10-Q 1 a2062216z10-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 September 25, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR ------- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-13782 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP ------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-3228969 --------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 -------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I - Financial Information Item 1. Financial Statements CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)

~~-----------~~==================== ~~-----------~~==================== SEPTEMBER 25, MARCH 25, 2001 2001* ----------- ----------- June 25, March 25, 2001 2001* ----------- ----------- ASSETS Property and equipment - ~~net,~~ less accumulated depreciation of $2221,~~195~~467,~~663~~313 and $25,089,665, respectively $ 1716,~~693~~852,~~303~~870 $ 20,186,022 Property and equipment - held for sale - ~~net,~~ less accumulated depreciation of $2213,~~277~~867,~~894~~712 and $21,272,511, respectively 1812,~~895~~562,~~913~~810 18,795,939 Cash and cash equivalents 2,~~996~~829,~~393~~640 4,943,694 Cash - restricted for tenants' security deposits ~~518~~449,~~461~~464 541,659 Mortgage escrow deposits 5,~~981~~554,~~607~~156 5,654,637 Prepaid expenses and other assets ~~925~~984,~~758~~459 1,060,972 -------------- ------------- Total assets $ 4739,~~011~~233,~~435~~399 $ 51,182,923 ============ ============

CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

~~-----------~~==================== ~~-----------~~==================== SEPTEMBER 25, MARCH 25, 2001 2001* ----------- ----------- June 25, March 25, 2001 2001* ----------- ----------- LIABILITIES AND PARTNERS' DEFICIT Liabilities Mortgage notes payable $ 2620,~~285~~306,~~923~~328 $ 27,753,150 Purchase Money Notes payable (Note 2) 2116,~~139~~135,~~325~~440 23,477,968 Due to selling partners (Note 2) 4836,~~702~~876,~~256~~567 52,122,189 Deferred revenue on sale of properties 510,~~247~~900,~~539~~346 3,838,789 Accounts payable, accrued expenses and other liabilities 3987,~~400,386~~314 1,644,571 Tenants' security deposits payable ~~469~~413,~~750~~046 481,950 Due to general partners of subsidiaries and their affiliates 9798,~~855~~238 98,265 Due to general partners and affiliates 3,~~055~~127,~~868~~839 2,978,008 Distributions payable 0 1,402,535 ----------- ----------- Total liabilities ~~108~~88,~~398~~845,~~902~~118 113,797,425 ----------- ----------- Minority interest ~~394~~132,~~127~~413 638,628 ----------- ----------- Commitments and contingencies (Note 5) Partners' deficit: Limited partners (6048,~~626~~709,~~253~~166) (62,083,074) General partners (1,~~155~~034,~~341~~966) (1,170,056) ----------- ----------- Total partners' deficit (6149,~~781~~744,~~594~~132) (63,253,130) ----------- ----------- Total liabilities and partners' deficit $ 4739,~~011~~233,~~435~~399 $ 51,182,923 =========== ===========

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 3 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

=============================== =============================== THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 25, SEPTEMBER 25, ------------------------------- ------------------------------- ~~Three~~2001 ~~Months~~2000 ~~Ended~~2001 ~~June~~2000 ~~25,~~ ------------------------------- ~~2001 2000~~ ------------------------------- Revenues: Rentals, net $ 32,~~358~~972,~~054~~306 $ 4,~~625~~466,~~997~~198 $ 6,330,360 $ 9,092,195 Other ~~186~~227,~~115~~487 ~~262~~307,~~874~~333 ~~Loss~~413,602 570,207 Gain on sale of property (Note 4) (2,664,619 9,512,645 1,~~007~~657,~~538)~~081 ~~(435~~9,~~543)~~077,102 ---------- ----------- ---------- ---------- Total revenues 25,~~536~~864,~~631~~412 414,~~453~~286,~~328~~176 8,401,043 18,739,504 ---------- ----------- ---------- ---------- Expenses Administrative and management ~~680~~683,~~838~~697 1,~~120~~189,~~334~~864 1,364,535 2,310,198 Administrative and management- related parties (Note 3) ~~484~~475,~~237~~193 ~~553~~538,~~080~~119 959,430 1,091,199 Operating ~~803~~558,~~118~~473 ~~888~~729,~~567~~937 1,361,591 1,618,504 Repairs and maintenance ~~781~~758,~~397~~529 1,~~012~~005,~~154~~759 1,539,926 2,017,913 Taxes and insurance ~~409~~388,~~658~~125 ~~520~~526,~~235~~348 797,783 1,046,583 Interest 1,~~541~~225,~~543~~944 32,~~824~~605,~~011~~178 2,767,487 6,429,189 Depreciation ~~444~~320,~~788~~066 ~~918~~875,~~597~~676 764,854 1,794,273 ---------- ----------- ---------- ---------- Total expenses 54,~~145~~410,~~579~~027 87,~~836~~470,~~978~~881 9,555,606 16,307,859 ---------- ----------- ---------- ---------- Net income (loss) before minority interest (21,~~608~~454,~~948)~~385 6,815,295 (41,~~383~~154,~~650~~563) 2,431,645 Minority interest in loss (income) of subsidiaries ~~241~~109,~~128~~450 (966,~~556~~508) 350,578 (103,064) ---------- ----------- ---------- ---------- ~~Loss~~Income (loss) before extra-ordinary item (21,~~367~~563,~~820)~~835 (46,~~480~~808,~~206~~787 (803,985) 2,328,581 Extraordinary item- forgiveness of indebtedness income (Note 4) 310,~~839~~473,~~356~~627 121,236 14,~~001~~312,~~550~~983 14,122,786 ---------- ----------- ---------- ---------- Net income $12,037,462 1$ 6,~~471~~930,~~536~~023 $13,508,998 9$16,~~521~~451,~~344~~367 ========== =========== ========== ========== Limited Partners Share: ~~Loss~~Income (loss) before extraordinary item $ (21,~~344~~548,~~141)~~196 $ (46,~~435~~740,~~404~~699 $ (795,945) $ 2,305,295 Extraordinary item 310,~~800~~368,~~962~~891 120,023 14,169,853 13,~~861~~981,~~535~~558 ---------- ----------- ---------- ---------- Net income $11,917,087 1$ 6,~~456~~860,~~821~~722 $13,373,908 9$16,~~426~~286,~~131~~853 ========== =========== ========== ==========

4 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (continued)

See accompanying notes to consolidated financial statements. 5 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited)

~~------------------------------------------~~=============================================================== LIMITED GENERAL TOTAL PARTNERS PARTNERS ------------------------------------------ ~~Limited General Total Partners Partners~~ ---------------------~~---------------------~~ Balance - March 26, 2001 $(63,253,130) $(62,083,074) $ (1,170,056) Net income 113,~~471~~508,~~536~~998 113,~~456~~373,~~821~~908 14135,~~715~~090 ------------ ------------ ------------ Balance - ~~June~~September 25, 2001 $(6149,~~781~~744,~~594~~132) $(6048,~~626~~709,~~253~~166) $ (1,~~155~~034,~~341~~966) ============ ============ ============

See accompanying notes to consolidated financial statements. 6 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited)

====================================== SIX MONTHS ENDED SEPTEMBER 25, ------------------------------- -------~~------------------------~~ ~~Three~~2001 ~~Months~~2000 ~~Ended June 25,~~ ------------------------------- ~~2001 2000~~ -------~~------------------------~~ Cash flows from operating activities: Net income $ 113,~~471~~508,~~536~~998 $ 916,~~521~~451,~~344~~367 ----------- ------------ Adjustments to reconcile net income to net cash (used in) provided by operating activities: ~~Loss~~Gain on sale of ~~property~~properties (Note 4) (1,~~007~~657,~~538~~081) ~~435~~(9,~~543~~077,102) Extraordinary item-forgiveness of indebtedness income (Note 4) (314,~~839~~312,~~356~~983) (14,~~001~~122,~~550~~786) Depreciation ~~444~~764,~~788~~854 ~~918~~1,~~597~~794,273 Minority interest in (loss) income of subsidiaries (~~241~~350,~~128~~578) 96103,~~556~~064 Decrease in cash-restricted for tenants' security deposits 513,~~968~~016 1215,~~493~~000 (Increase) decrease in mortgage escrow deposits (~~184~~101,~~165~~299) ~~726~~616,~~927~~662 (Increase) ~~decrease~~ in prepaid expenses and other assets (~~190~~360,~~635~~301) 64(446,~~503~~206) Increase in due to selling partners 12,~~452~~327,~~585~~661 36,~~636~~098,~~582~~026 ~~Increase~~Payments of interest to selling partners (~~decrease~~94,019) (2,652,035) (Decrease) increase in accounts payable, accrued expenses and other liabilities ~~590,254~~ (1,~~194~~887,~~859~~603) 2,218,805 Increase (decrease) in tenants' security deposits payable 56,~~030~~576 (5156,~~259~~867) Increase in due to general partners of subsidiaries and their affiliates 0383 ~~554~~558,~~799~~299 Decrease in due to general partners of subsidiaries and their affiliates (410) (468,852) Increase (decrease) in due to general partners and affiliates ~~143~~316,~~917~~687 (~~156~~211,~~119~~849) ----------- ------------ Total adjustments (~~805~~15,~~614~~335,097) (915,~~426~~631,~~639~~568) ----------- ------------ Net cash (used in)provided by operating activities ~~665~~(1,~~922~~826,099) 94819,~~705~~799 ----------- ------------

7 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited) (continued)

====================================== SIX MONTHS ENDED SEPTEMBER 25, ------------------------------- -------~~------------------------~~ ~~Three~~2001 ~~Months~~2000 ~~Ended June 25,~~ ------------------------------- ~~2001 2000~~ -------~~------------------------~~ Cash flows from investing activities: Proceeds from sale of properties 111,~~188~~393,~~000~~542 2,~~757~~857,~~360~~350 Acquisitions of property and equipment (~~128~~208,~~004~~766) (~~206~~411,~~631~~718) Increase in mortgage escrow deposits (~~426~~599,~~028~~971) (~~533~~30,~~490~~383) ------------ ------------ Net cash provided by investing activities ~~(633~~10,~~968)~~584,805 2,~~017~~415,~~239~~249 ------------ ------------ Cash flows from financing activities: Increase in purchase money notes payable 0 5,209 Principal payment of mortgage notes payable (17,~~467~~446,~~227~~822) (~~952~~1,~~802~~385,695) Principal payments of ~~Purchase~~purchase ~~Money~~money ~~Notes~~notes payable (3,270,301) (1,~~776~~002,~~591~~082) 0 Decrease in capitalization of minority interest (3155,~~373~~637) (310,~~229~~209) ------------ ------------ Net cash used in financing activities (310,~~247~~872,~~191~~760) (~~956~~2,~~031~~392,777) ------------ ------------ Net (decrease) increase in cash and cash equivalents (12,~~947~~114,~~301~~054) 1842,~~155,913~~271 Cash and cash equivalents - beginning of period 4,943,694 4,095,787 ------------ ------------ Cash and cash equivalents - end of period $ 2,~~996~~829,~~393~~640 $ 54,~~251~~938,~~700~~058 ============ ============ Supplemental disclosures of noncash activities: Increase in property and equipment - held for sale reclassified from property and equipment $ 2,~~182~~163,~~138~~925 $ 42,~~928~~755,~~115~~607 Decrease in property and equipment, net of accumulated depreciation (2,165) 0 Increase in deferred revenue on sale of properties reclassified from purchase money notes payable and due to selling partners 10,892,510 0

8 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited) (continued)

====================================== SIX MONTHS ENDED SEPTEMBER 25, ------------------------------- -------~~------------------------~~ ~~Three~~2001 ~~Months~~2000 ~~Ended June 25,~~ ------------------------------- ~~2001 2000~~ -------~~------------------------~~ ~~Decrease in property and equipment, net of accumulated depreciation (1,677) 0 Decrease in Purchase Money Notes payable 562,052 0 Decrease in due to selling partners 4,687,164 0~~ Forgiveness of indebtedness income (Note 4): ~~Increase~~Decrease in deferred revenue from sale of property (3,839,356) 0 Decrease in ~~Purchase~~purchase ~~Money~~money ~~Note~~note payable 0(1,148,096) (7,741,369) Decrease in due to selling partners 0(9,325,531) (5,~~505~~620,~~463~~699) Decrease in prepaid expenses and other assets 0 0(40,000) Decrease in due to general partners of subsidiaries and their affiliates 0 (~~554~~558,~~799~~299) Decrease in accounts payable, accrued expenses and other liabilities 0 (~~159~~162,~~919~~419) ~~Decrease in due to general partners and affiliates 0 (40,000)~~ Summarized below are the components of the gain on sale of property: Decrease in property and equipment, ~~net~~and ofproperty ~~accumulated~~and ~~depreciation~~equipment-held 2for sale 9,~~074~~008,~~284~~040 813,~~698~~624,~~376~~809 Decrease in cash - restricted for tenants' security deposits 1779,~~230~~179 4783,~~450~~821 Decrease in mortgage escrow deposits ~~283~~801,~~223~~751 ~~283~~696,~~836~~164 Decrease in prepaid expenses and other assets ~~325~~436,~~849~~814 4095,~~724~~322 Decrease in purchase money notes payable 0 (5,172,016) Decrease in due to selling partners (185,354) (9,854,311) Decrease in accounts payable, accrued expenses and other liabilities (161,609) (446,906) Decrease in tenant's security deposits payable (75,480) (80,594) Decrease in due to general partners and affiliates (166,856) (9,900) Decrease in mortgage notes payable 0 (5,156,141)

See accompanying notes to consolidated financial statements. 9 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Note 1 - General The consolidated financial statements for the six months ended September 25, 2001 and 2000 include the accounts of Cambridge Advantaged Properties Limited Partnership (the "Partnership") and thirty and forty-three subsidiary partnerships, respectively ("subsidiaries," "subsidiary partnerships" or "Local Partnerships"). The Partnership is a limited partner, with an ownership interest of 98.99% in each of the subsidiary partnerships. Through the rights of the Partnership and/or an affiliate of one of its General Partners (a "General Partner"), which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary partnerships (the "Local General Partner") and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. For financial reporting purposes, the Partnership's fiscal quarter ends September 25. All subsidiaries have fiscal quarters ending June 30. Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from July 1 through September 25. The Partnership's fiscal quarter ends on September 25 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with 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 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 (gains) losses aggregated approximately $(3,000) and $16,000 and $17,000 and $21,000 for the three and six 10 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) months ended September 25, 2001 and 2000, respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. The unaudited financial statements have been prepared on the same basis as the audited financial statements included in the Partnership's Form 10-K for the year ended March 25, 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 September 25, 2001, the results of operations for the three and six months ended September 25, 2001 and cash flows for the six months ended September 25, 2001 and 2000. However, the operating results for the six months ended September 25, 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 March 25, 2001 Annual Report on Form 10-K. Note 2 - Purchase Money Notes Payable Purchase Money Notes (the "Purchase Money Notes") in the original amount of $85,458,825 were issued to the selling partners of the subsidiary partnerships as part of the purchase price and are secured only by the interest in the subsidiary partnership to which the Purchase Money Note relates. A portion of these Purchase Money Notes, in the original amount of $31,932,568, are obligations at the subsidiary partnership level, whereas the remaining $53,526,257 is recorded at the Partnership level. The Purchase Money Notes generally provided for compound interest at rates which, in general, ranged from 9% to 10% per annum through August 31, 1989. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). 11 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Purchase Money Notes at September 25, 2001 and March 25, 2001 include $4,336,417 of interest accrued through August 31, 1989. 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 from operations, as defined) is applied first to accrued interest and then to current interest thereon. 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 beyond the initial term, without payment, reduces the 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. The Purchase Money Notes, after the extended maturity dates, call for the simple accrual of interest on the balance of principal, interest and Purchase Money Note extensions fees payable as of the date of maturity at the lesser rate of 12% or the lowest legally allowable rate; or prime plus 2% or the lowest legally allowable rate. Unpaid interest of approximately $36,664,000 and $51,597,000 as of September 25, 2001 and March 25, 2001, respectively, has been accrued and is included in due to selling partners in the consolidated balance sheets. 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 of the sale or refinancing of the apartment complex. The Partnership extended the terms of the Purchase Money Notes (ranging from August to December 1996) for up to three additional years (four years with respect to three subsidiary partnerships and seven years with respect to three subsidiary partnerships). 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 aggregating $365,180. The Purchase Money Notes with seven year extensions (one of which was sold) have maturity dates of October 2003. Additionally, an oral agreement was reached in August 2000 to extend the maturity dates of the remaining Purchase Money Notes to November 2001 and October 2002. The Partnership is working with the Local General Partners and Purchase Money Note hold- 12 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) ers to refinance or sell the properties. No assurance can be given that management's efforts will be successful. Extension fees of $198,165 were accrued and added to the Purchase Money Notes balance. The extension fees are being amortized over the term of the extensions. The Partnership cannot sell or otherwise liquidate its investments in those Local Partnerships that have subsidy agreements with the United States Department of Housing and Urban Development ("HUD") during the period that such agreements are in existence without HUD's approval. 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 of principal, accrued interest and extension fees. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the selling partner's recourse, in the event of nonpayment, would be to foreclose on the Partnership's interests in the respective subsidiary partnerships. Distributions aggregating approximately $3,884,000 and $4,230,000 were made to the Partnership for the six months ended September 25, 2001 and 2000, respectively, of which $3,355,000 and $2,054,000, respectively, were used to pay principal and interest on the Purchase Money Notes. In addition, approximately $0 and $598,000 was paid as "additional" interest on the Purchase Money Notes for the six months ended September 25, 2001 and 2000, respectively. 13 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Note 3 - Related Party Transactions The costs incurred to related parties for the three and six months ended September 25, 2001 and 2000 were as follows:

THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 25, SEPTEMBER 25 ------------------------------- ------------------------------- ~~Three~~2001 ~~Months~~2000 ~~Ended~~2001 ~~June~~2000 ~~25,~~ ---------------------------------- ~~2001 2000~~ --------------------------------- ~~Decrease~~Partnership inmanage- ~~Purchase~~ment ~~Money~~fees ~~Notes~~(a) ~~payable~~$271,000 0$280,000 (2$542,~~021~~000 $ 560,~~850~~000 Expense reimburse- ment (b) ~~Decrease~~49,650 in38,329 ~~due~~84,142 to75,401 ~~selling~~Local ~~partners~~administra- tive fee (~~185,354~~c) (114,~~858~~000 16,~~166)~~000 ~~Decrease~~28,000 in32,000 ~~accounts~~------- ~~payable,~~------- ~~accrued~~------- ~~expenses~~--------- Total general and ~~other~~administrative- ~~liabilities~~General ~~(236~~Partners 334,~~407)~~650 ~~(119~~334,~~773)~~329 ~~Decrease~~654,142 in667,401 ~~tenant's~~------- ~~security~~------- ~~deposits~~------- ~~payable~~--------- ~~(17,230)~~Property ~~(44,664)~~manage- ~~Decrease~~ment infees ~~due~~incurred to affiliates of the subsidiary partnerships' general partners ~~and~~140,543 ~~affiliates~~203,790 ~~(66~~305,~~057)~~288 (9423,~~900)~~798 ~~Decrease~~------- in------- ~~mortgage~~------- ~~notes~~--------- ~~payable~~Total 0general (and administrative- related parties $475,193 $538,119 $959,430 $1,~~823~~091,~~130)~~199 ======= ======= ======= =========

(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 $2,520,000 and $2,178,000 were accrued and unpaid as of September 25, 2001 and March 25, 2001, respectively. Without the General Partner's continued allowance of accrual without payment of certain fees and expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts but are under no obligation to continue to do so. Proceeds received from future sales will be used to pay any outstanding amounts due to the General Partners. 14 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) (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 Related General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance. Expense reimbursements and asset monitoring fees owed to the Related General Partner amounting to approximately $41,000 and $61,187 were accrued and unpaid as of September 25, 2001 and March 25, 2001, respectively. (c) C/R Special Partnership, the special limited partner, owning a .01% interest, 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 disposing of its investments. It is anticipated that this process will take a number of years. As of September 25, 2001, the Partnership has disposed of forty of its sixty-one original investments. Thirteen additional investments are listed for sale and the Partnership anticipates that a number of the eight remaining investments will be listed for sale by March 31, 2002. There can 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 received by the Partnership from such sales will be sufficient to return their original investment. Moreover, the Local General Partners and holders of the Purchase Money Notes generally have minimal decision-making rights with respect to the sale of each property which therefore makes it more cumbersome for the General Partners to sell each property. 15 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed a new entity: Cambridge Advantaged Liquidating L.L.C. (the "Trust"), a Delaware limited liability company which is wholly-owned by the Partnership. On July 21, 1999, the Partnership contributed its limited partnership interest in Decatur Apartments, Ltd., Florence Apartments, Ltd., Saraland Apartments, Ltd., Dickens Ferry Apartments, Ltd., Boonie Doone Apartments, Ltd., University Gardens Apartments, Ltd., and Southside Village Apartments, Ltd., to the Trust. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution 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. As of September 25, 2001 all of these properties were sold except for Saraland Apartments, Ltd. INFORMATION REGARDING DISPOSITIONS. On January 5, 2001, the property and the related assets and liabilities of West Scenic Apartments, Ltd. ("West Scenic") were sold back to the Purchase Money Note Holder for $1,218,000 resulting in a loss of approximately $973,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,839,000, resulting in forgiveness of indebtedness income. On April 11, 2001, the property and related assets and liabilities of Tall Pines ("Tall Pines") were sold to an unaffiliated third party for $2,145,000, resulting in a gain of approximately $751,000. The Partnership used approximately $1,015,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $3,424,000, resulting in forgiveness of indebtedness income of approximately $2,409,000. On April 20, 2001, the property and related assets and liabilities of Northwoods III Apartments were sold to an unaffiliated third party for $3,316,000, resulting in a gain of approximately $1,266,000. The Partnership used approximately $791,000 of the proceeds to pay off the Purchase Money Note and accrued interest 16 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) thereon, which had a total outstanding balance of $1,756,000, resulting in forgiveness of indebtedness income of approximately $965,000. On May 10, 2001, the property and related assets and liabilities of Ware Manor Associates ("Ware Manor") were sold to an unaffiliated third party for $1,364,500, resulting in a gain of approximately $389,000. The Partnership used approximately $472,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,846,000, resulting in forgiveness of indebtedness income of approximately $1,374,000. On May 21, 2001, Lexington Village ("Lexington") entered into a purchase and sale agreement with an unaffiliated third party purchaser for a purchase price of $1,350,000. The closing is expected to occur by the end of 2001. No assurance can be given that the closing will actually occur. On June 27, 2001, the property and related assets and liabilities of Oakwood Manor ("Oakwood") were sold to an unaffiliated third party purchaser for $3,099,000, resulting in a gain of approximately $259,000. The Partnership used approximately $1,077,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $6,803,000 resulting in forgiveness of indebtedness income of $5,726,000. On July 20, 2001, the property and related assets and liabilities of Washington Highland Apts. ("Washington Highland") were sold to an unaffiliated third party purchaser for $800,000, resulting in a loss of approximately $563,000. The Partnership will use approximately $185,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,905,000 resulting in forgiveness of indebtedness income of $1,721,000, which will be recognized in the December 25, 2001 10-Q. 17 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) On August 14, 2001, the Partnership's Limited Partnership Interest in Southside Village Apts. ("Southside") was sold to the Local General Partner for $5,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,926,000, resulting in gain on sale of property of approximately $3,681,000 which will be recognized in the December 25, 2001 10-Q. On August 14, 2001 the Partnership's Limited Partnership Interest in University Gardens Apts. ("University") was sold to the Local General Partner for $5,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,246,000, resulting in gain on sale of property of approximately $2,932,000 which will be recognized in the December 25, 2001 10-Q. On August 15, 2001 the Partnership's Limited Partnership Interest in Hackley Village ("Hackley") was sold to the Local General Partner. The Partnership paid approximately $9,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,825,000, resulting in gain on sale of property of approximately $1,284,000, which will be recognized in the December 25, 2001 10-Q. On August 21, 2001, Nottingham Woods Apartments, Ltd. ("Nottingham Woods") entered into a purchase and sale agreement with an unaffiliated third party purchaser for a purchase price of $1,900,000. The closing is expected to occur in the beginning of 2002. No assurance can be given that the closing will actually occur. On September 20, 2001, Shelton Beach Apartments, Ltd. ("Shelton Beach") entered into a purchase and sale agreement with an unaffiliated third party purchaser for a purchase price of $2,333,333. The closing is expected to occur in the beginning of 2002. No assurance can be given that the closing will actually occur. 18 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) On September 20, 2001, Northpointe II Apartments, Ltd. ("Northpointe II") entered into a purchase and sale agreement with an unaffiliated third party purchaser for a purchase price of $1,666,667. The closing is expected to occur in the beginning of 2002. No assurance can be given that the closing will actually occur. 19 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Note 5 - Commitments and Contingencies The following disclosures include changes and/or additions to disclosures regarding the subsidiary partnerships which were included in the Partnership's Annual Report on Form 10-K for the period ended March 25, 2001. MCCONNELL V. HUTTON ADVANTAGED PROPERTIES L.P. On or about November 3, 1999, eight alleged holders of beneficial interests in Purchase Money Notes issued by the Partnership in connection with the Partnership's acquisition of limited partnership interests in the West Scenic Apartments, Ltd. ("West Scenic"), Oakwood Manor, Ltd. ("Oakwood Manor") and Robindale East Apartments, Ltd. ("Robindale East") Local Partnerships brought an action in the Chancery Court of Pulaski County, Arkansas, entitled McConnell, et al., v. Hutton Advantaged Properties Limited Partnership, et al., Case No. EQ 99-5769 (the "McConnell Action"). Plaintiffs' original complaint contained a single count alleging fraud in connection with the Partnership's acquisition of limited partnership interests in those three Local Partnerships and named as defendants the Partnership, its general partners, its special limited partner and the general partner of the special limited partner, as well as two other defendants who are not affiliated with the Partnership. On or about December 27, 1999, the plaintiffs in the McConnell Action amended their complaint to add a second count alleging that the Purchase Money Notes involved in the McConnell Action had matured and were in default. Defendants (other than the two defendants who are not affiliated with the Partnership) have reached a written agreement with plaintiffs to settle the claims between them, which settlement contemplates the sale of real property owned by the West Scenic, Oakwood Manor, and Robindale East limited partnerships and an allocation of the sale proceeds between the plaintiffs, the Partnership and others. On January 5, 2001, the property and the related assets and liabilities of West Scenic limited partnership were sold. On September 27, 2001, the property and related assets and liabilities of Oakwood Manor were sold (see Notes 4 and 6 for a description of such sales). 20 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) UNIVERSITY GARDENS APARTMENTS, LTD. AND SOUTHSIDE VILLAGE APARTMENTS, LTD. By letters dated December 29, 1999, from counsel for Skyline Properties, Inc., Trustee of the University Gardens Apartments, Ltd. Partners Liquidating Trust and Southside Village Apartments, Ltd. Partners Liquidating Trust, ("Skyline"), the Partnership was informed of Skyline's intent to file an involuntary substitution affidavit pursuant to Section 7.1 of the relevant security agreements. Pursuant to a standstill agreement between the parties, on August 14, 2001, both properties' Limited Partnership Interests were sold (see Note 4). SARALAND APARTMENTS, LTD. On March 21, 2001, Saraland Apartments, Ltd. ("Saraland") filed a petition for relief under chapter 11 of the bankruptcy code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing was commenced in response to a nonjudicial foreclosure brought by HUD. Another lawsuit under Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act, is currently pending in the District Court for the Southern District of Alabama (the "District Court") against Saraland and others who it claims are potentially responsible parties. Redwing Carriers, Inc. ("Redwing"), a codefendant in this lawsuit, has commenced an action, also in the District Court, to recover all or a pro rata share of its environmental response costs from Saraland and others. Another lawsuit, pending in Circuit Court, Mobile County, Alabama, was filed by the former tenants of Saraland against Saraland and Redwing and is also related to the environmental issues. The debtor has filed a preliminary plan of reorganization and disclosure statement. Negotiations are currently ongoing among the Debtor, HUD, and the USEPA concerning amendments to the plan or reorganization and disclosure statement. 21 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds are the cash distributions from operations of the Local Partnerships in which the Partnership has invested and net proceeds from sales. These sources are available to meet obligations of the Partnership. However, the cash distributions received from the Local Partnerships to date have not been sufficient to meet all such obligations of the Partnership. Accordingly, certain fees and expense reimbursements owed to the General Partners amounting to approximately $2,836,000 and $2,514,000, were accrued and unpaid as of September 25, 2001 and March 25, 2001, respectively. 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 allowing the accrual without payment of these amounts but are under no obligation to do so. Proceeds received from future sales will be used to pay any outstanding amounts due to the General Partners. Distributions aggregating approximately $3,884,000 and $4,230,000 were made to the Partnership for the six months ended September 25, 2001 and 2000, respectively, of which $3,355,000 and $2,054,000, respectively, were used to pay principal and interest on the Purchase Money Notes. In addition, approximately $0 and $598,000 was paid as "additional" interest on the Purchase Money Notes for the six months ended September 25, 2001 and 2000, respectively. During the six months ended September 25, 2001, cash and cash equivalents of the Partnerships and its thirty consolidated Local Partnerships decreased approximately $2,114,000. This decrease was due to principal payment of mortgage notes payable ($7,447,000), principal payments of Purchase Money Notes payable ($3,270,000), acquisitions of property and equipment ($209,000), an increase in mortgage escrow deposits ($600,000), a decrease in capitalization of minority interest ($156,000) and cash used in operating activities ($1,826,000) which exceeded proceeds from mortgage notes payable ($11,394,000). Included in the adjustments to reconcile the net income to cash used in operating activities are gain on sale of properties ($1,657,000), forgiveness of indebtedness income ($14,313,000) and depreciation ($765,000). 22 For a discussion of Purchase Money Notes Payable, see Note 2 to the financial statements. For a discussion of the sale of properties in which the Partnership owns direct and indirect interest, see Note 4 to the financial statements. Even though sales have resulted in net gains for tax purposes, the net sales proceeds have not been sufficient to permit investors to pay the tax incurred and the funds available after payment of all or a portion of the Purchase Money Notes is minimal. For a discussion of contingencies affecting certain Local Partnerships, see Note 5 to the financial statements. Since the maximum loss for which the Partnership would be liable 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 except that the Partnership would lose its investment in the properties and any potential proceeds from the sale or refinancing of the properties. Management is not aware of any trends or events, commitments or uncertainties which have not been otherwise 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 diversification of the portfolio may not protect against a general downturn in the national economy. RESULTS OF OPERATIONS During the periods ended September 25, 2001 and 2000, Bellfort, Fircrest, Casa Ramon, Cloisters (Sundown), Conifer 208, Cedarbay, West Scenic, Tall Pines, Northwoods III (Windgate), Oakwood Manor and Ware Manor sold their properties and the related assets and liabilities and Cranbrook, Caroline Forest Apts., Bonnie Doone Apartments, Florence Apartments, Dickens Ferry Apartments, Decatur Apartments and Solemar sold their Local Partnership Interests (collectively the "Sold Assets"). The results of operations of the Partnership, as well as the Local Partnerships, remained fairly consistent during the three and six months ended 23 September 25, 2001 and 2000, excluding the Sold Assets, gain on sale of properties, forgiveness of indebtedness income, administrative and management, operating and interest expense. 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 which were issued when the Local Partnerships were acquired. Rental income decreased approximately 33% and 30% for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, rental income increased approximately 3% and 5% for the three and six months ended September 25, 2001 as compared to 2000, primarily due to rental rate increases. Other income decreased approximately 26% and 27% for the three and six months ended September 25, 2001 as compared to 2000 primarily due to decreases relating to the Sold Assets. Total expenses, excluding the Sold Assets, administrative and management, operating and interest, remained fairly consistent with an increase of approximately 1% for both the three and six months ended September 25, 2001 as compared to 2000. Administrative and management decreased approximately $506,000 and $946,000 for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, such expense decreased approximately $136,000 and $217,000 primarily due to a decrease in legal and accounting expenses at the Partnership level in 2001. Operating expenses decreased approximately $171,000 and $257,000 for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, such expense increased approximately $37,000 and $157,000, primarily due to increased utility charges at four Local Partnerships. Interest expense decreased approximately $1,379,000 and $3,662,000 for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, such expense decreased approximately $449,000 and $1,368,000, primarily due to an overaccrual of interest on the Purchase Money Notes in the first quarter of 2000 which was corrected in the third quarter of 2000. 24 Administrative and management-related parties, repairs and maintenance, taxes and insurance and depreciation decreased approximately $63,000 and $132,000, $247,000 and $478,000, $138,000 and $249,000, $556,000 and $1,029,000, respectively, for the three and six months ended September 25, 2001 as compared to 2000, primarily due to decreases relating to the Sold Assets. Robindale, Huntley #1, Huntley #2, Seymour-O'Brien, Autumn Ridge, Nu-Elm and Lexington are not being depreciated during the period ended September 25, 2001 because they are classified as assets held for sale. Loss on sale of property and forgiveness of indebtedness income will continue to fluctuate as a result of the disposition of properties (see Note 4 of the financial statements). 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 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 ADVANTAGED PROPERTIES LIMITED PARTNERSHIP (Registrant) By: Related Beta Corporation, a General Partner Date: October 31, 2001 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: October 31, 2001 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: ASSISTED HOUSING ASSOCIATES, INC., a General Partner Date: October 31, 2001 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: October 31, 2001 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: CAMBRIDGE AND RELATED ASSOCIATES LIMITED PARTNERSHIP By: Related Beta Corporation, Date: October 31, 2001 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: October 31, 2001 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer)

Three Months Ended June 25, ------------------------------- 2001 2000 ------------------------------- Partnership manage- ment fees (a) $271,000 $280,000 Expense reimburse- ment (b) 34,492 37,072 Local administra- tive fee (c) 14,000 16,000 -------- -------- Total general and administrative- General Partners 319,492 333,072 ------- ------- Property manage- ment fees incurred to affiliates of the subsidiary partnerships' general partners 164,745 220,008 ------- ------- Total general and administrative- related parties $484,237 $553,080 ======= =======

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