10-Q 1 f10q_dec2004-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 December 25, 2004 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 STATEMENTS OF NET ASSETS IN LIQUIDATION AS OF DECEMBER 25, 2004 CONSOLIDATED BALANCE SHEET AS OF MARCH 25, 2004 (Unaudited)

============ ============ ~~June~~December 25, March 25, ~~2003~~2004 ~~2003~~2004* ~~------------~~============ ~~------------~~============ ASSETS Property and equipment - less accumulated depreciation of $~~3,325,428~~0 and $3,~~271~~487,~~756~~890, respectively $ ~~3,424,574~~0 $ 3,~~478~~347,~~246~~387 ~~Property~~Cash and ~~equipment~~cash -equivalents ~~held~~465,057 ~~for~~860,978 ~~sale~~Cash - ~~less~~restricted ~~accumulated~~for ~~depreciation~~tenants' ofsecurity ~~$6,870,471~~deposits ~~and~~0 $6198,~~870,471,~~829 ~~respectively~~Mortgage ~~2,465,394~~escrow deposits 0 2,~~465~~039,~~394~~630 ~~Cash~~Prepaid expenses and ~~cash~~other ~~equivalents~~assets 1295,~~134,848~~097 1370,~~224,252~~579 ~~Cash~~------------ ------------ ~~restricted~~Total ~~for~~assets ~~tenants'~~relating ~~security~~to ~~deposits~~operating ~~128,207~~activities ~~127~~760,~~214~~154 ~~Mortgage escrow deposits 2~~6,~~890~~817,~~699~~403 ~~2,754,151~~------------ ~~Prepaid~~------------ ~~expenses~~Assets ~~and~~of ~~other~~discontinued ~~assets~~operations ~~467~~(Note 8) 1,~~519~~490,020 ~~534~~1,~~117~~614,379 ------------ ------------ Total assets $ 102,~~511~~250,~~241~~174 $ 108,~~583~~431,~~374~~782 ============ ============

2 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES STATEMENTS OF NET ASSETS IN LIQUIDATION AS OF DECEMBER 25, 2004 CONSOLIDATED BALANCE SHEET AS OF MARCH 25, 2004 (Unaudited) (continued)

============ ============ ~~June~~December 25, March 25, ~~2003~~2004 ~~2003~~2004* ~~------------~~============ ~~------------~~============ LIABILITIES AND PARTNERS' DEFICIT AND NET ASSETS IN LIQUIDATION Liabilities Mortgage notes payable $ ~~4,984,794~~0 $ 52,~~059~~128,~~854~~604 Purchase Money Notes payable (Note 2) ~~3,635,924~~0 32,~~635~~009,~~924~~344 Due to selling partners (Note 2) ~~10,083,497~~0 95,~~917~~518,~~404~~708 Accounts payable, accrued expenses and other liabilities ~~194~~11,~~312~~365 ~~153~~42,~~890~~571 Tenants' security deposits payable ~~122,110~~0 ~~119~~73,~~183~~817 Due to general partners ~~of subsidiaries~~ and ~~their~~ affiliates 22295,~~391~~550 224,~~391~~356,934 ~~Due~~------------ to------------ ~~general~~Total ~~partners~~liabilities ~~and~~relating ~~affiliates~~to 3operating activities 306,~~699,573~~915 314,~~511~~129,~~595~~978 ------------ ------------ ~~Total~~Minority ~~liabilities~~interest ~~22,742,601~~relating 22to operating activities 0 (94,~~420,241~~173) ------------ ------------ ~~Minority~~Liabilities of discontinued operation (including minority interest) ~~61,192~~(Note 598) 0 668,~~888~~462 ------------ ------------ Commitments and contingencies (Note 6) Partners' deficit and net assets in liquidation: Limited partners ~~(11~~2,~~632~~461,~~102)~~350 (115,~~240~~672,~~263~~236) General partners (~~660~~518,~~450~~091) (~~656~~600,~~492~~249) ------------ ------------ Total partners' deficit ~~(12~~and net assets in liquidation 1,~~292~~943,~~552)~~259 (116,~~896~~272,~~755~~485) ------------ ------------ Total liabilities and partners' deficit and net assets in liquidation $ 102,~~511~~250,~~241~~174 $ 108,~~583~~431,~~374~~782 ============ ============

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

~~==============================~~For the period For the period September 26, Three ~~Months~~months ~~Ended~~March ~~June~~26, Nine months 2004 ended 2004 through ended Through December 25, December 15, December 25, December 15, 2004 2003* 2004 2003* ----------------- -------------- ~~2003 2002~~ -------------- ---------------- Operations: Revenues: ~~Rentals,~~Other ~~net~~ $ ~~697~~7,~~161~~160 $ 17,~~556,843~~580 ~~Other~~$ 5721,~~416~~029 ~~163~~$ 23,~~491~~242 ~~Gain~~----------- on----------- ~~sale of properties (Note 4) 0 262,373~~ ----------- ----------- Total revenues ~~754~~7,~~577~~160 17,~~982~~580 21,~~707~~029 23,242 ----------- ----------- ----------- ----------- Expenses Administrative and management ~~166~~35,~~279~~958 ~~339~~20,~~622~~750 75,381 188,280 Administrative and management- related parties (Note 3) ~~338~~307,~~182~~820 ~~376~~302,~~451~~595 ~~Operating 156~~925,~~215~~890 ~~354~~926,~~203~~009 ~~Repairs and maintenance 151,229 324,355 Taxes and insurance 114,602 239,802~~ Interest ~~168~~97,~~891~~164 ~~415~~84,~~661~~443 ~~Depreciation 53~~273,~~672~~319 ~~128~~340,~~546~~294 ----------- ----------- ~~Total expenses 1,149,070 2,178,640~~ ----------- ----------- ~~Net~~Total ~~loss~~expenses ~~before minority interest (394~~440,~~493)~~942 ~~(195~~407,~~933)~~788 ~~Minority interest in (income) loss of subsidiaries (~~1,~~304)~~274,590 641,~~728~~454,583 ----------- ----------- ~~Loss before extra~~-~~ordinary item (395,797) (131,205) Extraordinary item~~-~~forgiveness of indebtedness income (Note 4) 0 5,683,676~~ ----------- ----------- ~~Net~~Loss from operations (~~loss~~433,782) ~~income~~(400,208) $ (~~395~~1,~~797~~253,561) ~~$ 5~~(1,~~552~~431,~~471~~341) ~~===========~~Discontinued ~~===========~~operations: ~~Limited~~Net ~~Partners~~(loss) ~~Share:~~income ~~Loss~~from ~~before~~discontinued ~~extraordinary~~operations ~~item~~(including $gain ~~(391,839~~on sale of properties) $(Note 6) (~~129~~50,~~893~~980) ~~Extraordinary~~87,861 ~~item~~117,721 ~~0 5~~7,~~626~~410,~~839~~120 ----------- ----------- ----------- ----------- Net (loss) income $(484,762) (~~391~~312,~~839~~347) $(1,135,840) 5,~~496~~978,~~946~~779 =========== =========== =========== ===========

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

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 5 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (Unaudited)

=================~~=================================~~ ~~Limited~~For ~~General~~the ~~Total~~period ~~Partners~~December ~~Partners~~16, 2004 through December 25, 2004 ----------------- Liquidating activities: Increases in net assets in liquidation Writedown of mortgage notes payable to their estimated settlement value 2,524,786 Writedown of Purchase Money Notes to their estimated settlement value 2,009,344 Writedown due to selling partners to their estimated settlement value 5,792,027 Writedown of accounts payable, accrued expense and other liabilities to their estimated settlement value 115,308 Write down of tenants security deposits to their estimated settlement value 86,695 Writedown due to general partners of subsidiaries and their affiliates to their estimated settlement value 32,400 ------------ Subtotal 10,560,560 ------------~~---------~~ ~~Balance~~Decreases -in ~~March~~net ~~26,~~assets ~~2003~~in ~~$(11,896,755)~~liquidation $Writedown of property and equipment to net realizable value (113,~~240~~115,~~263~~349) $Liquidation ~~(656,492)~~of ~~Net~~tenants ~~loss~~security deposits (~~395~~91,~~797~~923) Liquidation of mortgage escrow (~~391~~2,~~839~~560,089) Writedown of other assets to their estimated realizable value (3247,~~958~~941) ------------ ~~------------~~Subtotal (6,015,302) ------------ ~~Balance~~Increase -in ~~June~~net ~~25,~~assets ~~2003~~in $liquidation (~~12,292,552~~Note 7) $~~(11~~ 4,~~632~~545,~~102)~~258 ============ Limited Partners Share: Increase in net assets in liquidation $ ~~(660~~4,~~450)~~499,805 ============ Number of units outstanding $ 12,074 ============ Increase in net assets in liquidation per limited partner unit $ 373 ============

See accompanying notes to consolidated financial statements. 6 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT) (Unaudited)

========================================= ~~Three~~Limited ~~Months~~General ~~Ended~~Total ~~June~~Partners ~~25,~~Partners ------------------------------ ~~2003 2002~~ -----------~~-------------------~~ ~~Cash~~Balance ~~flows~~- ~~from~~March ~~operating~~26, ~~activities:~~2004 ~~Net (loss) income~~ $ (~~395~~6,~~797~~272,485) $ (5,~~552~~672,~~471 ------------ ------------ Adjustments to reconcile net (loss~~236) ~~income~~$ ~~to net cash provided by operating activities: Gain on sale of properties~~ (~~Note 4) 0 (262~~600,~~373~~249) ~~Extraordinary~~Net ~~item-forgiveness~~loss ~~of indebtedness income~~ (~~Note 4) 0 (5~~1,~~683~~135,~~676~~840) ~~Depreciation 53,672 128,546 Minority interest in income~~ (~~loss) of subsidiaries~~ 1,~~304 (64~~124,~~728~~482) ~~Increase in cash-restricted for tenants' security deposits~~ (~~993) (17~~11,~~261~~358) ~~(Increase)~~Writedown ~~decrease~~of inpayables ~~mortgage escrow deposits (69,243) 110,963 Decrease (Increase) in prepaid expenses and other assets 66,598 (151,009) Increase in~~ due to ~~selling~~the ~~partners~~general ~~166,093~~partner ~~364,044 Payments of interest~~ to ~~selling~~their ~~partners~~net 0estimated ~~(25,471)~~settlement ~~Increase~~value ~~in accounts payable~~4, ~~accrued expenses and other liabilities 40~~806,~~422~~326 24,~~145~~758,~~375~~263 ~~Increase (decrease) in tenants' security deposits payable 2~~48,~~927~~063 ~~(16)~~ Increase ~~(decrease)~~ in ~~due~~net toassets ~~general~~in ~~partners~~liquidation ~~and~~4,545,258 ~~their affiliates 187~~4,~~978~~499,805 ~~(65~~45,~~601)~~453 ------------ ------------ ~~Total adjustments 448,758 (3,521,207)~~ ------------ Balance -~~-----------~~ ~~Net~~December ~~cash~~25, ~~provided~~2004 by$ ~~operating activities 52~~1,~~961~~943,259 $ 2,~~031~~461,~~264~~350 ~~------------~~$ ~~------------~~(518,091) =========== =========== ===========

See accompanying notes to consolidated financial statements. 7 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS DECREASE IN CASH AND CASH EQUIVALENTS (Unaudited)

============================== ~~Three~~Nine Months Ended ~~June~~December 25, ------------------------------ 2004 2003* ~~2002~~ ------------------------------ Cash flows from ~~investing~~operating activities: ~~Proceeds~~Net loss $(1,135,840) $ 5,978,779 ----------- ----------- Income from discontinued operations (including gain on sale of properties) 0(117,721) 2(7,~~945~~410,~~677~~120) ~~Acquisitions~~Decrease ofin ~~property~~prepaid expenses and ~~equipment~~other 0assets (621,171 95,776 Decrease in due to selling partners 273),319 ~~Increase~~340,295 Decrease in ~~mortgage~~accounts ~~escrow~~payable, ~~deposits~~accrued expenses and other liabilities (67181,~~305~~792) (~~422~~34,~~977~~420) Increase in due to general partners and their affiliates 744,942 603,190 ----------- ----------- Total adjustments 739,919 (6,405,279) ----------- ----------- Net cash (used in) ~~provided~~operating ~~by investing~~ activities (67395,~~305~~921) 2(426,~~516,427~~500) ------------ ------------ Cash flows from ~~financing~~investing activities: ~~Principal~~Proceeds ~~payments~~from ofsale ~~mortgage notes payable (75,060) (2,246,209) Principal payments~~ of ~~purchase~~properties ~~money notes payable~~ 0 (189,~~924,613)~~212 ~~Decrease in capitalization of minority interest 0 (395)~~ ------------ ------------ Net cash ~~used~~provided inby ~~financing~~investing activities ~~(75,060)~~0 (489,~~171,217)~~212 ------------ ------------ Net (decrease) ~~increase~~ in cash and cash equivalents (89395,~~404~~921) ~~376~~(337,~~474~~288) Cash and cash equivalents - beginning of period 860,978 1,224,252 ~~4,967,577~~ ------------ ------------ Cash and cash equivalents - end of period $ 1465,~~134,848~~057 $ 5886,~~344,051~~964 ============ ============ Supplemental disclosures of noncash activities: Decrease in property and equipment, net of accumulated depreciation $ 0 $ (2,735) Increase in deferred revenue on sale of properties reclassified from purchase money notes payable and due to selling partners 0 11,245,818 Decrease in Purchase Money Notes payable 0 2,423,626 Decrease in due to selling partners 0 8,824,927

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

============================== ~~Three~~Nine Months Ended ~~June~~December 25, ------------------------------ 2004 2003* ~~2002~~ ------------------------------ ~~Forgiveness of indebtedness income (Note 4): Increase in deferred revenue from sale of property 0 5,683,676~~ Summarized below are the components of the discontinued operations (including gain on sale of ~~property~~properties): Decrease in property and equipment 23,422 ~~and property and equipment-held for sale 0 2~~1,~~094~~263,~~557~~191 Decrease in cash - restricted for tenants' security deposits 0116,904 2238,~~422~~897 ~~Decrease~~(Increase) decrease in mortgage escrow deposits 0(222,541) ~~397~~396,~~974~~739 ~~Decrease~~Increase in prepaid expenses and other assets 0(168,571) 67(12,~~697~~623) Decrease in due to selling partners 0 (484,~~245~~823,433) Increase in accounts payable, accrued expenses and other liabilities 0168,654 ~~258~~41,~~976~~301 Decrease (increase) in tenant's security deposits payable 03,275 (2036,~~728~~165) Decrease in mortgage notes payable (139,239) (2,349,818) Decrease in due to general partners and affiliates 0 (8762,~~700~~114) Decrease in ~~due~~Purchase toMoney ~~general~~Notes ~~partners~~payable of0 ~~subsidiaries~~(1,626,580) ~~and~~Increase ~~their~~(decrease) ~~affiliates~~in 0minority interest in loss of subsidiaries 100,375 (1150,~~649~~303)

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 9 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) Note 1 - General The consolidated financial statements for the nine months ended December 25, 2004 and 2003 include the accounts of Cambridge Advantaged Properties Limited Partnership (the "Partnership") and two and four 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. As of December 25, 2004, the Partnership has sold fifty-nine of its sixty-one original investments. For financial reporting purposes, the Partnership's fiscal quarter ends December 25. All subsidiaries have fiscal quarters ending September 30. Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from October 1 through December 25. The Partnership's fiscal quarter ends on December 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 U.S. generally accepted accounting principles ("GAAP"). On December 15, 2004, the Partnership entered into contracts to sell its Local Partnership Interests in it's remaining two subsidiary partnerships. Upon the consummation of these sales, the General Partners plan to fully liquidate the Partnership. As a result, the Partnership has changed its basis of accounting for periods subsequent to December 15, 2004 from the going concern basis to a liquidation basis. Accordingly, the Partnership has revalued its assets to their estimated net realizable values and liabilities to their estimated settlement amounts. Up through December 15, 2004 the Partnership recorded its results of operations using accounting principles generally accepted in the United States of America applicable to going concern entities. In accordance with FASB 144, the results of discontinued operations are reported as a separate component of income before extraordinary items on the Consolidated 10 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) Statements of Operations. Discontinued operations include the results of operations and any gain or loss recognized for Local Partnerships that have been disposed of or are held for sale. A gain or loss recognized on the disposal is disclosed in the notes to the financials statements. Adjustments to amounts previously reported in operations that are directly related to the disposal of a Local Partnership are reclassified in the current period as discontinued operations for comparability purposes. Assets and liabilities of a Local Partnership that are classified as held for sale are presented separately in the asset and liability sections, respectively, of the Consolidated Balance Sheets. 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. No such losses have been charged to the Partnership for the three and nine months ended December 25, 2004 and 2003, 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 Annual Report Form 10-K for the year ended March 25, 2004, except for the December 25, 2004 financial statements, which are prepared on the liquidation basis of accounting. In the opinion of the General Partners, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments and adjustments to present the liquidation basis of accounting) necessary to present fairly the financial position of the Partnership as of December 25, 2004, the statements of operations for the periods from September 26, 2004 through December 15, 2004 and March 26, 2004 through December 15, 2004 and the three and nine months ended December 25, 2003, the consolidated statement of changes in net assets in liquidation for the period from December 16, 2004 through December 25, 2004 and cash flows for the nine months ended 11 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) December 25, 2004 and 2003, respectively. However, the operating results for the nine months ended December 25, 2004 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, 2004 Annual Report on Form 10-K. Note 2 - Purchase Money Notes Payable Nonrecourse Purchase Money Notes (the "Purchase Money Notes") were issued to the selling partners of the subsidiary partnerships as part of the purchase price, and are secured only by the Partnership's interest in the subsidiary partnerships to which the Purchase Money Note relates. On December 15, 2004, the Partnership entered into contracts to sell it's Limited Partnership Interests in the remaining two subsidiary partnerships' to an affiliate of the Local General Partner (See Note 4). In accordance with the liquidation basis of accounting, the Purchase Money Notes relating to these two subsidiary partnerships, totaling approximately $7,801,000 (including approximately $5,792,000 of interest) were written down to their estimated settlement value, resulting in a gain on liquidation of approximately $7,801,000. There were no distributions made to the Partnership for the nine months ended December 25, 2004 and 2003, and no payments of principal or interest were made on the Purchase Money Notes. 12 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) Note 3 - Related Party Transactions The costs incurred to related parties for the periods September 26, 2004 through December 15, 2004 and March 26 through December 15, 2004 and the three and nine months ended December 25, 2003 were as follows:

For the period For the period September 26, 2004 Three ~~Months~~months ~~Ended~~March ~~June~~26, 2004 Nine months Through ended through ended December 15, December 25, December 15, December 25, 2004 2003 2004 2003 ------------------ ------------- ~~2003 2002~~ --------------- ------------- Partnership management fees (a) $285,500 $~~267~~285,~~000~~500 ~~Expense reimbursement (b) 26~~$856,~~228~~500 28$856,~~621~~500 ~~Local~~Expense ~~administrative~~reimbursement ~~fee~~ (cb) 222,~~500~~320 1017,~~000~~095 ~~-------- -------- Total general and administrative- General Partners 314~~69,~~228~~390 ~~305~~69,~~621~~509 -------- -------- ~~Property management fees incurred to affiliates of the subsidiary partnerships' general partners 23,954 70,830~~ -------- -------- Total general and administrative- related parties $~~338~~307,~~182~~820 $~~376~~302,~~451~~595 $925,890 $926,009 ======== ======== ======== ========

13 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) (a) After all other expenses of the Partnership are paid, an annual partnership management fee of up to .5% of invested assets is payable to the Partnership's General Partners and affiliates. Partnership management fees owed to the General Partners amounting to approximately $250,000 and $4,416,000 were accrued and unpaid as of December 25, 2004 and March 25, 2004, 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. As such, in accordance with the liquidation basis of accounting, the balance of the Partnership management fees owed were written down to their estimated settlement value of $250,000 during the quarter ended December 25, 2004. 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. Expense reimbursements owed to the General Partners amounting to approximately $46,000 and $57,000 were accrued and unpaid as of December 25, 2004 and March 25, 2004, respectively. Note 4 - Sale of Properties General The Partnership is currently in the process of disposing of its investments. As of December 25, 2004, the Partnership has disposed of fifty-nine of its sixty-one original investments. On December 15, 2004, the Partnership entered into contracts to sell the Limited Partnership Interest in its remaining two subsidiary partnerships. There can be no assurance as to whether or when the sales will actually occur. Information Regarding Dispositions ---------------------------------- On December 15, 2004, the Partnership entered into two purchase and sale agreements to sell its Limited Partnership Interest in Pebble Creek and Nu Elm Apartments ("Nu Elm") to an affiliate of the Local General Partner for purchase prices of $1,490,000 and $20, respectively. The contracts specify that the sales will be completed in two installments. The final installment is expected to take 14 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) place in 2006. The sales are contingent on the approval of the Department of Housing and Urban Development ("HUD"). No assurances can be given as to whether or when HUD will approve the sales. 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 $92,000. 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 $545,000. 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. Note 5 - Commitments and Contingencies a) Housing Assistance Payments Contracts In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8 Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon market rentals in instances where the existing Section 8 Contracts exceed current market rents. As a result, Section 8 Contracts that are renewed in the future in projects insured by the Federal Housing Administration ("FHA") may not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. MAHRA also provides for the restructuring of these mortgage loans so that the annual debt service on the restructured loan (or loans) can be supported by Section 8 rents established at the market rents. The restructured loans will be held by the current lender or another lender. There can be no assurance that a property owner will be permitted to restructure its mortgage indebtedness pursuant to the new rules implementing MAHRA or that an owner, or the holder of the mortgage, 15 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) would choose to restructure the mortgage if it were able to participate. MAHRA went into effect on September 11, 1998 when interim regulations implementing the program were published. It should be noted that there are many uncertainties as to the economic and tax impact on a property owner because of the combination of the reduced Section 8 contract rents and the restructuring of the existing FHA-insured mortgage loan under MAHRA. On October 21, 1998 President Clinton signed the Fiscal Year 1999 Departments of Veteran Affairs, Housing and Urban Development and Independent Agencies Appropriation Legislation into law. The bill provides, among other things, that owners of a property that were eligible for prepayment had to give notice of such prepayment to HUD tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The bill also provides for tenant-based vouchers for eligible tenants (generally below 80% of area median income) at the true comparable market rents for unassisted units in order to protect current residents from substantial increases in rent. On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent Agencies Appropriations Act (the "Appropriations Act"). The Appropriations Act contains revisions to the HUD Mark-to-Market Program and other HUD programs concerning the preservation of the HUD housing stock. On December 29, 1999 HUD issued Notice H99-36 addressing "Project Based Section 8 Contracts Expiring in Fiscal Year 2000" reflecting the changes in the Appropriations Act and superceding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice 99-36 clarifies many of the earlier uncertainties with respect to the earlier HUD Section 8 Mark-to-Market Programs and continued the Mark-up-to-Market Program which allows owners with Section 8 contracts to increase the rents to market levels where contract rents are currently below market. b) Other The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has two remaining properties and 16 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) therefore the Partnership may not be protected against a general downturn in the national economy. There are also substantial risks associated with owning properties receiving government assistance, for example the possibility that Congress may not appropriate funds to enable HUD to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owner's equity contribution. The Partnership cannot sell or substantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence, without HUD's approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contracts expire. Except as described in Note 4, there were no material 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 year ended March 25, 2004. 17 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited) Note 6 - Discontinued Operations: The following table summarizes the financial position and results of operations of the subsidiaries that are classified as discontinued operations. As of December 25, 2004 and for the periods September 26, 2004 through December 15, 2004 and March 26, 2004 through December 15, 2004, Pebble Creek and Nu Elm were classified as discontinued operations in the Consolidated Financial Statements. As of March 25, 2004 and for the three and nine month periods ended December 25, 2003, Pebble Creek, Nu Elm, Cabarras and Hathaway were classified as discontinued operations in the Consolidated Financial Statements. Assets and Liabilities of Discontinued Operations

18 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2004 (Unaudited)

19 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 $250,000 and $4,351,000, were accrued and unpaid as of December 25, 2004 and March 25, 2004, 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. As such, in accordance with the liquidation basis of accounting, the balance of the Partnership management fees owed were written down to their realizable value of $250,000 during the quarter ended December 25, 2004. 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. There were no distributions made to the Partnership for the nine months ended December 25, 2004 and 2003, respectively, and no payments of principal or interest were made on the Purchase Money Note. During the nine months ended December 25, 2004, cash and cash equivalents of the Partnership and its consolidated Local Partnerships decreased approximately $400,000. This decrease was due entirely to net cash used in operating activities. Included in the adjustments to reconcile the net income to cash used in operating activities are income from discontinued operations (including gain on sale of properties) ($118,000) and gain from liquidating activities ($4,545,258). 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. 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. 20 Therefore, investors should not expect that they will receive distributions sufficient to pay taxes incurred as a result of such sales. On December 15, 2004, the Partnership entered into contracts to sell the Local Partnership Interest in its remaining two subsidiary partnerships. Upon the consummation of these sales, the General Partners plan to liquidate the Partnership. As a result, commencing with this December 25, 2004 10-Q, financial statements are presented on the liquidation basis of accounting. Management is not aware of any other trends or events, commitments or uncertainties which have not been otherwise disclosed, that will or are likely to impact liquidity in any other way. Management believes the only impact would be from laws that have not yet been adopted. 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 included in the Partnership's Annual Report on Form 10-K for the year ended March 25, 2004. 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) 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. 21 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. c) Method of Accounting The accompanying financial statements for the period ended December 25, 2004 were prepared on the liquidation basis of accounting, and for the year ended March 25, 2004, on the accrual basis of accounting. d) Discontinued Operations In accordance with FASB 144, the results of discontinued operations are reported as a separate component of income before extraordinary items on the Consolidated Statements of Operations. Discontinued operations include the results of operations and any gain or loss recognized for Local Partnerships that have been disposed of or are held for sale. A gain or loss recognized on the disposal is disclosed in the notes to the financials statements. Adjustments to amounts previously reported in operations that are directly related to the disposal of a Local Partnership are reclassified in the current period as discontinued operations for comparability purposes. Assets and liabilities of a Local Partnership that are classified as held for sale are presented separately in the asset and liability sections, respectively, of the Consolidated Balance Sheets. Results of Operations --------------------- The results of operations for the three and nine months ended December 25, 2004 and 2003 consisted primarily of the results at the Partnership level and exclude gain on sale of properties and capital events with respect to Nu Elm, Pebble Creek, Cabarrus and Hathaway, in which the Partnership sold their respective Local Partnership Interests. Total operating expenses, excluding administrative and management remained fairly consistent with an increase (decrease) of approximately 1% and less than (1%) for the three and nine months ended December 31, 2004 as compared to 2003. Administrative and management increased (decreased) approximately $15,000 and ($113,000). The increase for the three months ended December 25, 2004 was due to an increase in legal fees related to sales and an increase in overhead at the Partnership level. The decrease for the nine months ended December 25, 2004 is 22 primarily due to the write-off of uncollectable receivables in 2003 and additional accounting fees relating to sales in 2003 at the Partnership level. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Partnership does not have any market risk sensitive instruments. Item 4. Controls and Procedures (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive Officer and Chief Financial Officer of the Assisted Housing Associates Inc., the Related Beta Corporation and Cambridge/Related Associates Limited Partnership, the general partners of the Partnership, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") as of the end of the period covered by this report. Based on such evaluation, such officer has concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes in Partnership's internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 23 PART II - OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Unregistered Sales of Equity 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 (3) Amended and Restated Agreement and Certificate of Limited Partnership as filed with the Secretary of the Commonwealth of the Commonwealth of Massachusetts.** (10a) Form of Escrow Agreement.** (31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a). (31.2) Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350). ** Incorporated by reference to exhibits filed with Amendment No. 1 to Cambridge Advantaged Properties L.P.'s Registration Statement on Form S-11 Registration File No. 2-91993. 24 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: February 7, 2005 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Director and President (Chief Executive Officer and Chief Financial Officer) Date: February 7, 2005 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (Chief Accounting Officer) By: ASSISTED HOUSING ASSOCIATES, INC., a General Partner Date: February 7, 2005 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Director and President (Chief Executive Officer and Chief Financial Officer) Date: February 7, 2005 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (Chief Accounting Officer) By: CAMBRIDGE AND RELATED ASSOCIATES LIMITED PARTNERSHIP By:Related Beta Corporation, Date: February 7, 2005 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Director and President (Chief Executive Officer and Chief Financial Officer) Date: February 7, 2005 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (Chief Accounting Officer) Exhibit 31.1 CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) 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 December 25, 2004 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the Partnership and I 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 me by others within those entities, particularly during the period in which this quarterly report was being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and c) evaluated the effectiveness of the Partnership's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and d) disclosed in this quarterly report any change in the Partnership's internal control over financial reporting that occurred during the period ending December 25, 2004 that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Partnership's auditors and to the boards of directors of the General Partners: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal controls over financial reporting. Date: February 7, 2005 ---------------- By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer Exhibit 32.1 CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b) AND SECTION 1350 OF TITLE 18 OF THE UNITED STATES CODE (18 U.S.C. 1350) In connection with the Quarterly Report of Cambridge Advantaged Properties Limited Partnership (the "Partnership") on Form 10-Q for the period ending December 25, 2004 as filed with the Securities and Exchange Commission ("SEC") on the date hereof (the "Report"), 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 partner of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 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. A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the SEC or its staff upon request. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer February 7, 2005

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