<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 November 30, 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
--- ---
<Page>
PART I - Financial Information
Item 1. Financial Statements
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<Table>
<Caption>
NOVEMBER 30, FEBRUARY 28,
2001 2001
------------ ------------
ASSETS
Property and equipment, net of
accumulated depreciation of
$16,185,062 and $25,049,936,
respectively $11,018,360 $19,378,524
Property and equipment-held for
sale, net of accumulated
depreciation of $17,460,890
and $11,301,311, respectively 14,169,159 9,186,060
Cash and cash equivalents 784,777 2,477,459
Cash - restricted for tenants'
security deposits 264,979 283,593
Mortgage escrow deposits 6,108,695 5,611,034
Rents receivable 94,797 251,411
Prepaid expenses and other assets 1,028,152 547,053
----------- ------------
Total assets $33,468,919 $37,735,134
=========== ============
</Table>
2
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<Table>
<Caption>
NOVEMBER 30, FEBRUARY 28,
2001 2001
------------ ------------
LIABILITIES AND PARTNERS'
DEFICIT
Liabilities:
Mortgage notes payable $ 18,650,392 $ 21,211,953
Purchase money notes payable
(Note 2) 17,036,937 20,801,534
Due to selling partners (Note 2) 25,849,142 30,460,518
Deferred revenue on sale of
properties 5,217,137 0
Accounts payable, accrued
expenses and other liabilities 1,359,171 1,842,834
Tenants' security deposits payable 264,979 283,593
Due to general partners of
subsidiaries and their affiliates 107,988 222,280
Due to general partners and
affiliates 2,181,563 1,894,730
Distribution payable 0 516,300
------------ ------------
Total liabilities 70,667,309 77,233,742
------------ ------------
Minority interest 27,991 33,648
------------ ------------
Commitments and contingencies
(Note 5)
Partners' deficit:
Limited partners (36,405,590) (38,688,406)
General partners (820,791) (843,850)
------------ ------------
Total partners' deficit (37,226,381) (39,532,256)
------------ ------------
Total liabilities and partners' deficit $ 33,468,919 $ 37,735,134
============ ============
</Table>
See Accompanying Notes to Consolidated Financial Statements.
3
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
-------------------------------- ---------------------------------
2001 2000 2001 2000
-------------------------------- ---------------------------------
Revenues:
Rentals, net $2,965,185 $3,384,472 $ 8,973,492 $10,359,641
Other 96,448 140,935 303,201 385,721
(Loss) gain on sale
of properties
(Note 4) (631,165) 151,528 (718,787) 2,700,575
-------------- -------------- -------------- --------------
Total revenues 2,430,468 3,676,935 8,557,906 13,445,937
-------------- -------------- -------------- --------------
Expenses
Administrative and
management 742,758 771,899 2,295,758 2,511,131
Administrative and
management-
related parties
(Note 3) 355,056 400,773 1,135,329 1,212,861
Operating 530,360 519,405 1,776,656 1,669,233
Repairs and
maintenance 746,141 886,900 2,169,532 2,621,902
Taxes and
insurance 356,352 385,305 1,047,169 1,202,194
Interest 554,228 746,724 1,701,933 2,320,372
Depreciation 266,877 415,198 892,621 1,217,228
-------------- -------------- -------------- --------------
Total expenses 3,551,772 4,126,204 11,018,998 12,754,921
-------------- -------------- -------------- --------------
(Loss) income before
minority interest
and extraordinary
item (1,121,304) (449,269) (2,461,092) 691,016
Minority interest in
loss (income)
of subsidiaries 5,772 (510) 4,478 (29,118)
-------------- -------------- -------------- --------------
(Loss) income before
extraordinary
item (1,115,532) (449,779) (2,456,614) 661,898
Extraordinary item-
forgiveness of
indebtedness
income (Note 4) 3,861,270 4,024,244 4,762,489 7,570,222
-------------- -------------- -------------- --------------
Net income $2,745,738 $3,574,465 $ 2,305,875 $ 8,232,120
============== ============== ============== ==============
</Table>
4
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(continued)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
---------------------------- -------------------------------
2001 2000 2001 2000
---------------------------- -------------------------------
(Loss) income before
extraordinary
item - limited
partners $(1,104,377) $ (445,281) $(2,432,048) $ 655,279
Extraordinary item -
limited partners 3,822,657 3,984,002 4,714,864 7,494,520
----------- ----------- ----------- -----------
Net income -
limited partners $ 2,718,280 $ 3,538,721 $ 2,282,816 $ 8,149,799
=========== =========== =========== ===========
Number of limited
partnership
units outstanding 10,038 10,038 10,038 10,038
=========== =========== =========== ===========
(Loss) income before
extraordinary
item per limited
partnership unit $ (110.02) $ (44.36) $ (242.28) $ 65.28
Extraordinary item
per limited
partnership unit 380.82 396.89 469.70 746.61
----------- ----------- ----------- -----------
Net income
per limited
partnership unit $ 270.80 $ 352.53 $ 227.42 $ 811.89
=========== =========== =========== ===========
</Table>
See Accompanying Notes to Consolidated Financial Statements.
5
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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 income -
nine months ended
November 30, 2001 2,305,875 2,282,816 23,059
------------ ------------ ----------
Balance-
November 30, 2001 $(37,226,381) $(36,405,590) $(820,791)
============ ============ ==========
</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>
NINE MONTHS ENDED
NOVEMBER 30,
-----------------------------
2001 2000
-----------------------------
Cash flows from operating activities:
Net income $ 2,305,875 $ 8,232,120
---------- ----------
Adjustments to reconcile net income
to net cash used in
operating activities:
Loss (gain) on sale of properties
(Note 4) 718,787 (2,700,575)
Extraordinary item - forgiveness
of indebtedness income (Note 4) (4,762,489) (7,570,222)
Depreciation 892,621 1,217,228
Minority interest in (loss) income
of subsidiaries (4,478) 29,118
(Increase) decrease in cash-restricted
for tenants' security deposits (2,450) 67,707
Increase in mortgage
escrow deposits (123,047) (348,114)
Decrease (increase) in rents receivable 95,171 (104,811)
Increase in prepaid
expenses and other assets (479,837) (340,291)
Increase in due to selling partners 1,316,569 1,609,927
Decrease in accounts payable,
accrued expenses and other liabilities (554,129) (436,673)
Decrease in tenants'
security deposits payable (1,057) (41,672)
Increase in due to general partners
of subsidiaries and their affiliates 130,155 154,991
Decrease in due to general partners of
subsidiaries and their affiliates (114,292) (136,197)
Increase (decrease) increase in due
to general partners and affiliates 327,041 (132,091)
----------- ------------
Total adjustments (2,561,435) (8,731,675)
----------- -----------
Net cash used in operating activities (255,560) (499,555)
------------ ------------
</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>
NINE MONTHS ENDED
NOVEMBER 30,
------------------------------------
2001 2000
------------------------------------
Cash flows from investing activities:
Proceeds from sale of properties 2,525,000 8,969,083
Acquisitions of property and
equipment (387,026) (243,364)
Increase in mortgage escrow deposits (527,985) (239,014)
----------- ----------
Net cash provided by
investing activities 1,609,989 8,486,705
----------- ----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (2,561,561) (5,807,414)
(Increase) decrease in minority interest (1,179) 67,628
Distributions paid to partners (516,300) (1,004,200)
Principal payments of purchase
money notes payable (84,912) (838,729)
Payments to selling partners (47,912) (1,693,978)
Increase in purchase money note
extension fees payable 164,753 310,762
----------- ----------
Net cash used in financing activities (3,047,111) (8,965,931)
----------- ----------
Net decrease in cash and
cash equivalents (1,692,682) (978,781)
Cash and cash equivalents at
beginning of period 2,477,459 3,431,673
----------- ----------
Cash and cash equivalents at
end of period $ 784,777 $ 2,452,892
=========== ==========
</Table>
8
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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>
NINE MONTHS ENDED
NOVEMBER 30,
------------------------------------
2001 2000
------------------------------------
Supplemental disclosures of
noncash activities:
Increase in property and equipment -
held for sale reclassified from
property and equipment $ 4,955,919 $ 0
Increase in deferred revenue on
sale of properties reclassified from
purchase money notes payable
and due to selling partners 5,092,137 7,570,222
Summarized below are the com-
ponents of forgiveness of indebtedness:
Decrease in purchase money
notes payable (1,844,438) 0
Decrease in due to selling partners (2,787,896) 0
Decrease in due to general partners
and affiliates (130,155) 0
Summarized below are the components
of the (loss) gain on sale of
properties:
Decrease in property and equipment -
held for sale, net of accumulated depre-
ciation 2,221,125 0
Decrease in property and equipment,
net of accumulated depreciation 650,345 6,141,738
Decrease in cash-restricted for
tenants' security deposits 21,064 0
Decrease in mortgage escrow
deposits 153,371 54,135
Decrease in rents receivable 61,443 39,912
(Increase) decrease in prepaid
expenses and other assets (1,262) 67,617
Increase in accounts payable, accrued
expenses and other liabilities 70,466 114,248
Decrease in tenants' security
deposits payable (17,557) (26,035)
Decrease in due to general
partner and their affiliates (40,208) (123,103)
</Table>
See Accompanying Notes to Consolidated Fin7ancial Statements.
9
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
NOTE 1 - GENERAL
The consolidated financial statements for the nine months ended November 30,
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
November 30. All Subsidiaries have fiscal quarters ending September 30. Accounts
of Subsidiaries have been adjusted for intercompany transactions from October 1
through November 30. The Partnership's fiscal quarter ends on November 30 in
order to allow adequate time for the Subsidiaries' financial statements to be
prepared and consolidated. The books and records of the Partnership are
maintained on the accrual basis of accounting, in accordance with generally
accepted accounting principles ("GAAP").
All intercompany accounts and transactions have been eliminated in
consolidation.
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 nine months ended November
30, 2001 and 2000, respectively. The Partnership's investment in each Subsidiary
is equal to the re-
10
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
spective Subsidiary's partners' equity less minority interest
capital, if any.
These unaudited financial statements have been prepared on the same basis as the
audited financial statements included in the Partnership's Form 10-K for the
year ended February 28, 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 November 30, 2001, the results of operations
for the three and nine months ended November 30, 2001 and 2000 and cash flows
for the nine months ended November 30, 2001 and 2000. However, the operating
results for the nine months ended November 30, 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 November 30, 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.
11
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
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 determinable inasmuch as it depends
on the actual future interest payments and ultimate repayment dates of the
Purchase Money Notes. Unpaid interest of $25,724,094 and $30,335,470 at November
30, 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 $1,368,812 were incurred by the Partnership through
November 30, 2001. All Purchase Money Notes are now extended with maturity dates
ranging from December 2001 to December 2004. On December 4, 2001, the two Local
partnerships with December 2001 maturity dates were sold effective January 1,
2002. Extension fees of $535,220 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
12
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
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.
During the nine months ended November 30, 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 $163,493 and $4,469,580 of which
$110,742 and $2,506,606 was used to pay principal and interest on the Purchase
Money Notes during the nine months ended November 30, 2001 and 2000,
respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
The costs incurred to related parties for the three and nine months ended
November 30, 2001 and 2000 were as follows:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30
------------------------- --------------------------
2001 2000 2001 2000
------------------------- --------------------------
Partnership management
fees (a) $ 241,953 $ 241,710 $ 725,860 $ 725,129
Expense reimbursement (b) 21,000 29,346 99,026 77,724
Property management
fees incurred to affiliates
of the General Partners (c) 0 20,013 0 81,769
Local administrative fee (d) 4,000 5,000 12,000 14,000
---------- ---------- ---------- ----------
Total general and
administrative-General
Partners 266,953 296,069 836,886 898,622
---------- ---------- ---------- ----------
Property management fees
incurred to affiliates of the
Subsidiary Partnerships'
general partners (c) 88,103 104,704 298,443 306,634
Subsidiary Partnerships'
general partners incentive
fee (e) 0 0 0 7,605
---------- ---------- ---------- ----------
Total general and
administrative-related
parties $ 355,056 $ 400,773 $1,135,329 $1,212,861
========== ========== ========== ==========
</Table>
13
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 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 $1,518,000 and $1,092,000 were accrued and
unpaid as of November 30, 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 $88,103 and $124,717, and $298,443 and $388,403
for the three and nine months ended November 30, 2001 and 2000, respectively. Of
such fees $0 and $20,013, and $0 and $81,769, 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 nine months ended November 30,
2000. On September 14, 2000 these two Local Partnerships were sold.
14
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 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 November 30, 2001, the Partnership has disposed of
twenty-eight of its forty-four original investments. Subsequently on December 4,
2001, two additional Local Partnerships' interests were sold effective January
1, 2002. Eight 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 Local General
Partner for $475,000, resulting in a loss in the amount of approximately
$193,000 and forgiveness of indebtedness income of approximately $130,000 as a
result of loans and management fees being forgiven. 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 an additional
$901,000.
On April 19, 2001, San Diego - Logan Square Gardens Company ("Logan") 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 January 2002. 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
15
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
loss in the amount of approximately $792,000 of which approximately $505,000 is
recognized in this 10-Q. 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 income of approximately $3,731,000.
On September 4, 2001, Albuquerque - Lafayette Square Apartments, Ltd.
("Lafayette") 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.
On September 25, 2001, Forth Worth - Northwood Apartments, Ltd ("Northwood")
entered into a purchase and sale agreement to sell the property and the related
assets and liabilities to an affiliate of the Local General Partner for a
purchase price of $3,800,000. The closing is expected to occur in June of 2002.
No assurances can be given that the sale will actually occur.
On October 25, 2001, El Paso - Gateway East, Ltd. ("Gateway") 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
$2,700,000. The closing is expected to occur in August 2002. No assurances can
be given that the sale will actually occur.
On November 26, 2001, the Partnership's Limited Partnership Interest in Buena
Vista Manor Apartments, Ltd. ("Buena Vista") was sold to the Local General
Partners for $125,000 resulting in a loss in the amount of approximately
$538,000. No proceeds were used to settle the associated Purchase Money Note and
accrued interest thereon, which had a total outstanding balance of approximately
$5,092,000 resulting in forgiveness of indebtedness income which will be
recognized in the February 28, 2002 10-K.
16
<Page>
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
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
November 30, 2001, unpaid accrued interest on the Purchase Money Notes amounted
to approximately $25,724,094. 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.
b) Legal Proceedings
On or about July 24, 2000, three limited 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 (the "Eastwyck Litigation"), MOBILE APARTMENTS,
LTD. V. SHEARSON + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ET AL.,
CV-00-4432 (the "Mobile Litigation"), and ZEIGLER PARTNERS LTD. V. SHEARSON +
RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ET AL., CV-00-4433 (the "Zeigler
Litigation") (collectively, the Eastwyck Litigation, the Mobile Litigation and
the Zeigler Litigation referred to as the "Litigations"). The Mobile Litigation
has been voluntarily dismissed by the plaintiff in favor of an interpleader
action described below.
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
The Partnership vigorously contested the Litigations, which have now been placed
on the suspense docket pursuant to the terms of a settlement reached in October
2001 (the "Settlement Agreement"). Pursuant to the Settlement Agreement, among
other things, the Partnerships will sell the property owned by Zeigler
Boulevard, Ltd. (the "Zeigler Sale") and the property owned by Mobile Eastwyck
III Limited (the "Eastwyck Sale") on or before March 1, 2002. The Partnership
will disburse $340,000 from Zeigler Sale to the plaintiff in the Zeigler
Litigation in exchange for a full release of all claims which were or could have
been asserted in the Zeigler Litigation. The Partnership will disburse $160,000
from the Eastwyck Sale to the plaintiff in the Eastwyck Litigation in exchange
for a full release of all claims which were or could have been asserted in the
Eastwyck Litigation.
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
(the "Escrow Amount") following the sale of the property known as Southbay,
which was owned by the Local Partnership known as New Jersey, Ltd. Pursuant to
the Settlement Agreement referred to above, the Interpleader Action has been
placed on the suspense docket, and the Escrow Amount will be disbursed to the
Partnership following the Eastwyck Sale and the Zeigler Sale, less approximately
$17,000 in legal fees.
While the Partnership expects the Zeigler Sale and the Eastwyck Sale to take
place on or before March 1, 2002 and that, accordingly, the Litigations will be
fully resolved, there can be no assurance that such sales will be consummated.
NOTE 6 - SUBSEQUENT EVENTS
On December 4, 2001, the Partnership's Limited Partnership Interest in Crossett
Apartments, Ltd. ("Crossett") was sold to the Local General Partner effective
January 1, 2002 for $7,920 resulting in a loss of
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CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 2001
(Unaudited)
approximately $198,000 and the related Purchase Money Note was assigned to
the Local General Partner. No proceeds were used to settle the associated
Purchase Money Note and accrued interest thereon, which had a total outstanding
balance of approximately $1,114,000 resulting in a gain on sale of property
which will be recognized in the February 28, 2002 10-K.
On December 4, 2001, the Partnership's Limited Partnership Interest in Cedar
Hill Apartments, Ltd. ("Cedar Hill") was sold to the Local General Partner
effective January 1, 2002 for $11,988 resulting in a loss of approximately
$378,000 and the related Purchase Money Note was assigned to the Local
General Partner. No proceeds were used to settle the associated Purchase
Money Note and accrued interest thereon, which had a total outstanding
balance of approximately $1,217,000 resulting in a gain on sale of property
which will be recognized in the February 28, 2002 10-K.
On December 18, 2001, Bay Village Company ("Bay Village") entered into a
purchase and sale agreement to sell the property and the related assets and
liabilities to an affiliate of the Local General Partner for a purchase price of
$6,075,000. The closing is expected to occur in June 2002. No assurances can be
given that the sale will actually occur.
19
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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 nine months ended November 30, 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 $163,493 and
$4,469,580, of which $110,742 and $2,506,606 was used to pay principal and
interest on the Purchase Money Notes during the nine months ended November 30,
2001 and 2000, respectively.
During the nine months ended November 30, 2001, cash and cash equivalents of the
Partnership and its nineteen consolidated Local Partnerships decreased
approximately ($1,693,000). This decrease was primarily due to principal
payments of mortgage notes payable ($2,562,000), an increase in mortgage escrow
deposits ($528,000), distributions paid to partners ($516,000), payments to
selling partners ($48,000), acquisitions of property and equipment ($387,000),
principal payments of Purchase Money Notes payable ($85,000) and cash used in
operating activities ($256,000) which exceeded proceeds from the sale of
properties ($2,525,000) and an increase in Purchase Money Note extension fees
payable ($165,000). Included in the adjustments to reconcile the net income to
cash used in operating activities is loss on sale of properties ($719,000),
forgiveness of indebtedness income ($4,762,000) and depreciation ($893,000).
The Partnership has a working capital reserve of approximately $154,000 at
November 30, 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 dis-
20
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tribution 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 nine months ended November 30, 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 $1,518,000 and $1,092,000 were accrued and unpaid as of November
30, 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 November 30, 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 has signed purchase and sale contracts.
For a discussion of Purchase Money Notes payable see Note 2 to the financial
statements.
21
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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
During the periods ended November 30, 2001 and 2000, Char-Mur Apartments, Ltd.
Rolling Meadows Apartments, Ltd., Pacific Palms, Westwood Apartments Company,
Ltd., Parktowne, Ltd., Westgate Associates, Limited and New Jersey, Ltd. sold
their properties and the related assets and liabilities (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 and nine months ended November 30, 2001 and 2000, 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 12% and 13% for the three and nine months
ended November 30, 2001, as compared to 2000. Excluding the Sold Assets, rental
income increased ap-
22
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proximately 7% and 6%, primarily due to rental rate increases and decreases in
vacancies at several Local Partnerships.
Other income decreased approximately $44,000 and $83,000 for the three and nine
months ended November 30, 2001, as compared to 2000. Excluding the Sold Assets,
other income increased approximately $30,000 and $32,000, primarily due to
mortgage interest subsidy payments received at four Local Partnerships.
Total expenses, excluding the Sold Assets and operating, remained fairly
consistent with an increase of approximately 2% for both the three and nine
months ended November 30, 2001, as compared to 2000.
Operating increased approximately $11,000 and $107,000 for the three and nine
months ending November 30, 2001, as compared to 2000. Excluding the Sold Assets,
operating increased approximately $59,000 and $327,000, primarily due to an
increase in utility costs and usage at seven Local Partnerships.
Administrative and management, administrative and management-related parties,
repairs and maintenance, taxes and insurance, interest and depreciation expense
decreased approximately $29,000 and $215,000, $46,000 and $78,000, $141,000 and
$452,000, $29,000 and $155,000, $192,000 and $618,000, and $148,000 and
$325,000, respectively, for the three and nine months ended November 30, 2001,
as compared to 2000, primarily due to decreases relating to the Sold Assets.
Buena Vista Manor Apartments, Ltd., Zeigler Boulevard, Ltd., Eastwyck III, Ltd.,
Rolling Meadows Apartments, Ltd., Wingate Associates, Limited, San Diego-Logan
Square Gardens Company, and Albuquerque - Lafayette Square Apartments, Ltd. are
not depreciated during the period ended November 30, 2001 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).
23
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
24
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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 - none
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
25
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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: December 20, 2001
By:/s/ Alan P. Hirmes
---------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: December 20, 2001
By:/s/ Glenn F. Hopps
---------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: December 20, 2001
By:/s/ Alan P. Hirmes
---------------------
Alan P. Hirmes,
President and Principal
Executive Financial Officer
Date: December 20, 2001
By:/s/ Glenn F. Hopps
---------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer