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 December 25, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-13782
CAMBRIDGE ADVANTAGED
PROPERTIES LIMITED PARTNERSHIP
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3228969
- ------------------------------- -------------------
(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
------- --------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes No X
------- --------
PART I - Financial Information
Item 1. Financial Statements
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
STATEMENTS OF NET ASSETS IN LIQUIDATION
AS OF DECEMBER 25, 2004
CONSOLIDATED BALANCE SHEET
AS OF MARCH 25, 2004
(Unaudited)
============ ============
December 25, March 25,
2004 2004*
============ ============
ASSETS
Property and equipment - less
accumulated depreciation of
$0 and $3,487,890,
respectively $ 0 $ 3,347,387
Cash and cash equivalents 465,057 860,978
Cash - restricted for tenants'
security deposits 0 198,829
Mortgage escrow deposits 0 2,039,630
Prepaid expenses and other assets 295,097 370,579
------------ ------------
Total assets relating to operating activities 760,154 6,817,403
------------ ------------
Assets of discontinued operations
(Note 8) 1,490,020 1,614,379
------------ ------------
Total assets $ 2,250,174 $ 8,431,782
============ ============
2
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
STATEMENTS OF NET ASSETS IN LIQUIDATION
AS OF DECEMBER 25, 2004
CONSOLIDATED BALANCE SHEET
AS OF MARCH 25, 2004
(Unaudited)
(continued)
============ ============
December 25, March 25,
2004 2004*
============ ============
LIABILITIES AND PARTNERS' DEFICIT
AND NET ASSETS IN LIQUIDATION
Liabilities
Mortgage notes payable $ 0 $ 2,128,604
Purchase Money Notes payable
(Note 2) 0 2,009,344
Due to selling partners (Note 2) 0 5,518,708
Accounts payable, accrued
expenses and other liabilities 11,365 42,571
Tenants' security deposits payable 0 73,817
Due to general partners and
affiliates 295,550 4,356,934
------------ ------------
Total liabilities relating to operating
activities 306,915 14,129,978
------------ ------------
Minority interest relating to operating
activities 0 (94,173)
------------ ------------
Liabilities of discontinued operation
(including minority interest) (Note 8) 0 668,462
------------ ------------
Commitments and contingencies
(Note 6)
Partners' deficit and net assets in liquidation:
Limited partners 2,461,350 (5,672,236)
General partners (518,091) (600,249)
------------ ------------
Total partners' deficit and net assets
in liquidation 1,943,259 (6,272,485)
------------ ------------
Total liabilities and partners' deficit and net
assets in liquidation $ 2,250,174 $ 8,431,782
============ ============
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
3
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the period For the period
September 26, Three months March 26, Nine months
2004 ended 2004 through ended
Through December 25, December 15, December 25,
December 15, 2004 2003* 2004 2003*
----------------- -------------- -------------- ---------------
Operations:
Revenues:
Other $ 7,160 $ 7,580 $ 21,029 $ 23,242
----------- ----------- ----------- -----------
Total revenues 7,160 7,580 21,029 23,242
----------- ----------- ----------- -----------
Expenses
Administrative and management 35,958 20,750 75,381 188,280
Administrative and management-
related parties (Note 3) 307,820 302,595 925,890 926,009
Interest 97,164 84,443 273,319 340,294
----------- ----------- ----------- -----------
Total expenses 440,942 407,788 1,274,590 1,454,583
----------- ----------- ----------- -----------
Loss from operations (433,782) (400,208) (1,253,561) (1,431,341)
Discontinued operations:
Net (loss) income from discontinued
operations (including gain on sale
of properties) (Note 6) (50,980) 87,861 117,721 7,410,120
----------- ----------- ----------- -----------
Net (loss) income (484,762) (312,347) (1,135,840) 5,978,779
=========== =========== =========== ===========
4
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(continued)
For the period For the period
September 26, Three months March 26, Nine months
2004 ended 2004 through ended
Through December 25, December 15, December 25,
December 15, 2004 2003* 2004 2003*
----------------- -------------- -------------- ---------------
Limited Partners Share:
Loss from operations $ (429,444) $ (396,206) $(1,241,025) $(1,417,028)
(Loss) income from discontinued
operations (including gain on
sale of properties) (50,470) 86,982 116,543 7,336,019
----------- ----------- ----------- -----------
Net (loss) income $ (479,914) $ (309,224) $(1,124,482) $ 5,918,991
=========== =========== =========== ===========
Number of units outstanding $ 12,074 $ 12,074 $ 12,074 $ 12,074
=========== =========== =========== ===========
Loss from operations per limited
partner unit $ (36) $ (33) $ (103) $ (117)
(Loss) income from discontinued
operations (including gain on sale
of properties) per limited partner unit (4) 7 10 607
----------- ----------- ----------- -----------
Net (loss) income per limited partner
unit $ (40) $ (26) $ (93) $ 490
=========== =========== =========== ===========
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
5
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN NET ASSETS IN LIQUIDATION
(Unaudited)
=================
For the period
December 16, 2004
through
December 25, 2004
-----------------
Liquidating activities:
Increases in net assets in liquidation
Writedown of mortgage notes payable to their
estimated settlement value 2,524,786
Writedown of Purchase Money Notes to their
estimated settlement value 2,009,344
Writedown due to selling partners to their
estimated settlement value 5,792,027
Writedown of accounts payable, accrued
expense and other liabilities to their estimated
settlement value 115,308
Write down of tenants security deposits to their
estimated settlement value 86,695
Writedown due to general partners of subsidiaries
and their affiliates to their estimated settlement value 32,400
------------
Subtotal 10,560,560
------------
Decreases in net assets in liquidation
Writedown of property and equipment to
net realizable value (3,115,349)
Liquidation of tenants security deposits (91,923)
Liquidation of mortgage escrow (2,560,089)
Writedown of other assets to their estimated
realizable value (247,941)
------------
Subtotal (6,015,302)
------------
Increase in net assets in liquidation (Note 7) $ 4,545,258
============
Limited Partners Share:
Increase in net assets in liquidation $ 4,499,805
============
Number of units outstanding $ 12,074
============
Increase in net assets in liquidation per
limited partner unit $ 373
============
See accompanying notes to consolidated financial statements.
6
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
PARTNERS' EQUITY (DEFICIT)
(Unaudited)
=========================================
Limited General
Total Partners Partners
-----------------------------------------
Balance -
March 26, 2004 $(6,272,485) $(5,672,236) $ (600,249)
Net loss (1,135,840) (1,124,482) (11,358)
Writedown of payables
due to the general
partner to their net
estimated settlement
value 4,806,326 4,758,263 48,063
Increase in net assets
in liquidation 4,545,258 4,499,805 45,453
----------- ----------- -----------
Balance -
December 25, 2004 $ 1,943,259 $ 2,461,350 $ (518,091)
=========== =========== ===========
See accompanying notes to consolidated financial statements.
7
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECREASE IN CASH AND CASH EQUIVALENTS
(Unaudited)
============================
Nine Months Ended
December 25,
----------------------------
2004 2003*
----------------------------
Cash flows from operating activities:
Net loss $(1,135,840) $ 5,978,779
----------- -----------
Income from discontinued operations
(including gain on sale of properties) (117,721) (7,410,120)
Decrease in prepaid
expenses and other assets 21,171 95,776
Decrease in due to selling partners 273,319 340,295
Decrease in accounts payable,
accrued expenses and other liabilities (181,792) (34,420)
Increase in due to general partners
and their affiliates 744,942 603,190
----------- -----------
Total adjustments 739,919 (6,405,279)
----------- -----------
Net cash used in operating activities (395,921) (426,500)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of properties 0 89,212
----------- -----------
Net cash provided by investing activities 0 89,212
----------- -----------
Net decrease in cash and cash equivalents (395,921) (337,288)
Cash and cash equivalents -
beginning of period 860,978 1,224,252
----------- -----------
Cash and cash equivalents -
end of period $ 465,057 $ 886,964
=========== ===========
8
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECREASE IN CASH AND CASH EQUIVALENTS
(Unaudited)
(continued)
============================
Nine Months Ended
December 25,
----------------------------
2004 2003*
----------------------------
Summarized below are the components
of the discontinued operations (including
gain on sale of properties):
Decrease in property and equipment 23,422 1,263,191
Decrease in cash - restricted for
tenants' security deposits 116,904 38,897
(Increase) decrease in mortgage escrow
deposits (222,541) 396,739
Increase in prepaid expenses and other
assets (168,571) (12,623)
Decrease in due to selling partners 0 (4,823,433)
Increase in accounts payable,
accrued expenses and other liabilities 168,654 41,301
Decrease (increase) in tenant's security
deposits payable 3,275 (36,165)
Decrease in mortgage notes payable (139,239) (2,349,818)
Decrease in due to general partners
and affiliates 0 (62,114)
Decrease in Purchase Money Notes
payable 0 (1,626,580)
Increase (decrease) in minority interest in
loss of subsidiaries 100,375 (150,303)
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
9
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
Note 1 - General
The consolidated financial statements for the nine months ended December 25,
2004 and 2003 include the accounts of Cambridge Advantaged Properties Limited
Partnership (the "Partnership") and two and four subsidiary partnerships,
respectively ("subsidiaries," "subsidiary partnerships" or "Local
Partnerships"). 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 an affiliate of one of its general partners (a "General
Partner"), which affiliate has a contractual obligation to act on behalf of the
Partnership, to remove the general partner of the subsidiary partnerships (the
"Local General Partner") and to approve certain major operating and financial
decisions, the Partnership has a controlling financial interest in the
subsidiary partnerships. As of December 25, 2004, the Partnership has sold
fifty-nine of its sixty-one original investments.
For financial reporting purposes, the Partnership's fiscal quarter ends December
25. All subsidiaries have fiscal quarters ending September 30. Accounts of the
subsidiary partnerships have been adjusted for intercompany transactions from
October 1 through December 25. The Partnership's fiscal quarter ends on December
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 U.S. generally
accepted accounting principles ("GAAP").
On December 15, 2004, the Partnership entered into contracts to sell its Local
Partnership Interests in it's remaining two subsidiary partnerships. Upon the
consummation of these sales, the General Partners plan to fully liquidate the
Partnership. As a result, the Partnership has changed its basis of accounting
for periods subsequent to December 15, 2004 from the going concern basis to a
liquidation basis. Accordingly, the Partnership has revalued its assets to their
estimated net realizable values and liabilities to their estimated settlement
amounts. Up through December 15, 2004 the Partnership recorded its results of
operations using accounting principles generally accepted in the United States
of America applicable to going concern entities.
In accordance with FASB 144, the results of discontinued operations are reported
as a separate component of income before extraordinary items on the Consolidated
10
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
Statements of Operations. Discontinued operations include the results of
operations and any gain or loss recognized for Local Partnerships that have been
disposed of or are held for sale. A gain or loss recognized on the disposal is
disclosed in the notes to the financials statements. Adjustments to amounts
previously reported in operations that are directly related to the disposal of a
Local Partnership are reclassified in the current period as discontinued
operations for comparability purposes. Assets and liabilities of a Local
Partnership that are classified as held for sale are presented separately in the
asset and liability sections, respectively, of the Consolidated Balance Sheets.
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.
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary have been charged to the Partnership. No such losses
have been charged to the Partnership for the three and nine months ended
December 25, 2004 and 2003, respectively. The Partnership's investment in each
subsidiary is equal to the respective subsidiary's partners' equity less
minority interest capital, if any. In consolidation, all subsidiary partnership
losses are included in the Partnership's capital account except for losses
allocated to minority interest capital.
The unaudited financial statements have been prepared on the same basis as the
audited financial statements included in the Partnership's Annual Report Form
10-K for the year ended March 25, 2004, except for the December 25, 2004
financial statements, which are prepared on the liquidation basis of accounting.
In the opinion of the General Partners, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
adjustments and adjustments to present the liquidation basis of accounting)
necessary to present fairly the financial position of the Partnership as of
December 25, 2004, the statements of operations for the periods from September
26, 2004 through December 15, 2004 and March 26, 2004 through December 15, 2004
and the three and nine months ended December 25, 2003, the consolidated
statement of changes in net assets in liquidation for the period from December
16, 2004 through December 25, 2004 and cash flows for the nine months ended
11
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
December 25, 2004 and 2003, respectively. However, the operating results for the
nine months ended December 25, 2004 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 March
25, 2004 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
partnerships to which the Purchase Money Note relates. On December 15, 2004, the
Partnership entered into contracts to sell it's Limited Partnership Interests in
the remaining two subsidiary partnerships' to an affiliate of the Local General
Partner (See Note 4). In accordance with the liquidation basis of accounting,
the Purchase Money Notes relating to these two subsidiary partnerships, totaling
approximately $7,801,000 (including approximately $5,792,000 of interest) were
written down to their estimated settlement value, resulting in a gain on
liquidation of approximately $7,801,000.
There were no distributions made to the Partnership for the nine months ended
December 25, 2004 and 2003, and no payments of principal or interest were made
on the Purchase Money Notes.
12
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
Note 3 - Related Party Transactions
The costs incurred to related parties for the periods September 26, 2004 through
December 15, 2004 and March 26 through December 15, 2004 and the three and nine
months ended December 25, 2003 were as follows:
For the period For the period
September 26, 2004 Three months March 26, 2004 Nine months
Through ended through ended
December 15, December 25, December 15, December 25,
2004 2003 2004 2003
------------------ ------------- --------------- -------------
Partnership
management fees (a) $285,500 $285,500 $856,500 $856,500
Expense
reimbursement (b) 22,320 17,095 69,390 69,509
-------- -------- -------- --------
Total general and
administrative-
related parties $307,820 $302,595 $925,890 $926,009
======== ======== ======== ========
13
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
(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 $250,000 and $4,416,000 were accrued and
unpaid as of December 25, 2004 and March 25, 2004, respectively. Without the
General Partner's continued allowance of accrual without payment of certain fees
and expense reimbursements, the Partnership will not be in a position to meet
its obligations. As such, in accordance with the liquidation basis of
accounting, the balance of the Partnership management fees owed were written
down to their estimated settlement value of $250,000 during the quarter ended
December 25, 2004. The General Partners have continued allowing the accrual
without payment of these amounts but are under no obligation to continue to do
so. Proceeds received from future sales will be used to pay any outstanding
amounts due to the General Partners.
(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. Expense
reimbursements owed to the General Partners amounting to approximately $46,000
and $57,000 were accrued and unpaid as of December 25, 2004 and March 25, 2004,
respectively.
Note 4 - Sale of Properties
General
The Partnership is currently in the process of disposing of its investments. As
of December 25, 2004, the Partnership has disposed of fifty-nine of its
sixty-one original investments. On December 15, 2004, the Partnership entered
into contracts to sell the Limited Partnership Interest in its remaining two
subsidiary partnerships. There can be no assurance as to whether or when the
sales will actually occur.
Information Regarding Dispositions
- ----------------------------------
On December 15, 2004, the Partnership entered into two purchase and sale
agreements to sell its Limited Partnership Interest in Pebble Creek and Nu Elm
Apartments ("Nu Elm") to an affiliate of the Local General Partner for purchase
prices of $1,490,000 and $20, respectively. The contracts specify that the sales
will be completed in two installments. The final installment is expected to take
14
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
place in 2006. The sales are contingent on the approval of the Department of
Housing and Urban Development ("HUD"). No assurances can be given as to whether
or when HUD will approve the sales.
On June 30, 2003, the Partnership's Limited Partnership Interest in Cabarras
Arms Associates ("Cabarras") was sold to the Purchase Money Note Holder for
$30,000, resulting in a loss in the amount of approximately $92,000. The
Partnership was released from the associated Purchase Money Note and accrued
interest thereon, which had a total outstanding balance of approximately
$2,415,000, resulting in gain on sale of property of such amount.
On June 30, 2003, the Partnership's Limited Partnership Interest in Hathaway
Court Associates ("Hathaway") was sold to the Purchase Money Note Holder for
$60,000, resulting in a gain in the amount of approximately $545,000. The
Partnership was released from the associated Purchase Money Note and accrued
interest thereon, which had a total outstanding balance of approximately
$4,035,000, resulting in gain on sale of property of such amount.
Note 5 - Commitments and Contingencies
a) Housing Assistance Payments Contracts
In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and
Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8
Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon
market rentals in instances where the existing Section 8 Contracts exceed
current market rents. As a result, Section 8 Contracts that are renewed in the
future in projects insured by the Federal Housing Administration ("FHA") may not
provide sufficient cash flow to permit owners of properties to meet the debt
service requirements of these existing FHA-insured mortgages. MAHRA also
provides for the restructuring of these mortgage loans so that the annual debt
service on the restructured loan (or loans) can be supported by Section 8 rents
established at the market rents. The restructured loans will be held by the
current lender or another lender. There can be no assurance that a property
owner will be permitted to restructure its mortgage indebtedness pursuant to the
new rules implementing MAHRA or that an owner, or the holder of the mortgage,
15
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
would choose to restructure the mortgage if it were able to participate. MAHRA
went into effect on September 11, 1998 when interim regulations implementing the
program were published. It should be noted that there are many uncertainties as
to the economic and tax impact on a property owner because of the combination of
the reduced Section 8 contract rents and the restructuring of the existing
FHA-insured mortgage loan under MAHRA.
On October 21, 1998 President Clinton signed the Fiscal Year 1999 Departments of
Veteran Affairs, Housing and Urban Development and Independent Agencies
Appropriation Legislation into law. The bill provides, among other things, that
owners of a property that were eligible for prepayment had to give notice of
such prepayment to HUD 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 bill also provides for
tenant-based vouchers for eligible tenants (generally below 80% of area median
income) at the true comparable market rents for unassisted units in order to
protect current residents from substantial increases in rent.
On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent
Agencies Appropriations Act (the "Appropriations Act"). The Appropriations Act
contains revisions to the HUD Mark-to-Market Program and other HUD programs
concerning the preservation of the HUD housing stock. On December 29, 1999 HUD
issued Notice H99-36 addressing "Project Based Section 8 Contracts Expiring in
Fiscal Year 2000" reflecting the changes in the Appropriations Act and
superceding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice
99-36 clarifies many of the earlier uncertainties with respect to the earlier
HUD Section 8 Mark-to-Market Programs and continued the Mark-up-to-Market
Program which allows owners with Section 8 contracts to increase the rents to
market levels where contract rents are currently below market.
b) Other
The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. Due to the sale of
properties, the portfolio is not diversified by the location of the properties
around the United States. The Partnership has two remaining properties and
16
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
therefore the Partnership may not be protected against a general downturn in the
national economy. There are also substantial risks associated with owning
properties receiving government assistance, for example the possibility that
Congress may not appropriate funds to enable HUD to make rental assistance
payments. HUD also restricts annual cash distributions to partners based on
operating results and a percentage of the owner's 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.
Except as described in Note 4, there were no material changes and/or additions
to disclosures regarding the subsidiary partnerships which were included in the
Partnership's Annual Report on Form 10-K for the year ended March 25, 2004.
17
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
Note 6 - Discontinued Operations:
The following table summarizes the financial position and results of operations
of the subsidiaries that are classified as discontinued operations. As of
December 25, 2004 and for the periods September 26, 2004 through December 15,
2004 and March 26, 2004 through December 15, 2004, Pebble Creek and Nu Elm were
classified as discontinued operations in the Consolidated Financial Statements.
As of March 25, 2004 and for the three and nine month periods ended December 25,
2003, Pebble Creek, Nu Elm, Cabarras and Hathaway were classified as
discontinued operations in the Consolidated Financial Statements.
Assets and Liabilities of Discontinued Operations
December 25, March 25,
2004 2004
----------- -----------
Assets
Property and equipment - less
accumulated depreciation of $0
and $1,145,456 $ 1,490,020 $ 1,281,404
Other assets 0 332,975
----------- -----------
Total assets $ 1,490,020 $ 1,614,379
=========== ===========
Liabilities and minority interest
Mortgage notes payable $ 0 $ 535,421
Other liabilities 0 139,243
Minority interest 0 (6,202)
----------- -----------
Total liabilities and minority interest $ 0 $ 668,462
=========== ===========
18
CAMBRIDGE ADVANTAGED PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 25, 2004
(Unaudited)
For the period For the period
September 26, 2004 Three months March 26, 2004 Nine months
Through ended through ended
December 15, December 25, December 15, December 25,
2004 2003 2004 2003
------------------ ------------- --------------- -------------
Revenues $ 428,747 $ 416,087 $ 1,258,900 $ 1,929,122
Gain on sale of properties (Note 4) 0 0 0 6,903,614
----------- ----------- ----------- -----------
Total revenue 428,747 416,087 1,258,900 8,832,736
----------- ----------- ----------- -----------
Total expenses 354,997 327,330 1,014,728 1,546,843
----------- ----------- ----------- -----------
Income (loss) before minority interest 73,750 88,757 244,172 7,285,893
Minority interest in (income) loss of
subsidiaries from discontinued
operations (124,730) (896) (126,451) 124,227
----------- ----------- ----------- -----------
Total net (loss) income from
discontinued operations $ (50,980) $ 87,861 $ 117,721 $ 7,410,120
=========== =========== =========== ===========
Income (loss) - limited partners
from discontinued operations $ (50,470) $ 86,982 $ 116,543 $ 7,336,019
=========== =========== =========== ===========
Number of BACs outstanding 12,074 12,074 12,074 12,074
=========== =========== =========== ===========
Income (loss) discontinued operations
per BAC $ (4) $ 7 $ 10 $ 607
=========== =========== =========== ===========
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary sources of funds are the cash distributions from
operations of the Local Partnerships in which the Partnership has invested and
net proceeds from sales. 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. Accordingly, certain fees and expense reimbursements owed to
the General Partners amounting to approximately $250,000 and $4,351,000, were
accrued and unpaid as of December 25, 2004 and March 25, 2004, respectively.
Without the General Partners' continued allowance of accrual with partial
payment of the partnership management fees, the Partnership will not be in a
position to meet its obligations. As such, in accordance with the liquidation
basis of accounting, the balance of the Partnership management fees owed were
written down to their realizable value of $250,000 during the quarter ended
December 25, 2004. The General Partners have continued allowing the accrual with
partial payment of the partnership management fees, but are under no obligation
to do so. Net proceeds and distributions received from future sales of the
Partnership's investments will be used to pay any outstanding amounts due to the
General Partners.
There were no distributions made to the Partnership for the nine months ended
December 25, 2004 and 2003, respectively, and no payments of principal or
interest were made on the Purchase Money Note.
During the nine months ended December 25, 2004, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships decreased approximately
$400,000. This decrease was due entirely to net cash used in operating
activities. Included in the adjustments to reconcile the net income to cash used
in operating activities are income from discontinued operations (including gain
on sale of properties) ($118,000) and gain from liquidating activities
($4,545,258).
For a discussion of Purchase Money Notes Payable, see Note 2 to the financial
statements.
For a discussion of the sale of properties in which the Partnership owns direct
and indirect interests, see Note 4 and Note 5 to the financial statements.
Even though sales have resulted in net gains for tax purposes, the net sales
proceeds have not been sufficient to permit any significant distributions to
investors after payment of all or a portion of the Purchase Money Notes.
20
Therefore, investors should not expect that they will receive distributions
sufficient to pay taxes incurred as a result of such sales.
On December 15, 2004, the Partnership entered into contracts to sell the Local
Partnership Interest in its remaining two subsidiary partnerships. Upon the
consummation of these sales, the General Partners plan to liquidate the
Partnership. As a result, commencing with this December 25, 2004 10-Q, financial
statements are presented on the liquidation basis of accounting. Management is
not aware of any other trends or events, commitments or uncertainties which have
not been otherwise disclosed, that will or are likely to impact liquidity in any
other way. Management believes the only impact would be from laws that have not
yet been adopted.
Critical Accounting Policies
- ----------------------------
In preparing the consolidated financial statements, management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Set forth below is a summary of the accounting policies
that management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Company's accounting policies included in Note 2 to
the consolidated financial statements which are included in the Partnership's
Annual Report on Form 10-K for the year ended March 25, 2004.
a) Property and Equipment
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, 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.
The Partnership complies with Statement of Financial Accounting Standards (SFAS)
No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". 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.
21
b) Income Taxes
No provision has been made for income taxes in the accompanying consolidated
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.
c) Method of Accounting
The accompanying financial statements for the period ended December 25, 2004
were prepared on the liquidation basis of accounting, and for the year ended
March 25, 2004, on the accrual basis of accounting.
d) Discontinued Operations
In accordance with FASB 144, the results of discontinued operations are reported
as a separate component of income before extraordinary items on the Consolidated
Statements of Operations. Discontinued operations include the results of
operations and any gain or loss recognized for Local Partnerships that have been
disposed of or are held for sale. A gain or loss recognized on the disposal is
disclosed in the notes to the financials statements. Adjustments to amounts
previously reported in operations that are directly related to the disposal of a
Local Partnership are reclassified in the current period as discontinued
operations for comparability purposes. Assets and liabilities of a Local
Partnership that are classified as held for sale are presented separately in the
asset and liability sections, respectively, of the Consolidated Balance Sheets.
Results of Operations
- ---------------------
The results of operations for the three and nine months ended December 25, 2004
and 2003 consisted primarily of the results at the Partnership level and exclude
gain on sale of properties and capital events with respect to Nu Elm, Pebble
Creek, Cabarrus and Hathaway, in which the Partnership sold their respective
Local Partnership Interests.
Total operating expenses, excluding administrative and management remained
fairly consistent with an increase (decrease) of approximately 1% and less than
(1%) for the three and nine months ended December 31, 2004 as compared to 2003.
Administrative and management increased (decreased) approximately $15,000 and
($113,000). The increase for the three months ended December 25, 2004 was due to
an increase in legal fees related to sales and an increase in overhead at the
Partnership level. The decrease for the nine months ended December 25, 2004 is
22
primarily due to the write-off of uncollectable receivables in 2003 and
additional accounting fees relating to sales in 2003 at the Partnership level.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership does not have any market risk sensitive instruments.
Item 4. Controls and Procedures
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive
Officer and Chief Financial Officer of the Assisted Housing Associates Inc., the
Related Beta Corporation and Cambridge/Related Associates Limited Partnership,
the general partners of the Partnership, has evaluated the effectiveness of the
Partnership's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended ("Exchange Act") as of the end of the period covered by this report.
Based on such evaluation, such officer has concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes
in Partnership's internal control over financial reporting during the fiscal
quarter to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Partnership's internal control over
financial reporting.
23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Unregistered Sales of Equity 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
(3) Amended and Restated Agreement and Certificate of Limited
Partnership as filed with the Secretary of the Commonwealth of
the Commonwealth of Massachusetts.**
(10a) Form of Escrow Agreement.**
(31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
(31.2) Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and
Section 1350 of Title 18 of the United States Code (18 U.S.C.
1350).
** Incorporated by reference to exhibits filed with Amendment
No. 1 to Cambridge Advantaged Properties L.P.'s Registration
Statement on Form S-11 Registration File No. 2-91993.
24
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 ADVANTAGED
PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: Related Beta Corporation,
a General Partner
Date: February 7, 2005
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Director and President
(Chief Executive Officer and
Chief Financial Officer)
Date: February 7, 2005
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Chief Accounting Officer)
By: ASSISTED HOUSING ASSOCIATES,
INC., a General Partner
Date: February 7, 2005
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Director and President
(Chief Executive Officer and
Chief Financial Officer)
Date: February 7, 2005
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Chief Accounting Officer)
By: CAMBRIDGE AND RELATED ASSOCIATES
LIMITED PARTNERSHIP
By:Related Beta Corporation,
Date: February 7, 2005
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Director and President
(Chief Executive Officer and
Chief Financial Officer)
Date: February 7, 2005
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Chief Accounting Officer)
Exhibit 31.1
CERTIFICATION PURSUANT
TO RULE 13a-14(a) OR RULE 15d-14(a)
I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of
Related Beta Corporation (general partner of each of the Partnership and
Cambridge and Related Associates, General Partners of the Partnership) and
Assisted Housing Associates, Inc. (general partner of the Partnership), hereby
certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ending
December 25, 2004 of the Partnership;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Partnership as of, and for, the periods presented in this
quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f)) for the Partnership and I have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Partnership, including its consolidated
subsidiaries, is made known to me by others within those entities,
particularly during the period in which this quarterly report was being
prepared;
b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles; and
c) evaluated the effectiveness of the Partnership's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this quarterly report based on such evaluation; and
d) disclosed in this quarterly report any change in the Partnership's
internal control over financial reporting that occurred during the period
ending December 25, 2004 that has materially affected, or is reasonably
likely to materially affect, the Partnership's internal control over
financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Partnership's auditors and to the boards
of directors of the General Partners:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Partnership's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Partnership's internal
controls over financial reporting.
Date: February 7, 2005
----------------
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
RULE 13a-14(b) OR RULE 15d-14(b) AND
SECTION 1350
OF TITLE 18 OF THE UNITED STATES
CODE (18 U.S.C. 1350)
In connection with the Quarterly Report of Cambridge Advantaged Properties
Limited Partnership (the "Partnership") on Form 10-Q for the period ending
December 25, 2004 as filed with the Securities and Exchange Commission ("SEC")
on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Executive Officer
and Chief Financial Officer of Related Beta Corporation (general partner of each
of the Partnership and Cambridge and Related Associates, general partner of the
Partnership) and Assisted Housing Associates, Inc. (general partner of the
Partnership), certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
A signed original of this written statement required by Section 906 has been
provided to the Partnership and will be retained by the Partnership and
furnished to the SEC or its staff upon request.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
February 7, 2005