10-Q 1 f10q_june2003-cam1.txt 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 June 25, 2003 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 ----- ------ 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 ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)

============ ============ ~~December~~June 25, March 25, ~~2002~~2003 2002*2003 ------------ ------------ ASSETS Property and equipment - less accumulated depreciation of $3,~~214~~325,~~590~~428 and $73,~~639~~271,~~553~~756, respectively $ 3,~~526~~424,~~547~~574 $ 53,~~470~~478,~~303~~246 Property and equipment - held for sale - less accumulated depreciation of $96,~~155~~870,~~587~~471 and $166,~~326~~870,~~084~~471, respectively 42,~~397~~465,~~105~~394 112,~~548~~465,~~976~~394 Cash and cash equivalents 71,~~125~~134,~~043~~848 41,~~967~~224,~~577~~252 Cash - restricted for tenants' security deposits ~~254~~128,~~436~~207 ~~304~~127,~~539~~214 Mortgage escrow deposits 32,~~275~~890,~~193~~699 42,~~376~~754,~~911~~151 Prepaid expenses and other assets ~~949~~467,~~127~~519 ~~758~~534,~~693~~117 ------------ ------------ Total assets $19 10,~~527~~511,~~451~~241 $27 10,~~426~~583,~~999~~374 ============ ============

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

============ ============ ~~December~~June 25, March 25, ~~2002~~2003 2002*2003 ------------ ------------ LIABILITIES AND PARTNERS' DEFICIT Liabilities Mortgage notes payable $ 64,~~203~~984,~~531~~794 $ 135,~~137~~059,~~483~~854 Purchase Money Notes payable (Note 2) 43,~~549~~635,~~492~~924 93,~~861~~635,~~837~~924 Due to selling partners (Note 2) 1210,~~102~~083,~~612~~497 229,~~957~~917,~~424~~404 ~~Deferred revenue on sale of properties 1,610,858 5,905,828~~ Accounts payable, accrued expenses and other liabilities ~~654~~194,~~212~~312 ~~587~~153,~~491~~890 Tenants' security deposits payable ~~218~~122,~~293~~110 ~~283~~119,~~920~~183 Due to general partners of subsidiaries and their affiliates 9522,~~811~~391 ~~114~~22,~~744~~391 Due to general partners and affiliates 3,~~278~~699,~~545~~573 3,~~329~~511,~~471~~595 ------------ ------------ Total liabilities 2822,~~713~~742,~~354~~601 5622,~~178~~420,~~198~~241 ------------ ------------ Minority interest ~~109~~61,~~826~~192 ~~222~~59,~~153~~888 ------------ ------------ Commitments and contingencies (Note 6) Partners' deficit: Limited partners (811,~~665~~632,~~247~~102) (2811,~~146~~240,~~094~~263) General partners (~~630~~660,~~482~~450) (~~827~~656,~~258~~492) ------------ ------------ Total partners' deficit (912,~~295~~292,~~729~~552) (2811,~~973~~896,~~352~~755) ------------ ------------ Total liabilities and partners' deficit $ 1910,~~527~~511,~~451~~241 $ 2710,~~426~~583,~~999~~374 ============ ============

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

============================ ==~~==========================~~ Three Months Ended ~~Nine~~June ~~Months Ended December~~ 25, ~~December 25,~~ ---------------------------- --~~--------------------------~~ ~~2002~~2003 ~~2001~~ 2002 ~~2001~~ ---------------------------- --~~--------------------------~~ Revenues: Rentals, net $ ~~870~~697,~~791~~161 $ 21,~~591~~556,~~487~~843 ~~$ 3,615,550 $ 8,921,847~~ Other 5357,~~784~~416 ~~152~~163,~~337~~491 ~~293,600 565,939~~ Gain on sale of properties (Note 4) ~~2,605,134~~0 7262,~~436,742~~373 ~~4,827,510 9,093,823~~ ------------ ------------ ~~------------ ------------~~ Total revenues 3754,~~529,709~~577 101,~~180~~982,~~566~~707 ~~8,736,660 18,581,609~~ ------------ ------------ ~~------------ ------------~~ Expenses Administrative and management ~~159~~166,~~764~~279 ~~502~~339,~~271~~622 ~~805,566 1,866,806~~ Administrative and management- related parties (Note 3) ~~319~~338,~~544~~182 ~~448~~376,~~858~~451 ~~1,050,009 1,408,288~~ Operating ~~149~~156,~~684~~215 ~~485~~354,~~216~~203 ~~697,684 1,846,807~~ Repairs and maintenance ~~257~~151,~~828~~229 ~~602~~324,~~519~~355 ~~807,112 2,142,445~~ Taxes and ~~insur-~~insurance ~~ance 112~~114,~~448~~602 ~~311~~239,~~758~~802 ~~684,631 1,109,541~~ Interest ~~184~~168,~~890~~891 ~~781~~415,~~508~~661 ~~932,105 3,548,995~~ Depreciation 4953,~~872~~672 ~~259~~128,~~492~~546 ~~299,713 1,024,346 Loss on impairment of assets (Note 5) 268,523 0 268,523 0~~ ------------ ------------ ~~------------ ------------~~ Total expenses 1,~~502~~149,~~553~~070 32,~~391~~178,~~622~~640 ~~5,545,343 12,947,228~~ ------------ ------------ ~~------------ ------------~~ Net ~~income~~loss before minority interest 2(394,~~027,156~~493) 6(195,~~788,944~~933) ~~3,191,317 5,634,381~~ Minority interest in ~~loss~~ (income) loss of subsidiaries ~~21,514~~ (~~123~~1,~~311~~304) ~~(59~~64,~~416)~~728 ~~227,267~~ ------------ ------------ ~~------------~~Loss ~~------------ Income~~ before extra-ordinary item 2(395,~~048,670~~797) ~~6,665,633 3,~~(131,~~901~~205) ~~5,861,648~~ Extraordinary item-forgiveness of indebtedness income (Note 4) ~~(242,779)~~0 15,~~667~~683,~~561~~676 ~~16,545,722 15,980,544~~ ------------ ------------ Net (loss) income $ (395,797) $ 5,552,471 =========== =========== Limited Partners Share: Loss before extraordinary item $ (391,839) $ (129,893) Extraordinary item 0 5,626,839 ------------ ------------ Net (loss) income $ 1(391,~~805,891~~839) $ 85,~~333~~496,~~194~~946 ~~$ 19,677,623 $ 21,842,192~~ ============ ===========~~= ============ ============~~

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 -------------------------------------------------- Balance - March 26, ~~2002~~2003 $(2811,~~973~~896,~~352~~755) $(2811,~~146~~240,~~094~~263) $ (~~827~~656,~~258~~492) Net ~~income~~loss 19(395,~~677,623~~797) 19(391,~~480,847~~839) ~~196~~(3,~~776~~958) ------------ ------------ ------------ Balance - ~~December~~June 25, ~~2002~~2003 $ (912,~~295~~292,~~729~~552) $ (811,~~665~~632,~~247~~102) $ (~~630~~660,~~482~~450) ============ ============ ============

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)

============================== ~~Nine~~Three Months Ended ~~December~~June 25, ------------------------------ 2003 2002 ~~2001~~ ------------------------------ Cash flows from operating activities: Net (loss) income $ 19(395,~~677,623~~797) $ 215,~~842~~552,~~192~~471 ------------ ------------ Adjustments to reconcile net (loss) income to net cash provided by ~~(used in)~~ operating activities: Gain on sale of properties (Note 4) ~~(4,827,510)~~0 (9262,~~093,823~~373) Extraordinary item-forgiveness of indebtedness income (Note 4) ~~(16,545,722)~~0 (155,~~980~~683,~~544~~676) Depreciation ~~299~~53,~~713~~672 1128,~~024,346~~546 ~~Loss on impairment of assets (Note 5) 268,523 0~~ Minority interest in income (loss) of subsidiaries 591,~~416~~304 (~~227~~64,~~267~~728) (Increase) ~~decrease~~ in cash-restricted for tenants' security deposits (~~11,137~~993) 10(17,~~481~~261) (Increase) decrease in mortgage escrow deposits (~~291~~69,~~161~~243) ~~(296~~110,~~468)~~963 Decrease (Increase) in prepaid expenses and other assets ~~(255~~66,~~156)~~598 (~~325~~151,~~882~~009) Increase in due to selling partners ~~837~~166,~~294~~093 3364,~~059,794~~044 Payments of interest to selling partners ~~(1,049,874)~~0 (9425,~~019~~471) Increase ~~(decrease)~~ in accounts payable, accrued expenses and other liabilities 140,~~999,022~~422 (12,~~827~~145,~~887)~~375 Increase (decrease) in tenants' security deposits payable 122,~~623~~927 ~~3,177~~(16) Increase (decrease) in due to general partners ~~of subsidiaries~~ and their affiliates 7187,~~867~~978 ~~383 Decrease in due to general partners of subsidiaries and their affiliates~~ (1765,~~284~~601) ~~(410) Increase in due to general partners and affiliates 88,649 514,178~~ ------------ ------------ Total adjustments ~~(19~~448,~~424,737)~~758 (233,~~233~~521,~~941~~207) ------------ ------------ Net cash provided by ~~(used in)~~ operating activities ~~252~~52,~~886~~961 (12,~~391~~031,~~749)~~264 ------------ ------------

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

============================== ~~Nine~~Three Months Ended ~~December~~June 25, ------------------------------ 2003 2002 ~~2001~~ ------------------------------ Cash flows from investing activities: Proceeds from sale of properties ~~10,760,000~~0 122,~~203~~945,~~542~~677 Acquisitions of property and equipment ~~(134,966)~~0 (~~312~~6,~~006~~273) Increase in mortgage escrow deposits (~~175~~67,~~527~~305) (~~823~~422,~~988~~977) ------------ ------------ Net cash (used in) provided by investing activities 10(67,~~449,507~~305) 112,~~067~~516,~~548~~427 ------------ ------------ Cash flows from financing activities: Principal ~~payment~~payments of mortgage notes payable (575,~~633,717~~060) (82,~~164~~246,~~825~~209) Principal payments of purchase money notes payable ~~(2,739,467)~~0 (31,~~507~~924,~~870~~613) Decrease in capitalization of minority interest ~~(171,743)~~0 (~~176,923~~395) ------------ ------------ Net cash used in financing activities (875,~~544,927~~060) (114,~~849~~171,~~618~~217) ------------ ------------ Net ~~increase~~ (decrease) increase in cash and cash equivalents ~~2,157,466~~ (289,~~173,819~~404) 376,474 Cash and cash equivalents - beginning of period 41,~~967~~224,~~577~~252 4,~~943~~967,~~694~~577 ------------ ------------ Cash and cash equivalents - end of period $ 71,~~125~~134,~~043~~848 $ 25,~~769~~344,~~875~~051 ============ ============ Supplemental disclosures of noncash activities: ~~Increase in property and equipment - held for sale reclassified from property and equipment $ 0 $ 5,764,304~~ Decrease in property and equipment, net of accumulated depreciation ~~(590)~~$ 0 $ (12,~~114~~735) Increase in deferred revenue on sale of properties reclassified from purchase money notes payable and due to selling partners ~~181~~0 11,~~280~~245,818 5Decrease in Purchase Money Notes payable 0 2,~~407~~423,~~677~~626 Decrease in due to selling partners 0 8,824,927

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

============================== ~~Nine~~Three Months Ended ~~December~~June 25, ------------------------------ 2003 2002 ~~2001~~ ------------------------------ Forgiveness of indebtedness income (Note 4): ~~Decrease~~Increase in ~~accounts~~deferred ~~payable,~~revenue ~~accrued~~from ~~expenses~~sale ~~and~~of ~~other~~property ~~liabilities~~0 (5,683,676) ~~(3,839,356) Decrease in purchase money note payable (2,037,119) (1,479,557) Decrease in due to selling partners (8,824,927) (10,661,631)~~ Summarized below are the components of the gain on sale of property: Decrease in property and equipment, and property and equipment-held for sale ~~8,661,767~~0 132,~~005~~094,~~337~~557 Decrease in cash - restricted for tenants' security deposits ~~61,240~~0 ~~141~~22,~~512~~422 Decrease in mortgage escrow deposits ~~1,568,406~~0 1397,~~191,695~~974 ~~(Increase)~~Decrease ~~decrease~~ in prepaid expenses and other assets ~~(10,278)~~0 ~~486~~67,~~838~~697 Decrease in ~~purchase money notes payable (535,759) (2,355,100) Decrease in~~ due to selling partners ~~(1,636,025)~~0 (648,~~817,633~~245) ~~Decrease~~Increase in accounts payable, accrued expenses and other liabilities ~~(649,285)~~0 ~~(224~~258,~~675)~~976 Decrease in tenant's security deposits payable ~~(78,250)~~0 (~~127~~20,~~129~~728) Decrease in due to general partners and affiliates ~~(139,575)~~0 (~~166~~87,~~856~~700) Decrease in due to general partners of subsidiaries and their affiliates ~~(9,516)~~ 0 ~~Decrease in mortgage notes payable~~ (1,~~300,235~~649) 0

See accompanying notes to consolidated financial statements. 9 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) Note 1 - General The consolidated financial statements for the three months ended June 25, 2003 and 2002 include the accounts of Cambridge Advantaged Properties Limited Partnership (the "Partnership") and four and fourteen 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 June 25. All subsidiaries have fiscal quarters ending March 31. Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from April 1 through June 25. The Partnership's fiscal quarter ends on June 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 losses aggregated approximately $0 and $5,000 for the three months ended June 25, 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. In consolidation, all subsidiary partnership losses are included in the 10 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) 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, 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 June 25, 2003 and the results of operations and cash flows for the three months ended June 25, 2003 and 2002, respectively. However, the operating results for the three months ended June 25, 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 March 25, 2003 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, is an obligation at the subsidiary partnership level, whereas the remaining $53,526,257 was 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. Through August 31, 1989, $4,336,417 of interest was accrued. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). Purchase Money Notes aggregated approximately $3,589,000 as of June 25, 2003 and March 25, 2003, respectively. As of June 25, 2003 four Subsidiary Partnership's 11 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) Purchase Money Notes remained outstanding. Subsequently, on June 30, 2003 two of the remaining four notes totaling approximately $1,602,000 were forgiven. 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 extension fees payable as of the date of maturity at one of the following two rates: (i) the lesser of 12% or the legally allowable rate; or (ii) the lesser of prime plus 2% or the lowest legally allowable rate. Unpaid interest of approximately $10,083,000 and $9,917,000 as of June 25, 2003 and March 25, 2003, 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 original 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 extension fees of 1/2 % per annum of the outstanding principal balance of the Purchase Money Notes. Of such fees incurred, $47,367 was accrued and added to the Purchase Money Notes balance. The extension fees are being amortized over the term of the extensions. The Purchase Money Notes with seven-year extensions have all been sold. Additionally, an oral agreement was reached in November 2002 that extended the maturity dates of the remaining 12 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) Purchase Money Notes through December 2003. Further extensions, until such properties are sold, are currently in the discussion stage. The Partnership is working with the Local General Partners and Purchase Money Note holders to refinance or sell the properties. No assurance can be given that management's efforts will be successful. 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 $0 and $3,046,000 were made to the Partnership for the three months ended June 25, 2003 and 2002, respectively, of which approximately $0 and $2,173,000, respectively, were used to pay principal and interest on the Purchase Money Notes. 13 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) Note 3 - Related Party Transactions The costs incurred to related parties for the three months ended June 25, 2003 and 2002 were as follows:

Three Months Ended ~~Nine~~June ~~Months Ended December~~ 25, ~~December 25,~~ ----------------------- -~~----------------------~~ ~~2002~~2003 ~~2001~~ 2002 ~~2001~~ ----------------------- -~~----------------------~~ Partnership management fees (a) $ ~~267~~285,~~000~~500 $ ~~271~~267,000 ~~$ 801,000 $ 813,000~~ Expense reimbursement (b) 1326,~~611~~228 28,~~001~~621 ~~61,336 112,143~~ Local administrative fee (c) 102,~~000~~500 1410,000 ~~30,000 42,000~~ ---------- ---------- ~~---------- ----------~~ Total general and administrative- General Partners ~~290~~314,~~611~~228 ~~313~~305,~~001~~621 ~~892,336 967,143~~ ---------- ---------- ~~---------- ----------~~ Property management fees incurred to affiliates of the subsidiary partnerships' general partners 2823,~~933~~954 ~~135~~70,~~857~~830 ~~157,673 441,145~~ ---------- ---------- ~~---------- ----------~~ Total general and administrative- related parties $ ~~319~~338,~~544~~182 $ ~~448~~376,~~858~~451 ~~$1,050,009 $1,408,288~~ ========== ========~~== ========== ==========~~

(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 $3,410,000 and $3,249,000 were accrued and unpaid as of June 25, 2003 and March 25, 2003, 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. (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 14 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) partnerships' performance. Expense reimbursements and asset monitoring fees owed to the General Partners amounting to approximately $64,000 and $38,000 were accrued and unpaid as of June 25, 2003 and March 25, 2003, 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. As of June 25, 2003, the Partnership has disposed of fifty-seven of its sixty-one original investments. Three additional investments are listed for sale and the Partnership anticipates that the remaining investment will be liquidated sometime during 2003. There can be no assurance as to whether or not the Partnership will achieve this goal. Furthermore, there can be no assurance that any proceeds will be realized based on the historical operating results of the Local Partnerships and the current economic conditions. Moreover, the Local General Partners and holders of the Purchase Money Notes generally have decision-making rights with respect to the sale of each property which makes it more cumbersome for the General Partners to cause a sale of each property. Information Regarding Dispositions ---------------------------------- On May 30, 2002, the property and the related assets and liabilities of Lexington Village ("Lexington") were sold to an affiliate of the Local General Partner for approximately $1,350,000, resulting in a gain of approximately $412,000. The Partnership used approximately $617,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, resulting in forgiveness of indebtedness income of approximately $2,828,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, 15 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) resulting in a gain of approximately $158,000. The Partnership used approximately $1,277,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,645,000, resulting in forgiveness of indebtedness income of approximately $1,368,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #2 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $379,000. The Partnership used approximately $1,194,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,725,000, resulting in forgiveness of indebtedness income of approximately $531,000. On April 30, 2002, the property and the related assets and liabilities of Shelton Beach Apartments ("Northpointe I") were sold to an unaffiliated third party for $2,333,333, resulting in a gain of approximately $598,000. The Partnership used approximately $1,124,000 of proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, resulting in forgiveness of indebtedness income of approximately $2,115,000. On April 30, 2002, the property and the related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a gain of approximately $394,000. The Partnership used approximately $570,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,119,000, resulting in forgiveness of indebtedness income of approximately $1,549,000. On February 15, 2002, the property and the related assets and liabilities of Robindale East Apartments ("Robindale") were sold to an unaffiliated third party for $735,000, resulting in a loss of approximately $527,000. No proceeds were used to settle the related Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,904,000, resulting in forgiveness of indebtedness income of such amount. 16 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2003 (Unaudited) On February 14, 2002, the property and the related assets and liabilities of Nottingham Woods Apartments ("Nottingham") were sold to an unaffiliated third party for $1,900,000, resulting in a gain of approximately $806,000. The Partnership used approximately $249,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,251,000, resulting in forgiveness of indebtedness income. During the year ended March 25, 2003, additional proceeds of approximately $298,000 were received, of which approximately $223,000 was paid on the Purchase Money Note, resulting in net forgiveness of indebtedness income of approximately $2,779,000. Note 5 - Subsequent Events On June 30, 2003 the Partnership's Limited Partnership Interest in Cabarras Arms Associates ("Cabarras") was sold to the Purchase Money Note Holder for $30,000, resulting in a loss in the amount of approximately $74,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,415,000, resulting in gain on sale of property of such amount. On June 30, 2003, the Partnership's Limited Partnership Interest in Hathaway Court Associates ("Hathaway") was sold to the Purchase Money Note Holder for $60,000, resulting in a gain in the amount of approximately $579,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $4,035,000, resulting in gain on sale of property of such amount. 17 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 $3,626,000 and $3,439,000, were accrued and unpaid as of June 25, 2003 and March 25, 2003, respectively. Without the General Partners' continued allowance of accrual with partial payment of the partnership management fees, the Partnership will not be in a position to meet its obligations. The General Partners have continued allowing the accrual with partial payment of the partnership management fees, but are under no obligation to do so. Net proceeds and distributions received from future sales of the Partnership's investments will be used to pay any outstanding amounts due to the General Partners. Distributions aggregating approximately $0 and $3,046,000 were made to the Partnership for the three months ended June 25, 2003 and 2002, respectively, of which approximately $0 and $2,173,000, respectively, were used to pay principal and interest on the Purchase Money Notes. During the three months ended June 25, 2003, cash and cash equivalents of the Partnership and its consolidated Local Partnerships decreased approximately $89,000. This decrease was due to principal payment of mortgage notes payable ($75,000) and an increase in mortgage escrow deposits relating to investing activities ($67,000) which exceeded cash provided by operating activities ($53,000). Included in the adjustments to reconcile the net loss to cash provided by operating activities is depreciation ($54,000). 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 interests, see Note 4 and Note 5 to the financial statements. 18 Even though sales have resulted in net gains for tax purposes, the net sales proceeds have not been sufficient to permit any significant distributions to investors after payment of all or a portion of the Purchase Money Notes. Therefore, investors should not expect that they will receive distributions sufficient to pay taxes incurred as a result of such sales. 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. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has four properties remaining and therefore the Partnership may not be protected against a general downturn in the national economy. 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 March 25, 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; 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) 19 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 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 identified any variable interest entities that were created after January 31, 2003 and is currently evaluating the impact of the provisions of FIN 46 on its consolidated financial statements. Results of Operations --------------------- During the three months ended June 25, 2003 and the year ended March 25, 2003, Nottingham Woods, Robindale East, Northpointe I, Northpointe II, Huntley #1, Huntley #2 Lexington and Conifer 317 (Pinewood) sold their properties and the related assets and liabilities and the Partnership sold or transferred its Local Partnership Interest in Saraland and Summer Arms (collectively the "Sold Assets"). Rental income decreased approximately 55% for the three months ended June 25, 2003 as compared to 2002. Excluding the Sold Assets, rental income increased approximately 3% for the three months ended June 25, 2003 as compared to 2002, primarily due to rental rate increases. Other income decreased approximately $106,000 for the three months ended June 25, 2003, as compared to 2002. Excluding the Sold Assets, other income decreased approximately $12,000 for the three months ended June 25, 2003 as compared to 20 2002 primarily due smaller cash and cash equivalents balances earning interest at the Local Partnerships and at the Partnership level. Administrative and management decreased approximately $173,000 for the three months ended June 25, 2003 as compared to 2002. Excluding the Sold Assets, administrative and management increased approximately $39,000 primarily due to an underaccrual of audit fees in 2002 at the Partnership level. Operating decreased approximately $198,000 for the three months ended June 25, 2003 as compared to 2002. Excluding the Sold Assets, operating increased approximately $25,000 primarily due to increases in heating costs at the Local Partnerships. Repairs and maintenance decreased approximately $173,000 for the three months ended June 25, 2003 as compared to 2002. Excluding the Sold Assets, repairs and maintenance decreased approximately $24,000 primarily due to repairs relating to a fire in 2002 at one Local Partnership and decreases in repairs related to tenant turnovers at a second Local Partnership. Taxes and insurance decreased approximately $125,000 for the three months ended June 25, 2003, as compared to 2002. Excluding the Sold Assets, taxes and insurance increased approximately $25,000 primarily due to an increase in liability insurance premiums at the remaining Local Partnerships. Administrative and management-related parties, interest and depreciation decreased approximately $38,000, $247,000 and $75,000, respectively, for the three months ended June 25, 2003 as compared to 2002, primarily due to decreases relating to the Sold Assets. Cabarrus, Nu-Elm and Hathaway are not being depreciated during the period ended June 25, 2003, because they are classified as assets held for sale. Item 3. Quantitative and Qualitative Disclosures about Market Risk None Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer of Related Beta Corporation and Assisted Housing, Inc., each of which is a general partner of Cambridge Advantaged Properties Limited Partnership (the "Partnership"), has evaluated the Partnership's disclosure controls and procedures relating to the 21 Partnership's quarterly report on Form 10-Q for the period ending June 25, 2003, as filed with Securities and Exchange Commission and has judged such controls and procedures to be effective as of June 25, 2003 (the "Evaluation Date"). There have been no significant changes in the internal controls or in other factors that could significantly affect internal controls relating to the Partnership since the Evaluation Date. 22 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 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 23 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: July 22, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: July 22, 2003 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: ASSISTED HOUSING ASSOCIATES, INC., a General Partner Date: July 22, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: July 22, 2003 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: CAMBRIDGE AND RELATED ASSOCIATES LIMITED PARTNERSHIP By: Related Beta Corporation, Date: July 22, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: July 22, 2003 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) CERTIFICATION I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, General Partners of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending June 25, 2003 of the Partnership; 2. 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; 3. 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; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the Partnership and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report was being prepared; b) evaluated the effectiveness of the Partnership's disclosure controls and procedures as of June 25, 2003 (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the Partnership's auditors and to the board of directors of the General Partners: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Partnership's ability to record, process, summarize and report financial data and have identified for the Partnership's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer July 22, 2003 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Cambridge Advantaged Properties Limited Partnership (the "Partnership") on Form 10-Q for the period ending June 25, 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 Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, general partner of the Partnership) and Assisted Housing Associates, Inc. (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 Chief Executive Officer and Chief Financial Officer July 22, 2003

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