-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Trb8lb26EDXC+2wDMNz0J94j0zOcVh3sixc4tOTu+PHMJWqlmH3VQT6DtROW8ksF /BN4NlohoecAVIrS2ugxYQ== 0000950146-99-000020.txt : 19990125 0000950146-99-000020.hdr.sgml : 19990125 ACCESSION NUMBER: 0000950146-99-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000718915 STANDARD INDUSTRIAL CLASSIFICATION: 6500 IRS NUMBER: 133161322 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12634 FILM NUMBER: 99502001 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON & RELATED HOUSING PROPERTIES LTD PARTNERSHIP DATE OF NAME CHANGE: 19940615 10-Q 1 NINE MONTHS 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - --- EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - --- EXCHANGE ACT OF 1934 Commission File Number 0-12634 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 13-3161322 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ PART I Item 1. Financial Statements CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited)
=========== =========== November 30, February 28, 1998 1998 ----------- ----------- ASSETS Property and equipment, net of accumulated depreciation of $55,019,018 and $67,405,570, respectively $49,202,713 $66,541,368 Property and equipment-held for sale, net of accumulated depreciation of $12,147,984 and $7,466,033 11,231,230 8,372,413 Cash and cash equivalents 7,273,081 6,069,843 Certificates of deposit 0 205,509 Cash - restricted for tenants' security deposits 819,828 843,561 Mortgage escrow deposits 5,846,931 6,784,348 Rents receivable 318,583 304,888 Prepaid expenses and other assets 1,362,603 955,224 ----------- ----------- Total assets $76,054,969 $90,077,154 =========== ===========
3 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (continued) (Unaudited)
=========== =========== November 30, February 28, 1998 1998 ----------- ----------- LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable $45,198,704 $55,464,577 Purchase money notes payable (Note 2) 39,902,759 46,352,956 Due to selling partners (Note 2) 48,895,135 54,951,723 Accounts payable, accrued expenses and other liabilities 2,594,509 4,637,981 Tenants' security deposits payable 819,828 843,561 Due to general partners of Subsidiaries and their affiliates 420,430 502,593 Due to general partners and affiliates 1,311,247 1,308,614 Distribution payable 0 2,030,972 ----------- ----------- Total liabilities 139,142,612 166,092,977 ----------- ----------- Minority interest 288,377 167,391 ----------- ----------- Commitments and contingencies (Note 6) Partners' deficit: Limited partners (62,293,729) (74,972,851) General partners (1,082,291) (1,210,363) ----------- ----------- Total partners' deficit (63,376,020) (76,183,214) ----------- ----------- Total liabilities and partners' deficit $76,054,969 $90,077,154 =========== ===========
See Accompanying Notes to Consolidated Financial Statements. 4 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
========================= =========================== Three Months Ended Nine Months Ended November 30, November 30, ------------------------- --------------------------- 1998 1997 1998 1997 ------------------------- --------------------------- Revenues: Rentals, net $ 5,356,967 $ 6,888,566 $ 16,632,164 $ 20,896,535 Other 171,038 209,248 562,273 686,263 Gain (loss) on sale of properties (Note 5) (46,161) (254,466) 5,381,595 229,152 ----------- ----------- ------------ ------------ Total revenues 5,481,844 6,843,348 22,576,032 21,811,950 ----------- ----------- ------------ ------------ Expenses Administrative and management 910,730 1,115,204 2,975,261 3,726,841 Administrative and management- related parties (Note 3) 579,141 635,452 1,744,109 2,020,549 Operating 787,650 1,000,679 2,558,430 3,514,051 Repairs and maintenance 1,441,738 1,869,079 4,302,948 5,562,010 Taxes and insurance 648,289 961,928 2,113,404 2,803,592 Interest 1,284,250 1,802,724 4,062,678 5,571,277 Depreciation 1,024,657 1,424,401 3,204,928 4,312,826 Loss on impairment of assets (Note 4) 0 0 3,191,072 0 ----------- ----------- ------------ ------------ Total expenses 6,676,455 8,809,467 24,152,830 27,511,146 ----------- ----------- ------------ ------------ Loss before minority interest and extraordinary item (1,194,611) (1,966,119) (1,576,798) (5,699,196) Minority interest in (income) loss of subsidiaries 134 (10,835) (621,160) (10,588) ----------- ----------- ------------ ------------ Loss before extraordinary item (1,194,477) (1,976,954) (2,197,958) (5,709,784) Extraordinary item- forgiveness of indebtedness income (loss) (Note 5) (3,750) 1,982,923 15,005,152 5,170,873 ----------- ----------- ------------ ------------ Net income (loss) $(1,198,227) $ 5,969 $ 12,807,194 $ (538,911) =========== =========== ============ ============
See Accompanying Notes to Consolidated Financial Statements. 5 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Partners' Deficit (Unaudited)
============ ============ =========== Limited General Total Partners Partners ------------ ------------ ----------- Balance-- March 1, 1998 $(76,183,214) $(74,972,851) $(1,210,363) Net income-- nine months ended November 30, 1998 12,807,194 12,679,122 128,072 ------------ ------------ ----------- Balance-- November 30, 1998 $(63,376,020) $(62,293,729) $(1,082,291) ============ ============ ===========
See Accompanying Notes to Consolidated Financial Statements. 6 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited)
============================= Nine Months Ended November 30, ----------------------------- 1998 1997 ----------------------------- Cash flows from operating activities: Net income (loss) $ 12,807,194 $ (538,911) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on sale of properties (Note 5) (5,381,595) (229,152) Extraordinary item - forgiveness of indebtedness income (Note 5) (15,005,152) (5,170,873) Depreciation 3,204,928 4,312,826 Loss on impairment of assets (Note 4) 3,191,072 0 Minority interest in income of Subsidiaries 621,160 10,588 Decrease (increase) in cash-restricted for tenants' security deposits 1,269 (6,073) Decrease (increase) in mortgage escrow deposits 478,414 (242,105) Increase in rents receivable (18,324) (97,783) Increase in prepaid expenses and other assets (415,861) (334,988) Increase in due to selling partners 2,680,055 3,735,764 Payments to selling partners (85,784) (173,488) (Decrease) increase in accounts payable, accrued expenses and other liabilities (368,142) 189,712 (Decrease) increase in tenants' security deposits payable (3,533) 28,873 Increase in due to general partners of Subsidiaries and their affiliates 173,859 189,986 Decrease in due to general partners of Subsidiaries and their affiliates (211,760) (281,587) Decrease in due to general partners and affiliates (8,617) (351,538) ------------ ----------- Total adjustments (11,148,011) 1,580,162 ------------ ----------- Net cash provided by operating activities 1,659,183 1,041,251 ------------ -----------
7 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (decrease) in Cash and Cash Equivalents (continued) (Unaudited)
============================= Nine Months Ended November 30, ----------------------------- 1998 1997 ----------------------------- Cash flows from investing activities: Decrease (increase) in certificates of deposit 205,509 (2,559) Proceeds from sale of properties 7,035,898 2,983,756 Acquisitions of property and equipment (388,507) (695,165) Increase in mortgage escrow deposits (435,464) 0 ----------- ----------- Net cash provided investing activities 6,417,436 2,286,032 ----------- ----------- Cash flows from financing activities: Principal payments of mortgage notes payable (4,241,819) (2,209,840) Decrease in minority interest (500,174) (31,084) Distributions paid to partners (2,030,972) (1,111,554) Principal payments of purchase notes payable (100,416) (1,264,735) ----------- ----------- Net cash used in financing activities (6,873,381) (4,617,213) ----------- ----------- Net increase (decrease) in cash and cash equivalents 1,203,238 (1,289,930) Cash and cash equivalents at beginning of period 6,069,843 5,981,506 ----------- ----------- Cash and cash equivalents at end of period $ 7,273,081 $ 4,691,576 =========== ===========
8 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (decrease) in Cash and Cash Equivalents (continued) (Unaudited)
============================= Nine Months Ended November 30, ----------------------------- 1998 1997 ----------------------------- Supplemental disclosures of noncash activities: Forgiveness of indebtedness Decrease in purchase money notes payable (6,349,781) (1,654,424) Decrease in due to selling partners (8,650,859) (3,516,449) Increase in due to general partners and affiliates 11,250 0 Decrease in due to general partners of subsidiaries and their affiliates (15,762) 0 Summarized below are the components of the gain on sale of properties: Decrease in property and equipment, net of accumulated depreciation 8,472,345 4,609,200 Decrease in cash-restricted for tenants' security deposits 22,464 43,945 Decrease in mortgage escrow deposits 894,467 304,613 Decrease in rents receivable 4,629 3,710 Decrease in prepaid expenses and other assets 8,482 58,456 Decrease in mortgage notes payable (6,024,054) (1,681,707) Decrease in accounts payable, accrued expenses and other liabilities (1,675,330) (42,376) Decrease in tenants' security deposits payable (20,200) (66,745) Decrease in due to general partners of Subsidiaries and their affiliates (28,500) (474,492)
See Accompanying Notes to Consolidated Financial Statements. 9 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) Note 1 - General The consolidated financial statements for the nine months ended November 30, 1998, include the accounts of Cambridge + Related Housing Properties Limited Partnership, a Massachusetts limited Partnership (the "Partnership") and thirty-five Subsidiary Partnerships ("Subsidiaries", "Subsidiary Partnerships" or "Local Partnerships"), one of which only has activity through the effective date of sale of the Partnership's interest and four of which only have activity through the date of sale of their properties and the related assets and liabilities (see Note 5). The consolidated financial statements for the nine months ended November 30, 1997, include the accounts of the Partnership and forty-one Subsidiary Partnerships, one of which only has activity through the date of sale of the Partnership's interest and one of which only has activity through the date of sale of its property and the related assets and liabilities (see Note 5). The Partnership is a limited partner, with an ownership interest of 98.99% in each of the Subsidiary Partnerships. Through the rights of the Partnership and/or a General Partner, which General Partner has a contractual obligation to act on behalf of the Partnership, the right to remove the local general partner of the Subsidiary Partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the Subsidiary Partnerships. For financial reporting purposes, the Partnership's fiscal quarter ends on November 30. All Subsidiaries have fiscal quarters ending September 30. Accounts of Subsidiaries have been adjusted for intercompany transactions from October 1 through November 30. The Partnership's fiscal quarter ends on November 30 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 intercompany accounts and transactions have been eliminated in consolidation. 10 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) Increases (decreases) in the capitalization of consolidated Subsidiaries attributable to minority interest arise from cash contributions from and cash distributions to the minority interest partners. Losses attributable to minority interests which exceed the minority interests' investment in a Subsidiary have been charged to the Partnership. Such losses aggregated approximately $0 and $1,000 and $0 and $6,500 for the three and nine months ended November 30, 1998 and 1997, respectively. The Partnership's investment in each Subsidiary is equal to the respective Subsidiary's partners' equity less minority interest capital, if any. These unaudited financial statements have been prepared on the same basis as the audited financial statements included in the Partnership's Form 10-K for the year ended February 28, 1998. In the opinion of the General Partners, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of November 30, 1998, the results of operations for the three and nine months ended November 30, 1998 and 1997 and cash flows for the nine months ended November 30, 1998 and 1997. However, the operating results for the nine months ended November 30, 1998 may not be indicative of the results for the year. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's February 28, 1998 Annual Report on Form 10-K. Note 2 - Purchase Money Notes Payable Nonrecourse Purchase Money Notes were issued to the selling partners of the Subsidiary Partnerships as part of the purchase price, and are secured only by the Partnership's interest in the Subsidiary Partnership to which the note relates. 11 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) The Purchase Money Notes, which provide for simple interest, will not be in default, if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding Subsidiary Partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. As of November 30, 1998, the maturity dates of each of the Purchase Money Notes associated with the remaining properties owned by the Subsidiary Partnerships were extended for three to five years (see below). Any interest not paid currently accrues, without further interest thereon, through the due date of the note. All accrued and unpaid interest must be paid on the due date of the note, unless the Partnership exercises an extension right. Continued accrual of such interest without payment would impact the effective rate of the notes, specifically by reducing the current effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the notes. Unpaid interest of $48,770,087 and $54,826,676 at November 30, 1998 and February 28, 1998, respectively, has been accrued and is included in the caption due to selling partners. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds from the sale or refinancing of the Apartment Complex, or in some cases the Local Partnership Interest to which the Purchase Money Note relates. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the assets. The Partnership sent an extension notice to each Purchase Note holder that pursuant to the note it was extending the maturity. However, the Partnership did not pay the extension fee at that time, deferring such payment to the future. The holders of the Note could argue that until the fee is paid the Note has not been properly extended. Extension fees in the amount of $408,212 were incurred by the Partnership through November 30, 1998. Such notes are now due with maturity dates ranging from July 2001 to December 2004. Of such fees incurred, $388,295 was accrued and added to the Purchase Money Notes balance. The Partnership expects that upon final maturity it will be required to refinance or sell its in- 12 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) vestments in the Local Partnerships in order to pay the Purchase Money Notes and accrued interest thereon. Based on the historical operating results of the Local Partnerships and the current economic conditions including changes in tax laws, it is uncertain as to whether the proceeds from such sales will be sufficient to meet the outstanding balances. Management is working with the selling partners to restructure and/or refinance the notes. No assurance can be given that management's efforts will be successful. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the sellers' recourse, in the event of non-payment, would be to foreclose on the Partnership's interests in the respective Local Partnerships. The Purchase Note holders of three of the Local Partnerships had sent default notices to the Partnership. The Partnership has negotiated stand still agreements with each of the note holders. During the nine months ended November 30, 1998 and 1997, the Partnership received cash flow distributions aggregating $142,973 and $307,277, respectively, of which $85,784 and $200,684 was used to pay interest on the purchase money notes. In addition, the Partnership received a distribution of proceeds from the sale of property of four Local Partnerships aggregating $1,847,379 for the nine months ended November 30, 1998 and proceeds from the sale of its Local Partnership Interest in one Local Partnership and the sale of a property of another Local Partnership aggregating $2,135,762 for the nine months ended November 30, 1997, of which $488,712 and $1,264,735 was used to pay principal on the Purchase Money Notes, respectively. 13 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) Note 3 - Related Party Transactions The costs incurred to related parties for the three and nine months ended November 30, 1998 and 1997 were as follows:
Three Months Ended Nine Months Ended November 30, November 30, -------------------- ------------------------ 1998 1997 1998 1997 -------------------- ------------------------ Partnership manage- ment fees (a) $241,500 $241,500 $ 724,500 $ 724,500 Expense reimburse- ment (b) 36,972 11,017 89,532 141,642 Property manage- ment fees incurred to affiliates of the General Partners (c) 32,014 62,916 133,093 197,734 Local administra- tive fee (d) 7,000 7,000 20,000 20,000 -------- -------- ---------- ---------- 317,486 322,433 967,125 1,083,876 -------- -------- ---------- ---------- Property manage- ment fees incurred to affiliates of the subsidiary partnerships' general partners (c) 261,655 313,019 776,984 936,673 -------- -------- ---------- ---------- Total general and administrative- related parties $579,141 $635,452 $1,744,109 $2,020,549 ======== ======== ========== ==========
(a) After all other expenses of the Partnership are paid, an annual Partnership management fee of up to .5% of invested assets is payable to the Partnership's General Partners and affiliates. Partnership management fees owed to the General Partners amounting to approximately $900,000 and $426,000 were accrued and unpaid as of November 30, 1998 and February 28, 1998. (b) The Partnership reimburses the General Partners and their affiliates for actual Partnership operating expenses incurred by the General Partners and their affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partners performs asset monitoring for the Partner- 14 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) ship. These services include site visits and evaluations of the Subsidiary Partnership's performance. (c) Property management fees incurred by Local Partnerships to affiliates of the Local Partnerships amounted to $293,669 and $375,935 and $910,077 and $1,134,407 for the three and nine months ended August 31, 1998 and 1997, respectively. Of such fees $32,014 and $62,916 and $133,093 and $197,734, respectively, were incurred to a company which is also an affiliate of the General Partners. (d) Cambridge/Related Housing Associates Limited Partnership, the special limited partner of each of the Subsidiary Partnerships, owning .01%, is entitled to receive a local administrative fee of up to $2,500 per year from each Subsidiary Partnership. Note 4 - Property and Equipment Caddo Parish-Villas South, Ltd. ("Villas South") filed for protection under Chapter 11 of the United States Bankruptcy Code on November 12, 1996 and the equivalent of a receiver has been appointed. Accordingly, for the nine months ended November 30, 1998, an impairment loss in the amount of $3,191,072 has been recognized. As of November 30, 1998, the building was written down to zero. Note 5 - Sale of Properties On November 25, 1998, the Parktowne, Ltd., Westwood Apartments Company, Ltd., Eastwyck III, Ltd., New Jersey, Ltd., and Zeigler Boulevard, Ltd. Partnerships entered into purchase and sale agreements to sell the properties and the related assets and liabilities to an unaffiliated third party for a purchase price of $2,500,000, $2,628,571, $1,328,571, $2,057,143 and $2,057,143, respectively. During December 1998, the purchaser failed to provide the necessary down payment thereby terminating the contract. The Local General Partner is actively pursuing other interested purchasers. On June 24, 1998, the Pacific Palm Limited Partnership entered into a contract to sell the property and the related assets and liabilities to an unaffiliated third party for a price of $4,500,000. The 15 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) buyer failed to close and a contract termination notice was sent on September 22, 1998. The Local General Partner is actively pursuing other interested purchasers. On April 27, 1998, the property and the related assets and liabilities of Riverside Gardens Limited Partnership ("Riverside") and Cudahy Gardens Limited Partnership ("Cudahy") were sold to a third party for approximately $1,834,000 and $232,000, respectively, resulting in losses of approximately $473,000 and $240,000 plus the assumption of the related mortgage notes. The Partnership used approximately $442,000 and $47,000, respectively, of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon which had total outstanding balances of approximately $5,402,000 and $2,672,000, respectively, resulting in forgiveness of indebtedness income of approximately $4,961,000 and $2,625,000, respectively. For tax purposes, the entire gain to be realized by the Partnership is anticipated to be approximately $6,500,000 and $3,600,000, respectively. On April 21, 1998, the Partnership's limited Partnership interest in Oklahoma City - Town and Country Village Apartments, Ltd. ("Town and Country") was assigned to the local general partner effective January 15, 1998, resulting in a gain of approximately $4,587,000. The related purchase money note and interest thereon were canceled resulting in forgiveness of indebtedness income of approximately $7,404,000. For tax purposes, the entire gain to be realized by the Partnership is anticipated to be approximately $11,500,000. On January 16, 1998, the property and related assets and liabilities of Country Ltd. ("Country") and Northbrook III, Ltd. ("Northbrook") were sold to a third party for approximately $3,247,000 and $1,998,000, respectively, resulting in gains of approximately $937,000 and $570,000, respectively. The Partnership used approximately $860,000 and $90,000, respectively, of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon which had total outstanding balances of $2,517,000 and $77,000, respectively, resulting in forgiveness of indebtedness income (loss) of $1,656,000 and $(13,000), respectively. For tax purposes, the entire gain to be realized by the Part- 16 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) nership is anticipated to be approximately $4,200,000 and $1,600,000, respectively. On September 9, 1997, the property and the related assets and liabilities of South Munjoy Associates, Limited ("South Munjoy") were sold to Montfort Housing Limited Partnership (which is an affiliate of Mainland Development Company of Portland, Maine) for $3,000,000, resulting in a loss in the amount of $254,466. The Partnership used $1,264,735 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon which had a total outstanding balance of $3,247,658, resulting in forgiveness of indebtedness income of $1,982,923. On April 25, 1997, the Partnership's Local Partnership Interest in Los Caballeros Apartments ("Los Caballeros") was sold to the Local General Partners of Los Caballeros for $100,000, resulting in a gain in the amount of $483,618. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon which had a total outstanding balance of $3,187,950, resulting in forgiveness of indebtedness income. Note 6 - Commitments and Contingencies There were no material changes, except as set forth in Note 5, and/or additions to disclosures regarding the Subsidiary Partnerships which were included in the Partnership's Annual Report on Form 10-K for the period ended February 28, 1998. Note 7 - Subsequent Events In order to facilitate an orderly disposition of the Partnership's assets the Partnership formed two new entities: Cambridge Liquidating Trust LLC (the "Trust"), a Massachusetts limited liability company which is owned 99.99% by the Partnership and .01% by affiliates of Related; and, Cambridge Liquidating Trust II ("Trust II"), a Massachusetts general partnership which is owned 99.99% by the Partnership and .01% by J. Michael Fried. On December 30, 1998 the Partnership contributed its limited partnership interest in Bethany Glen Associates, Westwood, Ltd., 17 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1998 (Unaudited) Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd. and Wingate Associates, Ltd. to the Trust. On December 31, 1998 the Partnership contributed its partnership interests in Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd., El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments, Ltd. to Trust II. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership, therefore, there should not be any tax effect to the limited partners of the Partnership. 18 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Partnership's primary sources of funds are (i) cash distributions from operations and sales of the Local Partnerships in which the Partnership has invested, (ii) interest earned on funds and (iii) cash in working capital reserves. All of these sources of funds are available to meet the obligations of the Partnership. During the nine months ended November 30, 1998 and 1997, the Partnership received cash flow distributions aggregating $142,973 and $307,277, respectively, of which $85,794 and $200,684 was used to pay interest on the Purchase Money Notes. In addition, the Partnership received a distribution of proceeds from the sale of property of four Local Partnerships aggregating $1,847,379 for the nine months ended November 30, 1998 and proceeds from the sale of its Local Partnership Interest in one Local Partnership and the sale of the property of another Local Partnership aggregating $2,135,762 for the nine months ended November 30, 1997, of which $488,712 and $1,264,735 was used to pay principal on the Purchase Money Notes, respectively. During the nine months ended November 30, 1998, cash and cash equivalents of the Partnership and its thirty-five consolidated Local Partnerships increased approximately $1,203,000. This increase was due to cash provided by operating activities ($1,660,000), a decrease in certificates of deposit ($206,000) and proceeds from sale of properties ($7,036,000) which exceeded principal payments of mortgage notes payable ($4,242,000), principal payments of purchase money notes payable ($100,000), an increase in mortgage escrow deposits ($435,000), distributions paid to partners ($2,031,000), a decrease in minority interest ($500,00) and acquisitions of property and equipment ($389,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is gain on sale of properties ($5,382,000), forgiveness of indebtedness income ($15,005,000), a loss on impairment of assets ($3,191,000) and depreciation ($3,205,000). The Partnership had a working capital reserve of approximately $3,062,000 and $2,339,000 (which does not include approximately $2,031,000 of net proceeds from sale of properties which was distributed to limited partners and General Partners in March 1998) at November 30, 1998 and February 28, 1998, respectively, of 19 which approximately $0 and $206,000 was restricted at November 30, 1998 and 1997 to secure an overdraft in Town and Country's bank account and to secure operating credit lines at five other Local Partnerships. The working capital reserve is temporarily invested in bank certificates of deposits or money market accounts which can be easily liquidated to meet obligations as they arise. The General Partners believe that the Partnership's reserves, net proceeds from future sales and future cash flow distributions will be adequate for its operating needs, and plans to continue investing available reserves in short term investments. In March 1998 and 1997, a distribution of approximately $2,011,000 and $1,100,000, and $21,000 and $11,000 was paid to the limited partners and General Partners, respectively, from net proceeds from the sale of properties. Of the total distributions of approximately $2,031,000 and $1,111,000 for the nine months ended November 30, 1998 and 1997, $0 and $1,111,000 ($110.68 per unit or 100%) represents a return of capital determined in accordance with generally accepted accounting principles. Partnership management fees owed to the General Partners amounting to approximately $900,000 and $426,000 were accrued and unpaid as of November 30, 1998 and February 28, 1998. The Local Partnerships which receive government assistance are subject to low-income use restrictions which limit the owners' ability to sell or refinance the properties. In order to maintain the existing inventory of affordable housing, Congress passed a series of related acts including the Emergency Low Income Preservation Act of 1987, the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (together the "Preservation Acts") and the Housing Opportunity Program Extension Act of 1996 (the "1996 Act"). In exchange for maintaining the aforementioned use restrictions, the Preservation Acts provide financial incentives for owners of government assisted properties. The 1996 Act provides financial assistance by funding the sale of such properties to not-for-profit owners and also restores the owners ability to prepay their HUD mortgage and convert the property to condominiums or market-rate rental housing. Local general partners have filed for incentives under the Preservation Acts or the 1996 Act for the following local Partnerships: San Diego - Logan Square Gardens Company, Albuquerque - Lafayette Square Apts. Ltd., Westgate Associates Limited, Riverside Gardens, a Limited Partnership, Pacific Palms, a Limited Partnership, Canton Commons Associates, Rosewood Manor Associates, Bethany Glen Associates and South Munjoy Associates, Ltd. The South Munjoy Associates, Ltd. property and the Riverside Gardens property were sold on 20 September 9, 1997 and April 27, 1998, respectively. The local general partners of the other properties are either negotiating purchase and sale contracts or exploring their alternatives under the 1996 Act. On October 21, 1998 President Clinton signed H.R. 4194 into law. The bill provided that owners of a property that was eligible for prepayment had to give notice of such prepayment to both his tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The Local General Partners of one Subsidiary Partnership, Westgate Associates, Limited ("Westgate"), have signed an option agreement to sell the project to the Vermont Housing Finance Agency, subject to HUD approval and other contingencies, on or before December 31, 1998. The option has expired and the Local General Partners are pursuing other opportunities. The Partnership's investment in Westgate was approximately $849,000 at November 30, 1998. Westgate's assets constituted approximately 3% of the consolidated total assets at November 30, 1998. For a discussion of Purchase Money Notes Payable see Note 2 to the financial statements. For a discussion of the Partnership's sale of properties see Note 5 to the financial statements. For a discussion of contingencies affecting certain Local Partnerships, see Note 6 to the financial statements. Since the maximum loss the Partnership would be liable for is its net investment in the respective Local Partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way. Management has been in contact with all the Local Partnerships in the southeast region and does not anticipate any significant increases to repairs and maintenance due to the effect of Hurricane Georges on the portfolio. 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 21 believes the only impact would be from laws that have not yet been adopted. The portfolio is diversified by the location of the properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining properties in the portfolio may be experiencing upswings. However, the geographic diversifications of the portfolio may not protect against a general downturn in the national economy. Results of Operations The results of operations of the Partnership, as well as the Local Partnerships, remained fairly consistent during the three and nine months ended November 30, 1998 and 1997 excluding South Munjoy, Country, Northbrook III, Riverside and Cudahy which sold their properties and Los Cabelleros, Clinton Plaza, Clinton Plaza #2, Grosvenor Plaza, Grosvenor Plaza #2 and Town and Country in which the Partnership's interest was sold (collectively the "Sold Assets") and loss on impairment of assets. Contributing to the relatively stable operations at the Local Partnerships is the fact that a large portion of the Local Partnerships are operating under Government Assistance Programs which provide for rental subsidies and/or reductions of mortgage interest payments under HUD Section 8 and Section 236 Programs. 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 mortgage interest. In addition, the Partnership incurred interest expense relating to the Purchase Money Notes issued when the Local Partnership Interests were acquired. Rental income decreased approximately 22% and 20% for the three and nine months ended November 30, 1998 as compared to 1997. Excluding the Sold Assets, rental income increased approximately 2% and 1% for the three and nine months ended November 30, 1998 as compared to 1997 primarily due to rental rate increases. Other income decreased approximately $38,000 and $124,000 for the three and nine months ended November 30, 1998 as compared to 1997. Excluding the Sold Assets such income increased approximately $28,000 and $37,000 for the three and nine months ended November 30, 1998, as compared to 1997, primarily due to 22 a increase in interest income and late charges at four Local Partnerships. Total expenses, excluding the Sold Assets and loss on impairment of assets, remained fairly consistent with an increase of approximately 1% and a decrease of approximately 1% for the three and nine months ended November 30, 1998 as compared to 1997. Administrative and management, administrative and management-related parties, operating, repairs and maintenance, taxes and insurance, interest and depreciation expense decreased approximately $204,000 and $752,000, $56,000 and $276,000, $213,000 and $956,000, $427,000 and $1,259,000, $314,000 and $690,000, $518,000 and $1,509,000, $400,000 and $1,108,000, respectively, for the three and nine months ended November 30, 1998 as compared to 1997 primarily due to decreases relating to the Sold Assets. Excluding the Sold Assets, and Pacific Palm for depreciation only, such expenses remained fairly consistent with (decreases) increases of approximately $62,000 and ($50,000), $45,000 and ($2,000), ($1,000) and ($170,00), $116,000 and $164,000, ($67,000) and ($36,000), ($33,000) and ($48,000), ($42,000) and ($135,000), respectively, for the three and nine months ended November 30, 1998 as compared to 1997. Pacific Palm is not depreciated during the quarter because it is classified an asset held for sale. Year 2000 Compliance The Partnership utilizes the computer services of an affiliate of the General Partners. The affiliate of the General Partners is in the process of upgrading its computer information systems to be year 2000 compliant and beyond. The Year 2000 compliance issue concerns the inability of a computerized system to accurately record dates after 1999. The affiliate of the General Partners recently underwent a conversion of its financial systems applications and is in the process of upgrading and testing the in house software and hardware inventory. The workstations that experienced problems from this process were corrected with an upgrade patch. The affiliate of the General Partners have incurred costs of approximately $1,000,000 to date and estimates the total costs to be approximately $2,000,000. These costs are not being charged to the Partnership. In regard to third parties, the Partnership's General Partners are in the process of evaluating the potential adverse impact that could result from the failure of material service providers to be year 2000 compliant. A detailed survey and assessment of third party readiness will be sent to material third parties in the fourth quarter of 1998. The results of the surveys will be 23 compiled in early 1999. No estimate can be made at this time as to the impact of the readiness of such third parties. The Partnership's General Partners plan to have these issues fully assessed by early 1999, at which time the risks will be addressed and a contingency plan will be implemented if necessary. 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Partnership is a Plaintiff in the Oklahoma County District Court in Oklahoma against Jerry L. Womack and Womack Property Management, Inc., an Oklahoma corporation. In this action entitled Shearson + Related Housing Properties Limited Partnership and Shearson/Related Housing Associates Limited Partnership v. Jerry L. Womack and Womack Property Management, Inc., the Partnership seeks judgment for damages caused by the individual defendant's resignation as general partner of Rolling Meadows of Chickasha, Ltd. (Rolling Meadows), of which the Partnership was a limited partner, and by the corporate defendant's mismanagement of the apartment project owned by Rolling Meadows. The individual defendant has counterclaimed against the Plaintiffs, alleging that they breached an agreement to advance funds to Rolling Meadows sufficient to pay operating losses on the property, thereby damaging such defendant in an amount exceeding $10,000. The corporate defendant has counterclaimed against the Plaintiffs for unpaid management fees and expenses approximating $6,000. Both counterclaims seek costs and attorneys' fees. The parties have agreed as a final step to have the case heard in a non-binding proceeding. Such mediation is expected to begin in January 1999. Discovery is continuing in the action. The Plaintiffs are responding vigorously to the counterclaims and intend to continue doing so. While it is impossible to predict with certainty, counsel believes the counter claims have no substantial merit and that an outcome unfavorable to the Partnership is unlikely. Item 2. Changes in Securities - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other information - None 25 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27 Financial Data Schedule (filed herewith) (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP (Registrant) By: GOVERNMENT ASSISTED PROPERTIES, INC., a General Partner Date: January 5, 1999 By: /s/ Alan P. Hirmes ------------------------------- Alan P. Hirmes, Vice President and Principal Financial Officer Date: January 5, 1999 By: /s/ Glenn F. Hopps ------------------------------- Glenn F. Hopps, Treasurer and Principal Accounting Officer By: RELATED HOUSING PROGRAMS CORPORATION, a General Partner Date: January 5, 1999 By: /s/ Alan P. Hirmes ------------------------------- Alan P. Hirmes, Vice President and Principal Financial Officer Date: January 5, 1999 By: /s/ Glenn F. Hopps ------------------------------- Glenn F. Hopps, Treasurer and Principal Accounting Officer EX-27 2 FDS THIRD QUARTER
5 The Schedule contains summary financial information extracted from the financial statements for Cambridge + Related Housing Properties L.P. and is qualified in its entirety by reference to such financial statements 0000718915 Cambridge + Related Housing Properties L.P. 1 9-MOS FEB-28-1999 MAR-01-1998 NOV-30-1998 13,939,840 0 318,583 0 0 1,362,603 127,600,945 67,167,002 76,054,969 5,146,014 133,996,598 0 0 0 (63,087,643) 76,054,969 0 22,576,032 0 0 16,899,080 3,191,072 4,062,678 0 0 0 0 15,005,152 0 12,807,194 1,263 0
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