Back to GetFilings.com
UNITED STATES
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 May 31, 2002
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 - Financial Information
Item 1. Financial Statements
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
MAY 31, FEBRUARY 28,
2002 2002
------------ ------------
ASSETS
Property and equipment, net of
accumulated depreciation of
$10,925,429 and $10,819,771,
respectively $ 5,836,108 $ 5,941,766
Property and equipment-held for
sale, net of accumulated
depreciation of $14,646,604
and $17,546,742, respectively 12,937,354 16,273,634
Cash and cash equivalents 778,688 780,650
Cash - restricted for tenants'
security deposits 221,862 235,380
Mortgage escrow deposits 6,014,861 6,203,393
Rents receivable 45,713 194,567
Prepaid expenses and other assets 487,318 1,291,316
------------ -----------
Total assets $26,321,904 $30,920,706
============ ===========
2
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
MAY 31, FEBRUARY 28,
2002 2002
------------ ------------
LIABILITIES AND PARTNERS'
DEFICIT
Liabilities:
Mortgage notes payable $14,119,479 $ 16,740,978
Purchase money notes payable
(Note 2) 14,813,743 16,329,543
Due to selling partners (Note 2) 22,520,010 24,698,606
Accounts payable, accrued
expenses and other liabilities 1,272,922 2,362,862
Tenants' security deposits payable 221,862 235,380
Due to general partners of
subsidiaries and their affiliates 10,923 8,423
Due to general partners and
affiliates 2,678,428 2,447,759
----------- ------------
Total liabilities 55,637,367 62,823,551
----------- ------------
Minority interest 27,704 153,784
----------- ------------
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (28,601,208) (31,287,535)
General partners (741,959) (769,094)
----------- ------------
Total partners' deficit (29,343,167) (32,056,629)
----------- ------------
Total liabilities and partners' deficit $26,321,904 $ 30,920,706
=========== ============
See Accompanying Notes to Consolidated Financial Statements.
3
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
MAY 31,
---------------------------------
2002 2001
---------------------------------
Revenues:
Rentals, net $2,505,909 $2,952,348
Other 61,929 104,373
Gain (loss) on sale of properties
(Note 4) 661,280 (68,323)
---------- ------------
Total revenues 3,229,118 2,988,398
---------- -----------
Expenses
Administrative and management 889,996 880,374
Administrative and management-
related parties (Note 3) 313,214 387,293
Operating 510,717 694,797
Repairs and maintenance 515,151 641,136
Taxes and insurance 296,895 351,726
Interest 437,232 571,949
Depreciation 105,658 288,023
---------- -----------
Total expenses 3,068,863 3,815,298
---------- -----------
Gain (loss) before minority
interest and extraordinary item 160,255 (826,900)
Minority interest in loss (income)
of subsidiaries 125,715 (462)
---------- -----------
Gain (loss) before extraordinary
item 285,970 (827,362)
Extraordinary item-forgiveness
of indebtedness income
(Note 4) 2,427,492 901,219
---------- -----------
Net income $2,713,462 $ 73,857
========== ===========
See Accompanying Notes to Consolidated Financial Statements.
4
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
MAY 31,
---------------------------------
2002 2001
---------------------------------
Income (loss) before extraordinary
item - limited partners $ 283,110 $ (819,088)
Extraordinary item - limited partners 2,403,217 892,206
---------- ----------
Net income - limited partners $2,686,327 $ 73,118
========== ==========
Number of limited Partnership
units outstanding 10,038 10,038
========== ==========
Income (loss) before extraordinary
item per limited partnership unit $ 28.20 $ (81.60)
Extraordinary item per limited
partnership unit 239.41 88.88
---------- ----------
Net income per limited partnership
unit $ 267.61 $ 7.28
========== ==========
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, 2002 $(32,056,629) $(31,287,535) $(769,094)
Net income -
three months ended
May 31, 2002 2,713,462 2,686,327 27,135
------------ ------------ ----------
Balance-
May 31, 2002 $(29,343,167) $(28,601,208) $ (741,959)
============ ============ ==========
See Accompanying Notes to Consolidated Financial Statements.
6
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
THREE MONTHS ENDED
MAY 31,
--------------------------------
2002 2001
--------------------------------
Cash flows from operating activities:
Net income $2,713,462 $ 73,857
---------- ---------
Adjustments to reconcile net income
to net cash provided by
operating activities:
(Gain) loss on sale of properties
(Note 4) (661,280) 68,323
Extraordinary item - forgiveness
of indebtedness income (Note 4) (2,427,492) (901,219)
Depreciation 105,658 288,023
Minority interest in (loss) income
of subsidiaries (125,715) 462
Increase in cash-restricted
for tenants' security deposits (14,694) (3,929)
Decrease in mortgage escrow deposits 273,287 8,655
Decrease in rents receivable 148,854 154,862
Decrease in prepaid expenses and
other assets 507,829 89,088
Increase in due to selling partners 328,159 551,435
Decrease in accounts payable, accrued
expenses and other liabilities (925,192) (326,553)
Decrease in tenants' security deposits
payable (897) (2,250)
Increase in due to general partners
of subsidiaries and their affiliates 2,500 92,947
Decrease in due to general partners of
subsidiaries and their affiliates 0 (112,998)
Increase in due to general partners
and affiliates 247,395 60,899
---------- ---------
Total adjustments (2,541,588) (32,255)
---------- ---------
Net cash provided by
operating activities 171,874 41,602
---------- ---------
7
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(Continued)
THREE MONTHS ENDED
MAY 31,
--------------------------------
2002 2001
--------------------------------
Cash flows from investing activities:
Proceeds from sale of properties 596,872 475,000
Acquisitions of property and
equipment (20,615) (127,741)
Increase in mortgage escrow deposits (166,799) (148,020)
------------ -----------
Net cash provided by investing
activities 409,458 199,239
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (186,509) (680,960)
Decrease in minority interest (365) (500)
Distributions paid to partners 0 (516,300)
Principal payments of purchase money
notes payable (340,000) 0
Payments to selling partners (56,420) (141,417)
----------- -----------
Net cash used in financing activities (583,294) (1,339,177)
----------- -----------
Net decrease in cash and
cash equivalents (1,962) (1,098,336)
Cash and cash equivalents at
beginning of period 780,650 2,477,459
----------- -----------
Cash and cash equivalents at
end of period $ 778,688 $ 1,379,123
=========== ===========
8
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(Continued)
THREE MONTHS ENDED
MAY 31,
---------------------------------
2002 2001
---------------------------------
Supplemental disclosures of
noncash activities:
Forgiveness of indebtedness
Decrease in purchase money
notes payable $ (720,000) $ (406,850)
Decrease in due to selling partners (1,685,795) (494,368)
Decrease in accounts payable,
accrued expenses and other liabilities (21,697) 0
Summarized below are the components
of the gain on sale of properties:
Decrease in property and
equipment held for sale, net
of accumulated depreciation $ 3,356,895 $ 649,092
Decrease in cash-restricted for
tenants' security deposits 28,212 4,970
Decrease in mortgage escrow deposits 82,044 24,607
Decrease in prepaid expenses and
other assets 296,169 5,976
(Decrease) increase in accounts
payable, accrued expenses and
other liabilities (143,051) 90,462
(Decrease) increase in tenants'
security deposits payable (12,622) 1,209
Decrease in due to general
partners of subsidiaries and
their affiliates 0 (92,947)
Decrease in due to selling partners (764,540) (99,838)
Decrease in purchase money notes
payable (455,800) 0
Decrease in mortgage notes payable (2,434,990) 0
Decrease in due to general partner
and their affiliates (16,726) (40,208)
See Accompanying Notes to Consolidated Financial Statements.
9
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
NOTE 1 - GENERAL
The consolidated financial statements for the three months ended May 31, 2002
and 2001, include the accounts of Cambridge + Related Housing Properties Limited
Partnership, a Massachusetts limited partnership (the "Partnership"), and twelve
and nineteen Subsidiary Partnerships ("Subsidiaries", "Subsidiary Partnerships"
or "Local Partnerships"), respectively. 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 one of its general partners (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 May
31. All Subsidiaries have fiscal quarters ending March 31. Accounts of
Subsidiaries have been adjusted for intercompany transactions from April 1
through May 31. The Partnership's fiscal quarter ends on May 31 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.
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 for both the three months ended May 31, 2002 and
2001, respectively. The Partnership's investment in each Subsidiary is equal to
the respective Subsidiary's partners' equity less minority interest capital, if
any.
10
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
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, 2002. 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 May 31, 2002, the results of operations and
cash flows for the three months ended May 31, 2002 and 2001. However, the
operating results for the three months ended May 31, 2002 may not be indicative
of the results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP 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, 2002 Annual Report on Form 10-K.
NOTE 2 - PURCHASE MONEY NOTES PAYABLE
Nonrecourse Purchase Money Notes (the "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 Purchase Money Note relates.
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 May 31, 2002, the maturity dates 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 extended
due date of each of the Purchase Money Notes, respectively. Continued accrual of
such interest without payment would impact the effective rate of the Purchase
Money Notes, specifically by reducing the current effective interest rate of 9%.
The exact effect is not determin-
11
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
able inasmuch as it is dependent on the actual future interest payments and
ultimate repayment dates of the Purchase Money Notes. Unpaid interest of
$22,504,011 and $24,682,606 at May 31, 2002 and February 28, 2002, 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
Partnerships interest ("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 Purchase Money Notes. The Partnership sent an extension notice to each
Purchase Money Note holder that pursuant to the Purchase Money Note, it was
extending the maturity. However in certain cases, the Partnership did not pay
the extension fee at that time, deferring such payment to the future. Extension
fees in the amount of $1,518,062 were incurred by the Partnership through May
31, 2002. All Purchase Money Notes are now extended with maturity dates ranging
from August to October 2002. Extension fees of $652,026 were accrued and added
to the Purchase Money Note balance.
The Partnership expects that upon final maturity it will be required to
refinance or sell its investments 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 unlikely that the proceeds from such sales
will be sufficient to meet the outstanding balances. Management is working with
the Purchase Money Note holders to restructure and/or refinance the Purchase
Money 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.
12
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
During the three months ended May 31, 2002 and 2001, the Partnership received
cash flow distributions aggregating $94,026 and $36,801, respectively, of which
$56,419 and $22,083 was used to pay interest on the Purchase Money Notes. In
addition, the Partnership received a distribution of proceeds from the sales of
Local Partnerships aggregating $591,871 and $88,387 of which $340,000 and
$84,877 was used to pay principal and interest on the Purchase Money Notes
during the three months ended May 31, 2002 and 2001, respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
The costs incurred to related parties for the three months ended May 31, 2002
and 2001 were as follows:
THREE MONTHS ENDED
MAY 31,
----------------------------
2002 2001
----------------------------
Partnership management fees (a) $ 242,778 $ 241,953
Expense reimbursement (b) 36,009 30,458
Local administrative fee (d) 3,125 4,000
---------- ---------
Total general and administrative -
General Partners 281,912 276,411
---------- ---------
Property management fees incurred to
affiliates of the Subsidiary Partnerships'
general partners (c) 31,302 110,882
---------- ---------
general and administrative-related parties $ 313,214 $ 387,293
========== =========
(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 $1,952,000 and $1,759,000 were accrued and
unpaid as of May 31, 2002 and February 28, 2002, respectively. The General
Partners' fees are being paid currently, other than the Partnership management
fees that were accrued and continue to be deferred.
13
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
(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 Partnership.
These services include site visits and evaluations of the Subsidiary
Partnerships' performance.
(c) Property management fees incurred by Local Partnerships to affiliates of the
Local Partnerships amounted to $31,302 and $110,882, for the three months ended
May 31, 2002 and 2001, respectively. No fees 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 - 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 May 31, 2002, the Partnership has disposed of thirty-two
of its forty-four original investments. Six additional investments are listed
for sale and the Partnership anticipates that the six remaining investments will
be listed for sale by December 31, 2002. There may 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 Partnerships and the current economic conditions including
changes in tax laws, it is unlikely that the proceeds from such sales received
by the Partnership will be sufficient to return to the limited partners their
original investment.
On March 16, 2001, the property and the related assets and liabilities of
Char-Mur Apartments ("Char-Mur") were sold to an affiliate of the
14
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
Local General Partner for $475,000, resulting in a loss in the amount of
approximately $193,000. The Partnership used approximately $85,000 to settle the
associated Purchase Money Note and accrued interest thereon, which had a total
outstanding balance of approximately $986,000, resulting in forgiveness of
indebtedness income of $901,000. In addition, approximately $21,000 of accounts
payable to an unrelated party were forgiven in the current year.
On March 27, 2002, the Partnership's limited partnership interest in Eastwyck
III, Ltd. Limited Partnership ("Eastwyck") was sold to the Local General
Partners for approximately $5,000 resulting in a loss of approximately $337,000.
No proceeds were used to settle the associated Purchase Money Note and accrued
interest thereon, which had a total outstanding balance of approximately
$1,220,000 resulting in a gain on sale of approximately $1,220,000.
On March 27, 2002, the property and the related assets and liabilities of
Ziegler Boulevard, Ltd. ("Ziegler") were sold to an unaffiliated third party
purchaser for approximately $2,379,000 resulting in a loss in the amount of
approximately $222,000. The Partnership used approximately $340,000 to settle
the associated Purchase Money Note and accrued interest thereon, which had a
total outstanding balance of approximately $2,746,000 resulting in forgiveness
of indebtedness income of approximately $2,406,000.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The following disclosure includes changes and/or additions to disclosures
regarding the Subsidiary Partnership which were included in the Partnership's
Annual Report on Form 10-K for the period ended February 28, 2002.
a) Purchase Money Notes
As part of the purchase price of its investment in the Local Partnerships, the
Partnership issued approximately $61,029,000 of Purchase Money Notes. As of May
31, 2002, unpaid accrued interest on the
15
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
May 31, 2002
(Unaudited)
Purchase Money Notes amounted to approximately $22,504,000. The principal of and
all accrued interest on the Purchase Money Notes is due at maturity. 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 Money
Note holder that pursuant to the note, it was extending the maturity. However in
certain cases, 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.
16
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 (ii) cash distributions from sales of the Local Partnerships in which
the Partnership has invested, (iii) interest earned on funds and (iv) cash in
working capital reserves. All of these sources of funds are available to meet
the obligations of the Partnership.
During the three months ended May 31, 2002 and 2001, the Partnership received
cash flow distributions aggregating $94,026 and $36,801, respectively, of which
$56,419 and $22,083, respectively, was used to pay interest on the Purchase
Money Notes. In addition, the Partnership received a distribution of proceeds
from the sales of Local Partnerships aggregating $591,871 and $88,387, of which
$340,000 and $84,877 was used to pay principal and interest on the Purchase
Money Notes during the three months ended May 31, 2002 and 2001, respectively.
During the three months ended May 31, 2002, cash and cash equivalents of the
Partnership and its twelve consolidated Local Partnerships decreased
approximately ($2,000). This decrease was primarily due to principal payments of
mortgage notes payable ($187,000), an increase in mortgage escrow deposits
relating to investing activities ($167,000), payments to selling partners
($56,000), acquisitions of property and equipment ($21,000) and principal
payments of Purchase Money Notes payable ($340,000) which exceeded proceeds from
the sale of properties ($597,000) and cash provided by operating activities
($172,000). Included in the adjustments to reconcile the net income to cash
provided by operating activities is gain on sale of properties ($661,000),
forgiveness of indebtedness income ($2,427,000) and depreciation ($106,000).
The Partnership has a working capital reserve of approximately $306,000 at May
31, 2002. The working capital reserve is temporarily invested in 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 plan to continue investing available reserves in short term
investments. In March 2002 and 2001, a distribution of approximately $0 and
$511,000 and $0 and $5,000 was paid to the
17
limited partners and General Partners, respectively, from net proceeds from the
sale of properties. None of the total distributions of approximately $0 and
$516,000 for the three months ended May 31, 2002 and 2001, was deemed to be a
return of capital in accordance with GAAP.
Partnership management fees owed to the General Partners amounting to
approximately $1,952,000 and $1,759,000 were accrued and unpaid as of May 31,
2002 and February 28, 2002, respectively. The General Partners' fees are being
paid currently, other than the Partnership management fees that were accrued and
continue to be deferred.
The Local Partnerships that 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
provided financial incentives for owners of government assisted properties. The
1996 Act provided financial assistance by funding the sale of such properties to
not-for-profit owners and also restores the owners ability to prepay their U.S.
Department of Housing and Urban Development ("HUD") mortgage and convert the
property to condominiums or market-rate rental housing. Local general partners
had 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 Limited Partnership, Pacific Palms, Canton Commons Associates,
Rosewood Manor Associates, Bethany Glen Associates and South Munjoy Associates,
Limited. As of May 31, 2002, all of these Local Partnerships were sold except
for Logan Square and Lafayette Square. The Preservation Acts have subsequently
been repealed or revoked. The Local General Partner of the Logan Square and
Lafayette Square properties has signed purchase and sale contracts.
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 4 to the
financial statements.
18
For a discussion of contingencies affecting certain Local Partnerships, see Note
5 to the financial statements and Part II, Item 1 of this report. 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 although the Partnership would lose its entire
investment in the property and any ability for future appreciation.
Management is not aware of any trends or events, commitments or uncertainties
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way. Management believes the only impact would be from
laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
United States 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
During the periods ended May 31, 2002 and 2001, Char-Mur Apartments, Ltd.
Rolling Meadows Apartments, Ltd., and Zeigler Boulevard Ltd. sold their
properties and the related assets and liabilities and the Partnership's Limited
Partnership Interest in Buena Vista Manor Apartments Ltd., Cedar Hill Apartments
Ltd., Crosset Apartments Ltd. and Eastwyck III, Ltd. was sold (collectively the
"Sold Assets"). Excluding the Sold Assets, the results of operations of the
Partnership, as well as the Local Partnerships, remained fairly consistent
during the three months ended May 31, 2002 and 2001, other than other income,
operating, gain on sale of properties and forgiveness of indebtedness income.
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 15% for the three months ended May 31,
2002, as compared to 2001. Excluding the Sold Assets, rental income increased
approximately 8% primarily due to rental rate increases and decreases in
vacancies at several Local Partnerships.
19
Other income decreased approximately $42,000 for the three months ended May 31,
2002, as compared to 2001. Excluding the Sold Assets, other income decreased
approximately $23,000, primarily due to larger cash and cash equivalent balances
earning interest in 2001 at the Partnership level as well as three Local
Partnerships.
Total expenses, excluding the Sold Assets, operating and repairs and
maintenance, remained fairly consistent with an increase of approximately 5% for
the three months ended May 31, 2002, as compared to 2001.
Operating decreased approximately $184,000 for the three months ending May 31,
2002, as compared to 2001. Excluding the Sold Assets, operating decreased
approximately $113,000 primarily due to a decrease in utility costs at four
Local Partnerships.
Repairs and maintenance decreased approximately $126,000 for the three months
ending May 31, 2002, as compared to 2001. Excluding the Sold Assets, repairs and
maintenance increased approximately $47,000 primarily due to repairs to heating
and air conditioning at one Local Partnership.
Administrative and management-related parties, taxes and insurance, interest and
depreciation expense decreased approximately $74,000, $55,000, $135,000 and
$182,000 for the three months ended May 31, 2002, as compared to 2001, primarily
due to decreases relating to the Sold Assets. Wingate Associates, Limited, San
Diego-Logan Square Gardens Company, Albuquerque - Lafayette Square Apartments,
Ltd., El Paso - Gateway East Ltd., Bay Village Co. and Fort Worth - Northwood
Apartments Ltd. are not depreciated during the period ended May 31, 2002 because
they are classified as assets held for sale.
Losses and gains on sales of properties and forgiveness of indebtedness income
will continue to fluctuate as a result of the disposition of properties (see
Note 4 to the financial statements).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - This information is incorporated by reference
in Note 5 to the Financial Statements.
Item 2. Changes in Securities and Use of Proceeds - 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
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter.
21
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: July 8, 2002
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: July 8, 2002
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: July 8, 2002
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive Financial Officer
Date: July 8, 2002
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer