<Page>
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 August 31, 2001
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
--- ---
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PART I - Financial Information
Item 1. Financial Statements
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<Table>
<Caption>
AUGUST 31, FEBRUARY 28,
2001 2001
------------- -------------
ASSETS
Property and equipment, net of
accumulated depreciation of
$21,848,265 and $25,049,936,
respectively $ 15,740,114 $ 19,378,524
Property and equipment-held for
sale, net of accumulated
depreciation of $14,600,764
and $11,301,311, respectively 11,786,672 9,186,060
Cash and cash equivalents 825,029 2,477,459
Cash - restricted for tenants'
security deposits 281,717 283,593
Mortgage escrow deposits 5,814,503 5,611,034
Rents receivable 192,502 251,411
Prepaid expenses and other assets 973,230 547,053
------------- -------------
Total assets $ 35,613,767 $ 37,735,134
============= =============
</Table>
2
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<Table>
<Caption>
AUGUST 31, FEBRUARY 28,
2001 2001
------------- -------------
LIABILITIES AND PARTNERS'
DEFICIT
Liabilities:
Mortgage notes payable $ 20,401,289 $ 21,211,953
Purchase money notes payable
(Note 2) 18,893,634 20,801,534
Due to selling partners (Note 2) 28,491,888 30,460,518
Deferred revenue on sale of
properties 3,729,275 0
Accounts payable, accrued
expenses and other liabilities 1,594,264 1,842,834
Tenants' security deposits payable 281,717 283,593
Due to general partners of
subsidiaries and their affiliates 109,282 222,280
Due to general partners and
affiliates 2,050,774 1,894,730
Distribution payable 0 516,300
------------- -------------
Total liabilities 75,552,123 77,233,742
------------- -------------
Minority interest 33,763 33,648
------------- -------------
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (39,123,870) (38,688,406)
General partners (848,249) (843,850)
------------- -------------
Total partners' deficit (39,972,119) (39,532,256)
------------- -------------
Total liabilities and partners' deficit $ 35,613,767 $ 37,735,134
============= =============
</Table>
See Accompanying Notes to Consolidated Financial Statements.
3
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
----------------------------------- ----------------------------
2001 2000 2001 2000
----------------------------------- ----------------------------
Revenues:
Rentals, net $ 3,055,959 $ 3,468,883 $ 6,008,307 $ 6,975,169
Other 102,380 153,229 206,753 244,786
(Loss) gain on sale
of properties
(Note 4) (19,299) 2,549,047 (87,622) 2,549,047
------------- ----------- ------------ -----------
Total revenues 3,139,040 6,171,159 6,127,438 9,769,002
------------- ----------- ------------ -----------
Expenses
Administrative and
management 672,626 786,265 1,553,000 1,739,232
Administrative and
management-
related parties
(Note 3) 392,980 405,899 780,273 812,088
Operating 551,499 560,221 1,246,296 1,149,828
Repairs and
maintenance 782,255 845,575 1,423,391 1,735,002
Taxes and
insurance 339,091 371,881 690,817 816,889
Interest 575,756 764,567 1,147,705 1,573,648
Depreciation 337,721 399,586 625,744 802,030
------------- ----------- ------------ -----------
Total expenses 3,651,928 4,133,994 7,467,226 8,628,717
------------- ----------- ------------ -----------
(Loss) income before
minority interest (512,888) 2,037,165 (1,339,788) 1,140,285
Minority interest in
income of subsidi-
aries (832) (27,946) (1,294) (28,608)
------------- ----------- ------------ -----------
(Loss) income before
extraordinary
item (513,720) 2,009,219 (1,341,082) 1,111,677
Extraordinary item-
forgiveness of
indebtedness
income (Note 4) 0 3,545,978 901,219 3,545,978
------------- ----------- ------------ -----------
Net (loss) income $ (513,720) $ 5,555,197 $ (439,863) $ 4,657,655
============= =========== ============ ===========
</Table>
4
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
----------------------------------- ---------------------------------
2001 2000 2001 2000
----------------------------------- ---------------------------------
(Loss) income before
extraordinary
item - limited
partners $ (508,583) $ 1,989,127 $ (1,327,671) $ 1,100,560
Extraordinary item -
limited partners 0 3,510,518 892,207 3,510,518
--------------- --------------- --------------- ---------------
Net (loss) income -
limited partners $ (508,583) $ 5,499,645 $ (435,464) $ 4,611,078
=============== =============== =============== ===============
Number of limited
partnership
units outstanding 10,038 10,038 10,038 10,038
=============== =============== =============== ===============
(Loss) income before
extraordinary
item per limited
partnership unit $ (50.66) $ 198.16 $ (132.26) $ 109.64
Extraordinary item
per limited
partnership unit 0 349.72 88.88 349.72
--------------- --------------- --------------- ---------------
Net (loss) income
per limited
partnership unit $ (50.66) $ 547.88 $ (43.38) $ 459.36
=============== =============== =============== ===============
</Table>
See Accompanying Notes to Consolidated Financial Statements.
