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, 2003
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
----- -----
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 + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============ ============
August 31, February 28,
2003 2003
------------ ------------
ASSETS
Property and equipment-held for
sale, net of accumulated
depreciation of $4,144,839
and $5,868,186, respectively $ 4,019,317 $ 5,029,926
Cash and cash equivalents 885,274 851,768
Cash - restricted for tenants'
security deposits 602 11,457
Mortgage escrow deposits 187,329 1,207,847
Rents receivable 4,148 8,372
Prepaid expenses and other assets 390,327 334,407
------------ ------------
Total assets $ 5,486,997 $ 7,443,777
============ ============
2
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
============ ============
August 31, February 28,
2003 2003
------------ ------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 2,186,111 $ 2,953,940
Purchase Money Notes payable
(Note 2) 1,465,667 2,408,117
Due to selling partners (Note 2) 2,229,460 3,685,011
Accounts payable, accrued
expenses and other liabilities 178,191 374,298
Tenants' security deposits payable 602 11,457
Due to general partners of
subsidiaries and their affiliates 179,986 33,423
Due to general partners and
affiliates 2,841,044 2,685,431
------------ ------------
Total liabilities 9,081,061 12,151,677
------------ ------------
Minority interest (119,532) (91,601)
------------ ------------
Commitments and contingencies
Partners' deficit:
Limited partners (2,991,260) (4,121,609)
General partners (483,272) (494,690)
------------ ------------
Total partners' deficit (3,474,532) (4,616,299)
------------ ------------
Total liabilities and partners' deficit $ 5,486,997 $ 7,443,777
============ ============
See Accompanying Notes to Consolidated Financial Statements.
3
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
========================== =========================
Three Months Ended Six Months Ended
August 31, August 31,
-------------------------- -------------------------
2003 2002 2003 2002
-------------------------- -------------------------
Revenues:
Rentals, net $ 409,572 $ 2,300,053 $ 939,302 $ 4,805,962
Other 7,995 261,397 20,365 323,326
(Loss) gain on sale
of properties
(Note 4) 0 (260,869) 1,369,607 400,411
----------- ----------- ----------- -----------
Total revenues 417,567 2,300,581 2,329,274 5,529,699
----------- ----------- ----------- -----------
Expenses
Administrative and
management 118,788 557,049 260,107 1,279,082
Administrative and
management-
related parties
(Note 3) 39,576 311,888 353,175 625,102
Operating 121,536 449,500 270,156 960,217
Repairs and
maintenance 76,766 503,909 187,849 1,019,060
Taxes and
insurance 49,415 289,996 125,360 586,891
Interest 31,185 358,092 65,642 795,324
Depreciation 0 105,659 0 211,317
----------- ----------- ----------- -----------
Total expenses 437,266 2,576,093 1,262,289 5,476,993
----------- ----------- ----------- -----------
(Loss) income before
minority interest
and extraordinary
item (19,699) (275,512) 1,066,985 52,706
Minority interest in
(income) loss
of subsidiaries (854) (2,848) 27,929 122,867
----------- ----------- ----------- -----------
(Loss) income before
extraordinary
item (20,553) (278,360) 1,094,914 175,573
Extraordinary item-
forgiveness of
indebtedness
income (Note 4) 0 0 46,853 2,427,492
----------- ----------- ----------- -----------
Net (loss) income $ (20,553) $ (278,360) $ 1,141,767 $ 2,603,065
=========== =========== =========== ===========
See Accompanying Notes to Consolidated Financial Statements.
4
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(continued)
======================== =======================
Three Months Ended Six Months Ended
August 31, August 31,
------------------------ -----------------------
2003 2002 2003 2002
------------------------ -----------------------
(Loss) income before
extraordinary
item - limited
partners $ (20,347) $ (275,576) $1,083,965 $ 173,817
Extraordinary item -
limited partners 0 0 46,384 2,403,217
---------- ---------- ---------- ----------
Net (loss) income -
limited partners $ (20,347) $ (275,576) $1,130,349 $2,577,034
========== ========== ========== ==========
Number of limited
partnership
units outstanding 10,038 10,038 10,038 10,038
========== ========== ========== ==========
(Loss) income before
extraordinary item
per limited
partnership unit $ (2.02) $ (27.45) $ 107.99 $ 17.32
Extraordinary item
per limited
partnership unit 0 0 4.62 239.41
---------- ---------- ---------- ----------
Net (loss) income
per limited
partnership unit $ (2.02) $ (27.45) $ 112.61 $ 256.73
========== ========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements.
5
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Partners' Deficit
(Unaudited)
==============================================
Limited General
Total Partners Partners
----------------------------------------------
Balance - March 1, 2003 $(4,616,299) $(4,121,609) $ (494,690)
Net income - six
months ended
August 31, 2003 1,141,767 1,130,349 11,418
----------- ----------- -----------
Balance-August 31, 2003 $(3,474,532) $(2,991,260) $ (483,272)
=========== =========== ===========
See Accompanying Notes to Consolidated Financial Statements.
6
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
============================
Six Months Ended
August 31,
----------------------------
2003 2002*
----------------------------
Cash flows from operating activities:
Net income $ 1,141,767 $ 2,603,065
----------- -----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of properties (Note 4) (1,369,607) (400,411)
Extraordinary item - forgiveness
of indebtedness income (Note 4) (46,853) (2,427,492)
Depreciation 0 211,317
Minority interest in loss of subsidiaries (27,929) (122,867)
Increase in cash-restricted
for tenants' security deposits (427) (16,567)
Decrease in mortgage escrow deposits 199,476 427,519
Decrease in rents receivable 4,224 82,190
(Increase) decrease in prepaid expenses
and other assets (74,269) 22,163
Increase in due to selling partners 64,852 619,292
Decrease in accounts payable, accrued
expenses and other liabilities (151,471) (506,272)
Increase in tenants' security deposits
payable 427 1,502
Increase in due to general partners
of subsidiaries and their affiliates 146,563 55,000
Increase in due to general partners
and affiliates 155,613 1,529,079
----------- -----------
Total adjustments (1,099,401) (525,547)
----------- -----------
Net cash provided by operating
activities 42,366 2,077,518
----------- -----------
7
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
============================
Six Months Ended
August 31,
----------------------------
2003 2002*
----------------------------
Cash flows from investing activities:
Proceeds from sale of properties 2,722,041 84,741
Acquisitions of property and
equipment (197,332) (42,781)
Increase in mortgage escrow deposits (20,403) (328,794)
----------- -----------
Net cash provided by (used in)
investing activities 2,504,306 (286,834)
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (97,164) (345,566)
Decrease in minority interest (2) (5,993)
Principal payments of purchase money
notes payable (942,450) (340,000)
Payments to selling partners (1,473,550) (61,004)
----------- -----------
Net cash used in financing activities (2,513,166) (752,563)
----------- -----------
Net increase in cash and cash
equivalents 33,506 1,038,121
Cash and cash equivalents at
beginning of period 851,768 780,650
----------- -----------
Cash and cash equivalents at
end of period $ 885,274 $ 1,818,771
=========== ===========
8
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
============================
Six Months Ended
August 31,
----------------------------
2003 2002*
----------------------------
Supplemental disclosures of
noncash activities:
Increase in deferred revenue on sale
of properties reclassified from
purchase money notes payable and
due to selling partners $ 0 $ 5,735,908
Forgiveness of indebtedness income
Decrease in purchase money
notes payable 0 (720,000)
Decrease in due to selling partners (46,853) (1,685,795)
Decrease in accounts payable,
accrued expenses and other liabilities 0 (21,697)
Summarized below are the components
of the gain on sale of properties:
Decrease in property and
equipment held for sale, net
of accumulated depreciation $ 1,207,941 $ 3,356,895
Decrease in cash-restricted for
tenants' security deposits 11,282 28,212
Decrease in mortgage escrow deposits 841,445 85,050
Decrease in prepaid expenses and
other assets 18,349 379,234
Decrease in accounts payable,
accrued expenses and other liabilities (44,636) (501,371)
Decrease in tenants' security deposits
payable (11,282) (13,147)
Decrease in due to selling partners 0 (764,540)
Decrease in purchase money notes
payable 0 (455,800)
Decrease in mortgage notes payable (670,665) (2,434,968)
Decrease in rent receivable 0 4,765
* As restated - see Note 5
See Accompanying Notes to Consolidated Financial Statements.
9
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2003
(Unaudited)
NOTE 1 - GENERAL
The consolidated financial statements for the six months ended August 31, 2003
and 2002, include the accounts of Cambridge + Related Housing Properties Limited
Partnership, a Massachusetts limited partnership (the "Partnership"), and two
and fourteen 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 U.S. 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,
2003 and 2002, respectively. The Partnership's investment in each Subsidiary is
equal to the respective Subsidiary's partners' equity less minority interest
capital, if any.
10
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2003
(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, 2003. 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, 2003, the results of operations for
the three and six months ended August 31, 2003 and 2002 and cash flows for the
six months ended August 31, 2003 and 2002. However, the operating results for
the six months ended August 31, 2003 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, 2003 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. As of August 31, 2003 only one
Subsidiary Partnership's Purchase Money Note totaling approximately $3,679,000,
which includes approximately $2,293,000 of interest, remains outstanding.
11
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2003
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS
The costs incurred to related parties for the three and six months ended August
31, 2003 and 2002 were as follows:
==================== ====================
Three Months Ended Six Months Ended
August 31, August 31,
-------------------- --------------------
2003 2002 2003 2002
-------------------- --------------------
Partnership manage-
ment fees (a) $ 0 $242,779 $241,710 $485,557
Expense reimburse-
ment (b) 24,555 34,682 56,716 70,691
Local administrative
fee (d) 625 3,125 1,250 6,250
-------- -------- -------- --------
Total general and
administrative-
General Partners 25,180 280,586 299,676 562,498
-------- -------- -------- --------
Property management
fees incurred to affil-
iates of the Subsidiary
Partnerships' general
partners (c) 14,396 31,302 53,499 62,604
-------- -------- -------- --------
Total general and
administrative-
related parties $ 39,576 $311,888 $353,175 $625,102
======== ======== ======== ========
(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. Commencing with the quarter ended August 31,
2003, the General Partners waived any Partnership management fees to which they
otherwise may have been entitled under the Partnership's Agreement of Limited
Partnership. Partnership management fees owed to the General Partners which were
accrued prior to the quarter ended August 31, 2003 amounted to approximately
$2,218,000 and $1,976,000 as of August 31, 2003 and February 28, 2003,
respectively.
(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
12
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2003
(Unaudited)
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 $14,396 and $31,302 and $53,499 and $62,604 for
the three and six months ended August 31, 2003 and 2002, respectively.
(d) Cambridge/Related Housing Associates Limited Partnership, the special
limited partner of each of the Subsidiary Partnerships, owning .01%, is entitled
to receive a local administrative fee of up to $2,500 per year from each
Subsidiary Partnership.
NOTE 4 - SALE OF PROPERTIES
General
- -------
The Partnership is currently in the process of winding up its operations and
disposing of its investments. As of August 31, 2003, the Partnership has
disposed of forty-three of its forty-four original investments. The final
property, Bay Village, has entered into a purchase and sale agreement (see
below).
On March 11, 2003, the property and the related assets and liabilities of El
Paso-Gateway East, Ltd. ("Gateway") were sold to an unaffiliated third party for
approximately $2,677,000 resulting in a gain in the amount of approximately
$1,370,000. The Partnership used approximately $2,416,000 to settle the
associated Purchase Money Note and accrued interest thereon, which had a total
outstanding balance of approximately $2,463,000, resulting in forgiveness of
indebtedness income of approximately $47,000.
On July 12, 2002, the property and the related assets and liabilities of San
Diego-Logan Square Gardens Company ("Logan") were sold to the Local General
Partners for approximately $9,241,000 resulting in a gain in the amount of
approximately $5,403,000, which was recognized in the November 30, 2002 10-Q.
The Partnership used approximately $5,740,000 to fully settle the associated
Purchase Money Note and accrued interest thereon.
13
CAMBRIDGE + RELATED HOUSING PROPERTIES
LIMITED PARTNERSHIP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
August 31, 2003
(Unaudited)
On March 27, 2002, the property and the related assets and liabilities of
Ziegler Boulevard, Ltd. ("Ziegler") were sold to an unaffiliated third party
purchaser for approximately $2,379,000 resulting in a loss in the amount of
approximately $485,000. The Partnership used approximately $340,000 to settle
the associated Purchase Money Note and accrued interest thereon, which had a
total outstanding balance of approximately $2,746,000 resulting in forgiveness
of indebtedness income of approximately $2,406,000.
On March 27, 2002, the Partnership's limited partnership interest in Eastwyck
III, Ltd. Limited Partnership ("Eastwyck") was sold to the Local General
Partners for approximately $5,000 resulting in a loss of approximately $336,000.
No proceeds were used to settle the associated Purchase Money Note and accrued
interest thereon, which had a total outstanding balance of approximately
$1,220,000 resulting in a gain on sale of approximately $1,220,000.
On 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 October 2003. No assurances can
be given that the sale will actually occur.
NOTE 5 - PRIOR PERIOD ADJUSTMENT
During the quarter ended November 30, 2001, extension fees in connection with
the Purchase Money Notes were overaccrued by $671,850. Such extension fees were
capitalized and amortized over the period of extension, and during the fiscal
year end February 28, 2002 the Partnership amortized $335,925 of such extension
fees resulting in net income being understated for that year. To correct the
misstatement, Partners' deficit was increased by $335,925 for the year ended
February 28, 2002, resulting in a restatement of the consolidated statement of
cash flows for the six months ended August 31, 2002.
14
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. None of these sources of funds are significant
although all of them are available to meet the obligations of the Partnership.
During the six months ended August 31, 2003 and 2002, the Partnership received
cash flow distributions aggregating $12,831 and $126,618, respectively, of which
$0 and $56,419, respectively, was used to pay interest on the Purchase Money
Notes. In addition, the Partnership received distributions of proceeds from the
sales of Local Partnerships aggregating $2,745,666 and $1,643,610, of which
$2,416,000 and $340,000 was used to pay principal and interest on the Purchase
Money Notes during the six months ended August 31, 2003 and 2002, respectively.
During the six months ended August 31, 2003, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships increased approximately
($34,000). This increase was due to cash provided by operating activities
($42,000) and proceeds from sale of properties ($2,722,000) which exceeded
principal payments of mortgage notes payable of ($97,000), an increase in
mortgage escrow deposits relating to investing activities ($20,000), payments to
selling partners ($1,474,000), acquisitions of property and equipment ($197,000)
and principal payments of Purchase Money Notes payable ($942,000). Included in
the adjustments to reconcile the net income to cash provided by operating
activities is gain on sale of properties ($1,370,000) and forgiveness of
indebtedness income ($47,000).
The Partnership has a working capital reserve of approximately $670,000 at
August 31, 2003. 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 and net
proceeds from future sales will be adequate for its operating needs, and plan to
continue investing available reserves in short term investments.
Commencing with the quarter ended August 31, 2003, the General Partners waived
any Partnership management fees to which they otherwise may have been entitled
under the Partnership's Agreement of Limited Partnership. Partnership management
15
fees owed to the General Partners which were accrued prior to the quarter ended
August 31, 2003 amounted to approximately $2,218,000 and $1,976,000 as of August
31, 2003 and February 28, 2003, respectively.
For a discussion of Purchase Money Notes payable see Note 2 to the financial
statements.
For a discussion of the Partnership's sale of properties see Note 4 to the
financial statements.
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. Due to the sale of properties, the
portfolio is not diversified by the location of the properties around the United
States, and therefore the Partnership may not be protected against a general
downturn in the national economy.
The Partnership's remaining investment, Bay Village, has entered into a purchase
and sale agreement (see Note 4).
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 include in the Partnership's
annual report on Form 10-K for the year ended February 28, 2003.
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;
16
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.
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.
New Accounting Pronouncements
- -----------------------------
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 is applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 are applicable no later than July 1, 2003. The
Partnership has not created any variable interest entities after January 31,
2003. The adoption of FIN 46 did not have a material impact on the Partnership's
financial reporting and disclosures.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by now requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 generally is effective for all
17
financial instruments entered into or modified after May 31, 2003, and is
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. The Partnership has evaluated SFAS No. 150 and determined that it
does not have an impact on the Partnership's financial reporting and
disclosures.
Results of Operations
- ---------------------
During the periods ended August 31, 2003 and 2002, Wingate Associates Limited,
Zeigler Boulevard Ltd. and Logan Square Gardens Company sold their properties
and the related assets and liabilities and the Partnership's Limited Partnership
Interest in Blue Ridge Manor, Ltd., Chaparral Apartments II, Ltd., Lafayette
Square Apts., Ltd., Northwood Apartments, Ltd., Oso Bay Apartments, Ltd.,
Rolling Meadows of Ardmore, Ltd., Tarleton Arms Apartments, Ltd., Gateway East
Ltd., Villas South, Ltd. and Eastwyck III, Ltd., were sold (collectively the
"Sold Assets").
Rental income decreased approximately 82% and 80% for the three and six months
ended August 31, 2003, as compared to 2002. Excluding the Sold Assets, rental
income decreased approximately 1% and 2% for the three and six months ended
August 31, 2003 as compared to 2002, primarily due to an increase in vacancies
at the remaining Local Partnership.
Other income decreased approximately $253,000 and $303,000 for the three and six
months ended August 31, 2003, as compared to 2002. Excluding the Sold Assets,
other income decreased approximately $4,000 and $3,000 primarily due to smaller
replacement reserves balances earning interest at the remaining Local
Partnership.
Administrative and management decreased approximately $438,000 and $1,019,000
for the three and six months ended August 31, 2003, as compared to 2002.
Excluding the Sold Assets, administrative and management increased approximately
$33,000 and $6,000 primarily due to an increase in accounting fees at the
Partnership level.
Administrative and management - related parties decreased approximately $272,000
for both the three and six months ending August 31, 2003, as compared to 2002
primarily due to a reduction in partnership management fees due to the waiving
of such fees by the Partnership's General Partners.
18
Operating decreased approximately $328,000 and $690,000 for the three and six
months ending August 31, 2003, as compared to 2002. Excluding the Sold Assets,
operating increased approximately $17,000 and $28,000 primarily due to an
increase in gas and water and sewer expenses at the remaining Local Partnership.
Repairs and maintenance decreased approximately $427,000 and $831,000 for the
three and six months ended August 31, 2003, as compared to 2002. Excluding the
Sold Assets, repairs and maintenance increased approximately $35,000 and $59,000
primarily due to an increase in repairs and maintenance payroll expense and snow
removal expense due to severe winter weather at the remaining Local Partnership.
Taxes and insurance decreased approximately $241,000 and $462,000 for the three
and six months ended August 31, 2003, as compared to 2002. Excluding the Sold
Assets, taxes and insurance increased approximately $13,000 and $19,000
primarily due to an increase in liability insurance premiums at the remaining
Local Partnership.
Interest and depreciation expense decreased approximately $327,000 and $730,000
and $106,000 and $211,000 for the three and six months ended August 31, 2003, as
compared to 2002, primarily due to decreases relating to the Sold Assets. Bay
Village was not depreciated during the period ended August 31, 2003 because it
is classified as an asset held for sale.
Losses and gains on sales of properties and forgiveness of indebtedness income
will continue to fluctuate as a result of the disposition of properties (see
Note 4 to the financial statements).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------
The Chief Executive Officer and Chief Financial Officer of Government Assisted
Properties, Inc. and Related Housing Programs Corporation, each of which is a
general partner of Cambridge + Related Housing Properties L.P. (the
"Partnership"), has evaluated the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
19
Securities Exchange Act of 1934 (the "Exchange Act")) as of August 31, 2003 (the
"Evaluation Date"). Based on such evaluation, such officer has concluded that,
as of the Evaluation Date, the Partnership's disclosure controls and procedures
are effective in alerting him, on a timely basis, to material information
relating to the Partnership required to be included in the Partnership's reports
filed or submitted under the Exchange Act .
Changes in Internal Control Over Financial Reporting
- ----------------------------------------------------------
There has been no significant change in the Partnership's internal control over
financial reporting during the Partnership's fiscal quarter ended August 31,
2003 which has materially affected, or is reasonably likely to materially
affect, such internal control over financial reporting .
20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
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
31.1 Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
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).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBRIDGE + RELATED HOUSING
PROPERTIES LIMITED PARTNERSHIP
(Registrant)
By: GOVERNMENT ASSISTED PROPERTIES,
INC., a General Partner
Date: September 22, 2003
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: September 22, 2003
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
By: RELATED HOUSING PROGRAMS
CORPORATION, a General Partner
Date: September 22, 2003
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal
Executive and Financial Officer
Date: September 22, 2003
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer and
Principal Accounting Officer
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13A-14(A) OR RULE 15D-14(A)
I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer
of Government Assisted Properties, Inc. and Related Housing Programs Corporation
(the "General Partners"), each of which is a general partner of Cambridge +
Related Housing Properties L.P. (the "Partnership"), hereby certify that:
5. I have reviewed this quarterly report on Form 10-Q for the period
ending August 31, 2003 of the Partnership;
6. 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;
7. 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;
8. 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 controls over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Partnership and
I have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under my
supervision, 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 my conclusion
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 August 31, 2003 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 my 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 control over financial reporting.
Date: September 22, 2003
------------------
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 + Related Housing
Properties Limited Partnership (the "Partnership") on Form 10-Q for the period
ending August 31, 2003 as filed with the Securities and Exchange Commission on
the date hereof (the "Report"), I, Alan P. Hirmes, Principal Executive Officer
and Principal Financial Officer of Government Assisted Properties, Inc. and
Related Housing Programs Corporation, each of which is a general partner of the
Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 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.
By: /s/Alan P. Hirmes
-----------------
Alan P. Hirmes
Principal Executive Officer and
Principal Financial Officer
September 22, 2003