10-Q 1 a2026064z10-q.txt 10-Q 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, 2000 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-12634 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 13-3161322 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ PART I - Financial Information Item 1. Financial Statements CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited)

2 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (continued)

See Accompanying Notes to Consolidated Financial Statements. 3 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)

4 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) (continued)

See Accompanying Notes to Consolidated Financial Statements. 5 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Partners' Deficit (Unaudited)

See Accompanying Notes to Consolidated Financial Statements. 6 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited)

7 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited) (continued)

8 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited) (continued)

See Accompanying Notes to Consolidated Financial Statements. 9 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) NOTE 1 - GENERAL The consolidated financial statements for the six months ended August 31, 2000 and 1999, include the accounts of Cambridge + Related Housing Properties Limited Partnership, a Massachusetts limited Partnership (the "Partnership") and twenty-four and thirty Subsidiary Partnerships ("Subsidiaries", "Subsidiary Partnerships" or "Local Partnerships"), respectively, zero and five of which, respectively, only have activity through the effective date of the sale of Partnership interest and one and zero of which, respectively, only have activity through the date of the sale of property and related assets and liabilities (see Note 4). 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 and $88,000 for both 10 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) the three and six months ended August 31, 2000 and 1999. The Partnership's investment in each Subsidiary is equal to the respective 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 29, 2000. 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, 2000, the results of operations for the three and six months ended August 31, 2000 and 1999 and cash flows for the six months ended August 31, 2000 and 1999. However, the operating results for the six months ended August 31, 2000 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 29, 2000 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, 2000, 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 the Purchase Money Note. Continued accrual of such interest without payment would impact the effective rate of the Purchase Money Notes, specifi- 11 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) cally by reducing the current effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the Purchase Money Notes. Unpaid interest of $34,545,670 and $36,560,820 at August 31, 2000 and February 29, 2000, 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 interest in the Local Partnerships in which the Partnership invested ("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 $716,985 were incurred by the Partnership through August 31, 2000. Such Purchase Money Notes are now extended with maturity dates ranging from July 2001 to December 2004. Extension fees of $581,032 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 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) During the six months ended August 31, 2000 and 1999, the Partnership received cash flow distributions aggregating $43,500 and $182,415, respectively, of which $26,100 and $109,449 was used to pay interest on the Purchase Money Notes. In addition, the Partnership received a distribution of proceeds from the sale of one and zero Local Partnerships and proceeds from the sale of its Local Partnership Interest in zero and five Local Partnerships aggregating $3,572,961 and $0 and $0 and $2,828,103, respectively, of which $1,667,877 and $0 was used to pay principal on the Purchase Money Notes during the six months ended August 31, 2000 and 1999, respectively. 13 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) NOTE 3 - RELATED PARTY TRANSACTIONS The costs incurred to related parties for the three and six months ended August 31, 2000 and 1999 were as follows:

(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 $609,000 and $875,000 were accrued and unpaid as of August 31, 2000 and February 29, 2000, respectively. Without the General Partners' continued allowance of accrual without payment of certain fees and 14 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued to allow the accrual without payment of these amounts but is under no obligation to continue to do so. (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 $137,267 and $242,427 and $263,686 and $495,321 for the three and six months ended August 31, 2000 and 1999, respectively. Of such fees $33,458 and $7,054 and $61,756 and $38,198, 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 entered into an agreement with the local general partner of Parktowne Ltd. and Westwood Apartment Company Ltd., which provides for an annual incentive fee based on cash flow distributed from the respective properties. Such fee amounted to $0 and $10,770 and $7,605 and $10,770 for the three and six months ended August 31, 2000 and 1999, respectively. 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, 2000, the Partnership has disposed of twenty-one of its forty-four original investments. Eight additional investments are listed for sale and the Partnership anticipates that the fifteen remaining investments will be listed for sale by Decem- 15 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) ber 31, 2001. 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. INFORMATION REGARDING DISPOSITION On June 18, 1999, the Partnership's limited partnership interest in Warren Manor Apartments Limited Partnership was sold to the local general partners for approximately $935,000, resulting in a loss in the amount of approximately $3,548,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $9,187,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Golf Manor Apartments Limited Partnership was sold to the local general partners for approximately $255,000, resulting in a loss in the amount of approximately $544,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,227,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Warren Woods Apartments, L.P. was sold to the local general partners for approximately $377,000, resulting in a loss in the amount of approximately $1,914,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,532,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Rosewood Manor Apartments Limited Partnership was sold to the local general partners for approximately $406,000, resulting in a loss in the amount of approximately $1,031,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,568,000, resulting in forgiveness of indebtedness income. 16 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) On June 18, 1999, the Partnership's limited partnership interest in Canton Commons Apartments Limited Partnership was sold to the local general partners for approximately $855,000, resulting in a gain in the amount of approximately $987,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $7,816,000, resulting in forgiveness of indebtedness income. On May 5, 1999, Wingate Associates Limited entered into an agreement for the purchase and sale of real estate with an unaffiliated third party for a price of $2,560,000. Since entering into the agreement, the purchaser and Wingate Associates Limited have negotiated amendments to such agreement. The amendments call for a reduction in the purchase price to $2,360,000 and an additional down payment of $25,000. The closing is expected to occur in late 2000. No assurances can be given that the sale will actually occur. On October 6, 1999, Westgate Associates Limited ("Westgate") entered into an agreement for the purchase and sale of real estate with an unaffiliated third party for a purchase price of approximately $2,055,000. The sale is expected to take place in October 2000. No assurances can be given that the sale will actually occur. On January 17, 2000, Rolling Meadows Apartments, Ltd. ("Rolling Meadows") entered into an agreement for the purchase and sale of real estate with an unaffiliated third party for a purchase price of $2,400,000. The sale was expected to occur in August 2000 but has been extended to October 2000. No assurances can be given that the sale will actually occur. On April 28, 2000, the property and the related assets and liabilities of Pacific Palms were sold to a third party for approximately $4,900,000, resulting in a gain of approximately $2,549,000. The Partnership used approximately $1,668,000 of the net proceeds to settle the associated Purchase Money Notes and accrued interest thereon which had a total outstanding balance of approximately $5,214,000, resulting in forgiveness of indebtedness of approximately $3,546,000. The Partnership netted approximately $1,905,000 of cash which was placed into working capital to pay Partnership expenses. For tax purposes, the entire gain to be realized by the Partnership is anticipated to be approximately $6,402,000. 17 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) On June 19, 2000, New Jersey Ltd. entered into a purchase and sale agreement to sell its property and the related assets and liabilities to an unaffiliated third party for a purchase price of approximately $2,050,000. The closing is expected to take place in late 2000. No assurances can be given that the sale will actually occur. 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 29, 2000. 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 the end of the 1999 Fiscal Year, unpaid accrued interest on the Purchase Money Notes amounted to approximately $36,561,000. The principal of and all accrued interest on the Purchase Money Notes is due at maturity. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the assets. The Partnership sent an extension notice to each Purchase Money Note holder that pursuant to the note, it was extending the maturity. However, in certain cases the Partnership did not pay the extension fee at that time, deferring such payment to the future. The holders of the Note could argue that until the fee is paid the Note has not been properly extended. b) Legal Proceedings GRANDVIEW-BLUE RIDGE MANOR LIMITED, BRECKENRIDGE-CHAPARRAL APARTMENTS II, LTD., EL PASO-GATEWAY EAST, LTD., ALBUQUERQUE-LAFAYETTE SQUARE APARTMENTS, LTD., CORPUS CHRISTI-OSO BAY APARTMENTS, LTD., SAN DIEGO-LOGAN SQUARE GARDENS CO., ARDMORE-ROLLING MEADOWS OF ARDMORE, LTD., FORT WORTH-NORTHWOODS APARTMENTS, LTD., STEPHENVILLE-TARLETON ARMS APARTMENTS, LTD., AND CADDO PARRISH-VILLAS 18 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) SOUTH, A LOUISIANA LIMITED PARTNERSHIP F/K/A VILLAS SOUTH, LTD. (THE "ROAR PROPERTIES"). In 1998, the Purchase Money Note holder, Roar Company (the "Noteholders") disputed the exact calculation of the extension fee. The Partnership cannot sell or otherwise liquidate its investments in those Local Partnerships that have subsidy agreements with HUD during the period that such agreements are in existence without HUD's approval. It is uncertain as to whether the proceeds from such sales will be sufficient to meet the outstanding balances of principal, accrued interest and extension fees. No agreement has been reached with the Noteholders regarding the sale of the Roar Properties or the calculation of the extension fee. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed Cambridge Liquidating Trust II ("Trust II"), a Massachusetts general partnership, on December 31, 1998, which is owned 99% by Cambridge Liquidating GP II, L.L.C. ("GP II") and 1% by Cambridge Liquidating GP I, L.L.C. ("GP I"). Both GP I and GP II are owned by the Partnership. The Partnership then assigned its limited partnership interests in the Roar Properties to Trust II. In each case, the interests were assigned subject to each respective Purchase Money Note. The assignment did not involve any consideration being paid to the Partnership; therefore, there should not be any tax effect to the limited partners of the Partnership. On August 27, 1999, Trust II filed a Declaratory Judgment Action styled Cambridge Liquidating Trust II v. Roar Company, et al, Cause No. 99-06802 in the 191st District Court of Dallas County Texas seeking a court ruling as to the proper calculation of the extension fee (the "Action"). Prior to September 1, 1999, the Noteholders were tendered the sums calculated to be due as the extension fees under the Purchase Money Notes as of August 31, 1999. A representative of the Noteholders stated that the tender was rejected. The checks that were tendered were not cashed. Trust II seeks a declaratory judgement that the maturity dates of the Purchase Money Notes have been extended and that the extension fees it tendered were properly calculated. Trust II also seeks an accounting that the Trustee for the alleged owners and holders of the Notes has failed to make approximately $93,000 in distributions 19 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements August 31, 2000 (Unaudited) to Trust II and/or its predecessors. The discovery process is in its very preliminary stages. Trust II intends to vigorously pursue its claims. To date, defendants have filed a "general denial". The present Scheduling order in place sets the case for trial on May of 2001. Mediation must be conducted by December 31, 2000. Management of the Partnership will vigorously prosecute the Action and may assert claims against the Noteholders. The General Partner can express no opinion on the outcome of the case. NOTE 6 - SUBSEQUENT EVENTS On September 14, 2000, the property and the related assets and liabilities of Westwood Apartments Company, Ltd. ("Westwood") were sold to an unaffiliated third party for $2,025,000, resulting in a loss of approximately $131,000. The Partnership advanced approximately $234,000 and along with the net sales proceeds used these funds to pay off the outstanding HUD mortgage. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,059,000, resulting in forgiveness of indebtedness income. For tax purposes, the entire gain to be realized by the Partnership is anticipated to be approximately $4,993,000. On September 14, 2000, the property and the related assets and liabilities of Parktowne Ltd. ("Parktowne") were sold to an unaffiliated third party for $2,500,000, resulting in a gain of approximately $347,000. The Partnership used approximately $839,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,791,000, resulting in forgiveness of indebtedness income of approximately $952,000. For tax purposes, the entire gain to be realized by the Partnership is anticipated to be approximately $2,819,000. 20 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 and sales of the Local Partnerships in which the Partnership has invested, (ii) interest earned on funds and (iii) 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, 2000 and 1999, the Partnership received cash flow distributions aggregating $43,500 and $182,415, respectively, of which $26,100 and $109,449 was used to pay interest on the Purchase Money Notes. In addition, the Partnership received a distribution of proceeds from the sale of one and zero Local Partnerships and proceeds from the sale of its Local Partnership Interest in zero and five Local Partnerships aggregating $3,572,961 and $0 and $0 and $2,828,103, respectively, of which $1,667,877 and $0 was used to pay principal on the Purchase Money Notes during the six months ended August 31, 2000 and 1999, respectively. During the six months ended August 31, 2000, cash and cash equivalents of the Partnership and its twenty-four consolidated Local Partnerships decreased approximately ($689,000). This decrease was due to cash used by operating activities ($493,000) principal payments of mortgage notes payable ($1,952,000), an increase in mortgage escrow deposits ($61,000), distributions paid to partners ($1,004,000), payments to selling partners ($1,694,000) and acquisitions of property and equipment ($193,000) which exceeded proceeds from the sale of properties ($4,594,000), an increase in Purchase Money Note extension fees payable ($48,000) and an increase in capitalization of consolidated subsidiaries attributable to minority interest ($68,000). Included in the adjustments to reconcile the net income to cash used in operating activities is depreciation ($802,000). The Partnership has a working capital reserve of approximately $1,963,000 at August 31, 2000. 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 2000 and 1999, a distribution of approximately $994,000 and $2,000,000 and $10,000 and $20,000 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 $1,004,000 21 and $2,020,000 for the six months ended August 31, 2000 and 1999, was deemed to be a return of capital in accordance with GAAP. Partnership management fees owed to the General Partners amounting to approximately $609,000 and $875,000 were accrued and unpaid as of August 31, 2000 and February 29, 2000. Without the General Partners' continued allowance of accrual without payment of certain fees and expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued to allow the accrual without payment of these amounts but is under no obligation to continue to do so. The Local Partnerships which 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 provide financial incentives for owners of government assisted properties. The 1996 Act provides 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 have 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. The South Munjoy Associates, Limited property and the Riverside Gardens Limited Partnership were sold on September 9, 1997 and April 27, 1998, respectively. The Bethany Glen Associates property was sold on November 8, 1999. The Canton Commons Associates and Rosewood Manor Associates, limited partnership interests were sold on June 18, 1999. The Westgate Associates Limited Partnership entered into a purchase and sale contract with an unaffiliated third party purchaser as of March 6, 2000. No assurance can be given that the transaction will be consummated. The Pacific Palms property was sold on April 28, 2000. The local general partners of the other properties are either negotiating purchase and sale contracts or exploring their alternatives under the 1996 Act. For a discussion of Purchase Money Notes payable see Note 2 to the financial statements. 22 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, 2000 and 1999, excluding Bethany Glen Associates and Pacific Palms Limited Partnership which sold their properties and Warren Manor Apartments Limited Partnership, Golf Manor Limited Partnership, Warren Woods Apartments L.P., Canton Commons Apartments Limited Partnership and Rosewood Manor Apartments Limited Partnership in which the Partnership's interest was sold (collectively the "Sold Assets"). Contributing to the relatively stable operations at the Local Partnerships is the fact that a large portion of the Local Partnerships are operating under government assistance programs which provide for rental subsidies and/or reductions of mortgage interest payments under HUD Section 8 and Section 236 programs. 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. 23 Rental income decreased approximately 33% and 34% for the three and six months ended August 31, 2000 as compared to 1999. Excluding the Sold Assets, rental income increased approximately 6% and 5% for the three and six months ended August 31, 2000 as compared to 1999, primarily due to rental rate increases and decreases in vacancies at seven Local Partnerships. Other income decreased approximately 25% and 28% for the three and six months ended August 31, 2000 as compared to 1999. Excluding the Sold Assets, such income increased approximately 11% for both the three and six months ended August 31, 2000, primarily due to an increase in interest income and miscellaneous income received from prior sold properties at the Partnership level. Total expenses, excluding the Sold Assets and administrative and management, remained fairly consistent with decreases of approximately 3% and 1% for the three and six months ended August 31, 2000 as compared to 1999. Administrative and management decreased approximately 45% and 31% for the three and six months ended August 31, 2000 as compared to 1999. Excluding the Sold Assets, administrative and management decreased approximately 34% and 18%, primarily due to a decrease in legal fees incurred by the Partnership and a decrease in the amortization of the Purchase Money Note extension fees. Administrative and management-related parties, operating, repairs and maintenance, taxes and insurance, interest and depreciation expense decreased approximately $130,000 and $283,000, $220,000 and $506,000, $661,000 and $1,071,000, $327,000 and $552,000, $316,000 and $803,000, $437,000 and $931,000, respectively, for the three and six months ended August 31, 2000 as compared to 1999, primarily due to decreases relating to the Sold Assets. Excluding the Sold Assets, administrative and management-related parties, operating, repairs and maintenance, taxes and insurance, and interest increased (decreased) approximately $27,000 and $27,000, $33,000 and $24,000, ($51,000) and ($20,000), ($36,000) and $32,000, ($62,000) and ($123,000), respectively, for the three and six months ended August 31, 2000 as compared to 1999. Excluding the Sold Assets, Rolling Meadows Apartments, Ltd., Westgate Associates, Limited and Wingate Associates, Limited for depreciation only, depreciation expense remained fairly consistent with a decrease of approximately $9,000 and $16,000 for the three and six months ended August 31, 2000 as compared to 1999. Rolling Meadows Apartments, Ltd., Westgate Associates, Limited and Wingate Associates, Limited are not depreciated during the period because they are classified as assets held for sale. 24 Item 3. Quantitative and Qualitative Disclosures about Market Risk None 25 PART II - OTHER INFORMATION Item 1. Legal Proceedings - This information is incorporated by reference to the discussion of the Roar Properties 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. 26 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 20, 2000 By: /s/ Alan P. Hirmes ------------------- Alan P. Hirmes, President and Principal Executive and Financial Officer Date: September 20, 2000 By: /s/ Glenn F. Hopps ------------------- Glenn F. Hopps, Treasurer and Principal Accounting Officer By: RELATED HOUSING PROGRAMS CORPORATION, a General Partner Date: September 20, 2000 By: /s/ Alan P. Hirmes ------------------- Alan P. Hirmes, President and Principal Executive Financial Officer Date: September 20, 2000 By: /s/ Glenn F. Hopps ------------------- Glenn F. Hopps, Treasurer and Principal Accounting Officer

CAMBRIDGE RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP 10-Q