5
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Partners' Deficit
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
TOTAL PARTNERS PARTNERS
------------- ------------- ----------
Balance-
March 1, 2001 $(39,532,256) $(38,688,406) $(843,850)
Net loss -
six months ended
August 31, 2001 $ (439,863) $ (435,464) $ (4,399)
------------- ------------- ----------
Balance-
August 31, 2001 $(39,972,119) $(39,123,870) $(848,249)
============= ============= ==========
</Table>
See Accompanying Notes to Consolidated Financial Statements.
6
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
<Table>
<Caption>
SIX MONTHS ENDED
AUGUST 31,
2001 2000
--------------------------
Cash flows from operating activities:
Net (loss) income $ (439,863) $ 4,657,655
----------- -----------
Adjustments to reconcile net (loss)
income to net cash used in
operating activities:
Loss (gain) on sale of properties
(Note 4) 87,622 (2,549,047)
Extraordinary item - forgiveness of
indebtedness income (Note 4) (901,219) (3,545,978)
Depreciation 625,744 802,030
Minority interest in income
of subsidiaries 1,294 28,608
(Increase) decrease in cash-restricted
for tenants' security deposits (3,094) 36,158
Decrease (increase) in mortgage
escrow deposits 54,647 (178,476)
Decrease (increase) in rents receivable 58,909 (67,514)
Increase in prepaid expenses and
other assets (432,153) (103,630)
Increase in due to selling partners 967,017 1,109,306
Decrease in accounts payable,
accrued expenses and other liabilities (360,206) (331,877)
Decrease in tenants' security
deposits payable (3,085) (36,158)
Increase in due to general partners
of subsidiaries and their affiliates 92,947 27,830
Decrease in due to general partners of
subsidiaries and their affiliates (112,998) (2,836)
Increase (decrease) in due to general
partners and affiliates 196,252 (339,538)
----------- -----------
Total adjustments 271,677 (5,151,122)
----------- -----------
Net cash used in
operating activities (168,186) (493,467)
----------- -----------
</Table>
7
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
<Table>
<Caption>
SIX MONTHS ENDED
AUGUST 31,
2001 2000
--------------------------
Cash flows from investing activities:
Proceeds from sale of properties 475,000 4,593,628
Acquisitions of property and
equipment (237,038) (193,040)
Increase in mortgage escrow deposits (282,723) (60,838)
------------ -----------
Net cash (used in) provided by
investing activities (44,761) 4,339,750
------------ -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (810,664) (1,952,474)
(Decrease) increase in minority interest (1,179) 67,628
Distributions paid to partners (516,300) (1,004,200)
Increase in Purchase Money
Note extension fees payable 21,450 47,850
Principal payments of Purchase Money
Notes payable (110,707) 0
Payments to selling partners (22,083) (1,693,978)
------------ -----------
Net cash used in financing activities (1,439,483) (4,535,174)
------------ -----------
Net decrease in cash and
cash equivalents (1,652,430) (688,891)
Cash and cash equivalents at
beginning of period 2,477,459 3,431,673
------------ -----------
Cash and cash equivalents at
end of period $ 825,029 $ 2,742,782
============ ===========
</Table>
8
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
<Table>
<Caption>
SIX MONTHS ENDED
AUGUST 31,
2001 2000
--------------------------
Supplemental disclosures of noncash activities:
Decrease in Purchase Money
Notes payable $ (1,496,670) 0
Decrease in due to selling
partners (2,234,480) 0
Summarized below are the
components of forgiveness
of indebtedness on sale of
properties
Forgiveness of indebtedness
Decrease in purchase money
notes payable (321,973) (2,131,500)
Decrease in due to selling
partners (579,246) (1,414,478)
Summarized below are the
components of the gain
on sale of properties:
Decrease in property and
equipment, net of accumulated
depreciation 649,092 1,986,231
Decrease in cash-restricted for
tenants' security deposits 4,970 0
Decrease in mortgage escrow
deposits 24,607 0
Decrease in prepaid expenses and
other assets 5,976 23,132
Decrease in due to general partners
of subsidiaries and their affiliates (92,947) 0
Increase in accounts payable, accrued
expenses and other liabilities 109,761 35,218
Increase in tenants' security
deposits payable 1,209 0
Decrease in due to selling partners (99,838) 0
Decrease in due to general partner
and their affiliates (40,208) 0
</Table>
See Accompanying Notes to Consolidated Financial Statements.
9
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
NOTE 1 - GENERAL
The consolidated financial statements for the six months ended August 31, 2001
and 2000, include the accounts of Cambridge + Related Housing Properties Limited
Partnership, a Massachusetts limited partnership (the "Partnership"), and
nineteen and twenty-four 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
August 31. All Subsidiaries have fiscal quarters ending June 30. Accounts of
Subsidiaries have been adjusted for intercompany transactions from July 1
through August 31. The Partnership's fiscal quarter ends on August 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 and six months ended August 31,
2001 and 2000, respectively. The Partnership's investment in each Subsidiary is
equal to the respective Subsidiary's partners' equity less minority interest
capital, if any.
10
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(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, 2001. 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 August 31, 2001, the results of operations for
the three and six months ended August 31, 2001 and 2000 and cash flows for the
six months ended August 31, 2001 and 2000. However, the operating results for
the six months ended August 31, 2001 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, 2001 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 August 31, 2001, 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 reduc-
11
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
ing the current effective interest rate of 9%. The exact effect is not
determinable inasmuch as it depends on the actual future interest payments and
ultimate repayment dates of the Purchase Money Notes. Unpaid interest of
$28,401,298 and $30,335,470 at August 31, 2001 and February 28, 2001,
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 $883,670 were incurred by the Partnership through August
31, 2001. All Purchase Money Notes are now extended with maturity dates ranging
from October 2001 to December 2004. Extension fees of $391,917 were 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 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
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
During the six months ended August 31, 2001 and 2000, the Partnership received
cash flow distributions aggregating $66,320 and $43,500, respectively, of which
$22,083 and $26,100 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 $163,458 and $3,572,961 of which $110,707 and
$1,667,877 was used to pay principal and interest on the Purchase Money Notes
during the six months ended August 31, 2001 and 2000, respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
The costs incurred to related parties for the three and six months ended August
31, 2001 and 2000 were as follows:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31
-------------------------- ----------------------
2001 2000 2001 2000
-------------------------- ----------------------
Partnership management
fees (a) $241,954 $241,709 $483,907 $483,419
Expense reimbursement
(b) 47,568 22,923 78,026 48,378
Property management
fees incurred to affiliates
of the General Partners (c) 0 33,458 0 61,756
Local administrative fee (d) 4,000 4,000 8,000 9,000
-------- -------- -------- --------
Total general and
administrative-General
Partners 293,522 302,090 569,933 602,553
-------- -------- -------- --------
Property management fees
incurred to affiliates of the
Subsidiary Partnerships'
general partners (c) 99,458 103,809 210,340 201,930
Subsidiary Partnerships'
general partners incentive
fee (e) 0 0 0 7,605
-------- -------- -------- --------
Total general and
administrative-related
parties $392,980 $405,899 $780,273 $812,088
======== ======== ======== ========
</Table>
13
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(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 $1,376,000 and $1,092,000 were accrued and
unpaid as of August 31, 2001 and February 28, 2001, respectively. The General
Partners' fees are being paid currently, other than the Partnership Management
fees that were accrued and continue to be deferred.
(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 $99,458 and $137,262, and $210,340 and $263,686
for the three and six months ended August 31, 2001 and 2000, respectively. Of
such fees $0 and $33,458, and $0 and $61,756, 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.
(e) The Partnership had entered into an agreement with the local general partner
of Parktowne Ltd. and Westwood Apartment Company Ltd., which provided for an
annual incentive fee based on cash flow distributed from the respective
properties. Such fee amounted to $7,605 for the six months ended August 31,
2000. Subsequently, on September 14, 2000 these two Local Partnership were sold.
14
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
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 August 31, 2001, the Partnership has disposed of
twenty-seven of its forty-four original investments. Five additional investments
are listed for sale and the Partnership anticipates that the twelve 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 unaffiliated third party
purchaser for $475,000, resulting in a loss in the amount of approximately
$68,000. 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 approximately $901,000.
On April 19, 2001, San Diego - Logan Square Gardens Company ("Logan Square")
entered into a purchase and sale agreement to sell the property and the related
assets and liabilities to an unaffiliated third party purchaser for a purchase
price of $9,500,000. The closing is expected to occur in November 2001. No
assurances can be given that the sale will actually occur.
On August 31, 2001, the property and the related assets and liabilities of
Rolling Meadows Apartments, Ltd. ("Rolling Meadows") were sold to an
unaffiliated third party purchaser for $1,925,000 resulting in a loss in the
amount of approximately $792,000. The Partnership used approximately $26,000 to
settle the associated Purchase Money Note and accrued interest thereon, which
had a total outstanding balance of approximately $3,757,000 resulting in
forgiveness of indebtedness
15
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
income of approximately $3,731,000 which will be recognized in the November 30,
2001 10Q.
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, 2001.
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
August 31, 2001, unpaid accrued interest on the Purchase Money Notes amounted to
approximately $28,401,298. 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
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
b) Legal Proceedings
On or about July 24, 2000, three partnerships controlled by one of the Purchase
Money Note holders commenced litigation in the Circuit Court of Jefferson
County, Alabama against the Partnership, captioned as follows: MOBILE EASTWYCK
III APARTMENTS, LTD. V. SHEARSON + RELATED HOUSING PROPERTIES LIMITED
PARTNERSHIP ET AL., CV-00-4431, MOBILE APARTMENTS, LTD. V. SHEARSON + RELATED
HOUSING PROPERTIES LIMITED PARTNERSHIP ET AL., CV-00-4432, and ZEIGLER PARTNERS
LTD. V. SHEARSON + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ET AL.,
CV-00-4433 (collectively, the "Litigations"). The Litigation commenced by Mobile
Apartments, Ltd. has been voluntarily dismissed by the plaintiff in favor of an
interpleader action described below.
The plaintiffs in each of the Litigations sold their interest in certain limited
partnerships to the Partnership. These limited partnerships own low-income
housing properties located in Mobile, Alabama (the "Alabama Limited
Partnerships"). The Complaints allege that, as payment for a portion of the
purchase price of the Partnership's acquired interest in the Alabama Limited
Partnership, the plaintiffs took a Purchase Money Note from the Partnership, and
the Partnership pledged its right title and interest in the Alabama Limited
Partnerships as security for the Purchase Money Notes. The Complaints allege
that the Partnership has defaulted in its obligations under the Purchase Money
Notes, and that the plaintiffs are entitled to sell the Partnership's interests
in the Alabama Limited Partnerships and the underlying property to pay off the
Purchase Money Notes.
The Partnership has vigorously contested the Litigations, claiming that, among
other things, the Purchase Money Notes are not in default, that the Purchase
Money Note holder has breached his fiduciary duty to the Partnership as general
partner of the Alabama Limited Partnerships, and that the Purchase Money Note
holder assigned a 25% interest of the Purchase Money Notes to third parties who
are not joined in the Litigations. While the Partnership intends to continue to
contest the Litigations, because the Litigations are in their earliest stages
and no discovery has taken place, management is unable at this time to evaluate
the likelihood of an unfavorable outcome or whether the resulting liability, if
any, would have a material adverse effect on the financial condition of the
Partnership.
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2001
(Unaudited)
In or about March 2001, Wallace, Jordan, Ratliff, and Brandt, L.L.C. ("Wallace
Jordan"), as Escrow Agents, commenced an interpleader action in the Circuit
Court of Jefferson County, Alabama entitled WALLACE, JORDAN, RATLIFF, AND
BRANDT, LLC V. SHEARSON + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ET AL.,
CV-01-001155 (the "Interpleader Action"). The Interpleader Action seeks to
resolve competing claims to $125,000 which is held in escrow by Wallace Jordan
following the sale of the property known as Southbay, which was owned by the
Local Partnership known as New Jersey, Ltd. The Partnership does not expect to
have any liability as a result of the Interpleader Action because the action
seeks only to resolve the claims of $125,000 paid into Court; however, because
the Interpleader Action is in its earliest stages and no discovery has taken
place, management is unable at this time to evaluate the likelihood of an
unfavorable outcome or whether such an outcome would have a material adverse
effect on the financial condition of the Partnership. The Partnership and the
plaintiffs have recently engaged in meaningful settlement negotiations of the
litigations and the interpleader which the Partnership is hopeful will lead to a
resolution of these litigations.
NOTE 6 - SUBSEQUENT EVENT
On September 4, 2001, Albuquerque - Lafayette Square Apartments, Ltd.
("Lafayette Square") entered into a purchase and sale agreement to sell the
property and the related assets and liabilities to an unaffiliated third party
purchaser for a purchase price of $7,000,000. The closing is expected to occur
in May 2002. No assurances can be given that the sale will actually occur.
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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 six months ended August 31, 2001 and 2000, the Partnership received
cash flow distributions aggregating $66,320 and $43,500, respectively, of which
$22,083 and $26,100, 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 $163,458 and $3,572,961, of
which $110,707 and $1,667,877 was used to pay principal and interest on the
Purchase Money Notes during the six months ended August 31, 2001 and 2000,
respectively.
During the six months ended August 31, 2001, cash and cash equivalents of the
Partnership and its nineteen consolidated Local Partnerships decreased
approximately ($1,652,000). This decrease was primarily due to principal
payments of mortgage notes payable ($811,000), an increase in mortgage escrow
deposits ($283,000), distributions paid to partners ($516,000), payments to
selling partners ($22,000), acquisitions of property and equipment ($237,000),
principal payments of Purchase Money Notes payable ($111,000) and cash used in
operating activities ($168,000) which exceeded proceeds from the sale of
properties ($475,000) and an increase in Purchase Money Note extension fees
payable ($21,000). Included in the adjustments to reconcile the net loss to cash
used in operating activities is loss on sale of properties ($88,000),
forgiveness of indebtedness income ($901,000) and depreciation ($626,000).
The Partnership has a working capital reserve of approximately $303,000 at
August 31, 2001. 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 2001 and 2000, a distribution
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of approximately $511,000 and $994,000 and $5,000 and $10,000 was paid to the
limited partners and General Partners, respectively, from net proceeds from the
sale of properties. None of the total distributions of approximately $516,000
and $1,004,000 for the six months ended August 31, 2001 and 2000, was deemed to
be a return of capital in accordance with GAAP.
Partnership management fees owed to the General Partners amounting to
approximately $1,376,000 and $1,092,000 were accrued and unpaid as of August 31,
2001 and February 28, 2001, 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 August 31, 2001, 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 is currently negotiating purchase and sale
contracts.
For a discussion of Purchase Money Notes payable see Note 2 to the financial
statements.
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For a discussion of the Partnership's sale of properties see Note 4 to the
financial statements.
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
The results of operations of the Partnership, as well as the Local Partnerships,
remained fairly consistent during the three and six months ended August 31, 2001
and 2000, excluding Pacific Palms, Westwood Apartments Company, Ltd., Parktowne,
Ltd., Westgate Associates, Limited, New Jersey, Ltd., and Char-Mur Apartments
which sold their properties (collectively the "Sold Assets"), and operating and
taxes and insurance.
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 12% and 14% for the three and six months
ended August 31, 2001, as compared to 2000. Excluding the Sold Assets, rental
income increased approximately
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6% and 5%, primarily due to rental rate increases and decreases in vacancies at
several Local Partnerships.
Other income decreased approximately $51,000 and $38,000 for the three and six
months ended August 31, 2001, as compared to 2000. Excluding the Sold Assets,
other income (decreased) increased approximately ($23,000) and $4,000, primarily
due to the receipt of insurance refunds on sold properties in 2000 and a
decrease in interest earned on smaller cash and cash equivalent balances in 2001
at the Partnership level.
Total expenses, excluding the Sold Assets, operating and taxes and insurance,
remained fairly consistent with an increase of approximately 5% and 3% for the
three and six months ended August 31, 2001, as compared to 2000.
Operating (decreased) increased approximately ($9,000) and $96,000 for the three
and six months ending August 31, 2001, as compared to 2000. Excluding the Sold
Assets, operating increased approximately $93,000 and $268,000, primarily due to
an increase in utility costs and usage at eight Local Partnerships.
Taxes and insurance decreased approximately $33,000 and $126,000 for the three
and six months ended August 31, 2001, as compared to 2000. Excluding the Sold
Assets, taxes and insurance increased approximately $42,000 and $37,000,
primarily due to an underaccrual in 2000 at one Local Partnership and an
increase in property taxes at a second Local Partnership.
Administrative and management, repairs and maintenance, interest and
depreciation expense decreased approximately $114,000 and $186,000, $63,000 and
$312,000, $189,000 and $426,000, and $62,000 and $176,000, respectively, for the
three and six months ended August 31, 2001, as compared to 2000, primarily due
to decreases relating to the Sold Assets. Excluding the Sold Assets,
administrative and management, repairs and maintenance and interest increased
(decreased) approximately $42,000 and $133,000, $65,000 and ($24,000) and
$15,000 and $16,000, respectively, for the three and six months ended August 31,
2001 as compared to 2000. Excluding the Sold Assets, Buena Vista Manor
Apartments, Ltd., Zeigler Boulevard, Ltd., Eastwyck III, Ltd., Rolling Meadows
Apartments, Ltd., Wingate Associates, Limited and San Diego-Logan Square Gardens
Company for depreciation only, depreciation expense remained fairly consistent
with an increase of approximately $14,000 and $6,000 for the three and six
months ended August 31, 2001 as compared to 2000. These six
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properties are not depreciated during the period because they are classified as
assets held for sale.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
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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:
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
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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: September 25, 2001
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: September 25, 2001
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: September 25, 2001
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive Financial Officer
Date: September 25, 2001
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer