twelve original investments. One additional investment is listed for sale
and the General Partner anticipates that the six remaining investments will be
listed for sale by December 31, 2001. There can be no assurance as to when the
Partnership will dispose of its last remaining investments or the amount of
proceeds which may be received. However, based on the historical operating
results of the Local Partnership and the current economic conditions including
changes in tax laws, it is unlikely that the proceeds from such sales will be
sufficient to return the limited partners original investment.
-58-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
PLAYERS CLUB AT FORT MYERS, LTD. AND SUNTREE AT FORT MYERS, LTD.
On December 29, 1999, the property and related assets and liabilities of Players
and Suntree were sold to an unaffiliated third party for approximately
$19,350,000 resulting in a gain of approximately $5,642,000 and forgiveness of
indebtedness income of approximately $2,929,000 as a result of forgiveness of
interest on mortgage debt and advances from the General Partners.
GALVESTON - STEWART'S 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 approximately $1,379,000. Galveston used $5,000,000 of the
net proceeds to settle the mortgage indebtedness and accrued interest thereon
which amounted to approximately $8,630,000, resulting in forgiveness of
indebtedness income of approximately $3,630,000.
BROOKWOOD APARTMENTS L.P.
On March 24, 2000, the property and related assets and liabilities of Brookwood
were sold to an unaffiliated third party for $7,300,000, resulting in a gain of
approximately $3,189,000.
NOTE 11 - Extraordinary Item - Forgiveness of Indebtedness Income
Extraordinary items-forgiveness of indebtedness consist of the following:
<TABLE>
<CAPTION>
Year Ended March 25
---------------------------------------------
2000 1999 1998
------------ ----------- -----------
<S> <C> <C> <C>
Sheridan $ 0 $ 501,769 $ 0
Galveston 0 0 3,629,807
Suntree 891,649 0 0
Players Club 2,037,580 0 0
------------ ----------- -----------
$2,929,229 $ 501,769 $3,629,807
============ =========== ===========
</TABLE>
PLAYERS AND SUNTREE
On December 28, 1999, the property and related assets and liabilities of Players
and Suntree were sold to an unaffiliated third party for $19,350,000. For
financial reporting purposes, forgiveness of indebtedness income of $2,037,580
and $891,649, respectively, was realized (see Note 10, above).
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.
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, above).
-59-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
NOTE 12 - Commitments and Contingencies
a) Events of Default and Going Concern
The financial statements for one subsidiary partnership have been prepared
assuming it will continue as a going concern. The circumstances described below,
as well as matters discussed in Note 2, above, raise substantial doubt about the
Partnership and its consolidated subsidiaries' ability to continue as a going
concern. The auditors for this one subsidiary partnership modified their report
on the 1999 Fiscal Year financial statements due to the uncertainty of the
subsidiary partnership's ability to continue as a going concern. The one
subsidiary partnership is 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 Partner of this subsidiary partnership to refinance or restructure
mortgage indebtedness and to provide consultation and advice in such matters as
required.
The following is a description of the subsidiary's events of default and going
concern issues, as well as the courses of action taken by the respective Local
General Partner to enable the subsidiary partnership to achieve such goals.
TRIANGLE/OAKS LIMITED PARTNERSHIP
During the years ended December 31, 1999, 1998 and 1997, the Local Partnership
incurred losses of $291,361, $1,035,346 and $915,330, respectively. In addition,
at December 31, 1999, accounts payable and accrued expenses excluding mortgage
notes payable exceed available cash by $143,163 and total liabilities exceed
total assets by $8,365,625. 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. Management's intent is to dispose of all
the property and equipment of the Local Partnership by the end of 2000. During
the 1999 Fiscal Year, the Partnership advanced approximately $240,000 to the
Local Partnership. Approximately $3,565,000 and $3,325,000 was outstanding at
March 25, 2000 and 1999, respectively. Such amounts will be voluntary loans.
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 $369,000 and $375,000 at
March 25, 2000 and 1999, respectively. Triangle/Oaks net loss after minority
interest amounted to approximately $301,000, $1,015,000 and $897,000 for the
1999, 1998 and 1997 Fiscal Years, respectively.
-60-
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
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, 2000, uninsured cash and cash
equivalents approximated $1,320,000.
c) 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 25% 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, 1999.
-61-
<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 Associates, 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, 60, 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. Mr. Ross also serves on the
Board of Trustees of Charter Municipal Mortgage Acceptance Company.
ALAN P. HIRMES, 45, 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, 44, 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
-62-
<PAGE>
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, 37, 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, 34, 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 Partnership Agreement, 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.
-63-
<PAGE>
At March 25, 2000, security ownership by the General Partners and their
affiliates is as listed:
<TABLE>
<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.
General Partnership Related and Cambridge
Interest in the Associates Limited Partnership 4 67.0%
Partnership ------
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, above, 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 during the 1997 Fiscal Year. Commencing August 1,
1997 the properties are managed by Related Management Company, an affiliate of
the Related General Partner and were paid approximately $322,000, $311,000 and
$115,000 during the 1999, 1998 and 1997 Fiscal Years, respectively.
Whitney Management Corp., which was an affiliate of the Related General Partner
through October 1997, is the managing agent of three of the properties. Property
management fees earned by Whitney Management Corp. were approximately $165,330
for the 1997 Fiscal Year. 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, above).
-64-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
Page
----------
(a) 1. Financial Statements
Independent Auditors' Report 17
Consolidated Balance Sheets at March 25, 2000 and 1999 44
Consolidated Statements of Operations for the Years Ended
March 25, 2000, 1999 and 1998 45
Consolidated Statements of Changes in Partners' Deficit
for the Years Ended March 25, 2000, 1999 and 1998 46
Consolidated Statements of Cash Flows for the Years Ended
March 25, 2000, 1999 and 1998 47
Notes to Consolidated Financial Statements 49
The financial statements of the Local Partnerships are not
included separately herein
(a) 2. FINANCIAL STATEMENTS SCHEDULES
Independent Auditors' Report on Financial Statement Schedules 69
Schedule III - Real Estate and Accumulated Depreciation 71
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 70
(27) Financial Data Schedule (filed herewith) 72
** 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.
-65-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K (continued)
Sequential
Page
----------
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter
-66-
<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 6, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
By: RELATED AND CAMBRIDGE ASSOCIATES,
LIMITED PARTNERSHIP,
a General Partner
By: Related Advantaged Residential
Associates Inc.,
its General Partner
Dated: June 6, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
<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.
<TABLE>
<CAPTION>
Signature Title Date
---------------------- -------------------------------------------- ------------
<S> <C> <C>
/s/ Alan P. Hirmes President (principal executive June 6, 2000
------------------ and financial officer) of Related Advantaged
Alan P. Hirmes Residential Associates, Inc.
/s/ Glenn F. Hopps Treasurer (principal accounting officer) June 6, 2000
------------------ of Related Advantaged Residential
Glenn F. Hopps Associates, Inc.
/s/ Stephen M. Ross Director of Related Advantaged June 6, 2000
------------------ Residential Associates, Inc.
Stephen M. Ross
</TABLE>
<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 2, 2000 on pages 17 and
18, which is based in part on the reports of other auditors, we have also
audited supporting Schedule III at March 25, 2000. 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 Partnership is currently in the process of winding up its operations and
disposing of its investments. It is anticipated that this process will take a
number of years.
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 one (Fiscal 1999) subsidiary partnership have
modified their report due to the uncertainty of the subsidiary partnership's
ability to continue as a going concern. This subsidiary partnership's loss
aggregated $306,986, $1,035,345 and $915,330 for the 1999, 1998 and 1997 Fiscal
Years, respectively, and their assets constituted 26% and 21% of the
Partnership's assets at March 25, 2000 and 1999, respectively. These matters
raise substantial doubt about Cambridge Advantaged Properties II Limited
Partnership and Subsidiaries' ability 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
June 2, 2000
<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
The Harbours Associates VA
Brookwood Apartments L.P. KS
Westwind II Associates VA
Suncreek-268, Ltd OR
<PAGE>
CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 25, 2000
<TABLE>
<CAPTION>
Initial Cost to Partnership Cost Capitalized
---------------------------- Subsequent to
Buildings and Acquisition:
Subsidiary Partnership's 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 7,636,795 1,093,520 8,228,192 486,156
(5) Apple Creek Associates of Denton, Ltd 7,531,561 398,000 8,517,595 (328,171)
(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 (h) 0 3,204,124 10,013,904 (13,218,028)
(2) Suntree at Fort Myers, Ltd (h) 0 2,098,029 8,748,887 (10,846,916)
(3) Woodridge, Ltd 8,000,000 1,368,929 7,072,779 541,593
(6) The Harbours Associates 12,760,468 1,449,985 15,323,441 (255,982)
(6) Westwind II Associates 4,392,915 322,817 4,919,687 750,207
(3) Brookwood Apartments L.P. 5,396,206 368,827 6,803,294 158,403
(1) Suncreek-268, Ltd 6,800,000 0(b) 9,170,112 4,554,654
(1) McAdam Park-336, Ltd (f) 0 0(e) 11,027,615 (11,027,615)
----------- ----------- ------------ ------------
$71,887,945 $12,829,147 $114,100,562 $(31,795,860)
========== ========== =========== ===========
<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 8,714,348 9,807,868
(5) Apple Creek Associates of Denton, Ltd 398,000 8,189,424 8,587,424
(5) Galveston-Stewart's Landing, Ltd (a)(g) 0 0 0
(2) Players Club at Fort Myers, Ltd (h) 0 0 0
(2) Suntree at Fort Myers, Ltd (h) 0 0 0
(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 6,961,698 7,330,524
(1) Suncreek-268, Ltd 2,000,000(b) 11,724,766 13,724,766
(1) McAdam Park-336, Ltd (f) 0(e) 0 0
----------- ----------- -----------
$ 8,748,435 $86,385,414 $95,133,849
========== ========== ==========
<CAPTION>
Life on which
Depreciation in
Latest Income
Accumulated Year of Date Statement is
Subsidiary Partnership's Residential Property Depreciation Construction Acquired Computed(c)(d)
--------------------------------------------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C>
(2) Triangle/Oaks Limited Partnership $ 9,483,002 (c) 9/85 40 Years
(4) Sheridan Square Associates of Lawton 4,349,452 (c) 10/85 30 Years
(5) Apple Creek Associates of Denton, Ltd 4,241,098 (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 (h) 0 (c) 10/85 27.5 Years
(2) Suntree at Fort Myers, Ltd (h) 0 (c) 10/85 30 Years
(3) Woodridge, Ltd 4,057,580 (c) 10/85 10-30 Years
(6) The Harbours Associates 7,533,321 (c) 11/85 30 Years
(6) Westwind II Associates 2,866,468 (c) 12/85 30 Years
(3) Brookwood Apartments L.P. 3,341,526 (c) 12/85 30 Years
(1) Suncreek-268, Ltd 6,327,777 (c) 12/85 27.5 Years
(1) McAdam Park-336, Ltd (f) 0 (c) 12/85 27.5 Years
-----------
$42,200,224
==========
</TABLE>
(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) primarily the straight-line method over the estimated useful lives
determined by the Partnership date of acquisition.
(c) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight-line method over the estimated useful
lives ranging from 5 to 15 years.
(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).
(h) On December 28, 1999, the property and the related assets and liabilities of
Players Club at Fort Myers, Ltd. and Suntree at Fort Myers, 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.
<TABLE>
<CAPTION>
Cost of Property and Equipment Accumulated Depreciation
--------------------------------------------- ------------------------------------------
Year Ended March 25,
-----------------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $114,625,937 $114,541,061 $120,889,451 $46,716,125 $43,665,440 $43,124,557
Additions during period:
Improvements 228,071 84,876 157,112
Depreciation expense 2,723,439 3,050,685 3,276,844
Reductions during period:
Dispositions (19,720,159) 0 (6,505,502) (7,239,340) 0 (2,735,961)
----------- ----------- ----------- ---------- ---------- ----------
Balance at end of period $(95,133,849) $114,625,937 $114,541,061 $42,200,224 $46,716,125 $43,665,440
=========== =========== =========== ========== ========== ==========
</TABLE>
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.
