10-Q 1 f10q_firstquarter-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, 2002 OR ------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-13782 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Delaware 13-3228969 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ PART I - Financial Information Item 1. Financial Statements CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)

~~=============~~------------ ~~=============~~------------ ~~DECEMBER~~June 25, ~~MARCH~~March 25, ~~2001~~2002 ~~2001~~2002* ------------- ------------- ASSETS Property and equipment - less accumulated depreciation of $107,~~701~~764,~~600~~929 and $257,~~089~~639,~~665~~553, respectively $ 95,~~097~~339,~~325~~024 $ 205,~~186~~470,~~022~~303 Property and equipment - held for sale - less accumulated depreciation of $1911,~~958~~828,~~370~~782 and $2116,~~272~~326,~~511~~084, respectively 169,~~165~~460,~~845~~690 1811,~~795~~548,~~939~~976 Cash and cash equivalents 25,~~769~~344,~~875~~051 4,~~943~~967,~~694~~577 Cash - restricted for tenants' security deposits ~~389~~299,~~666~~378 ~~541~~304,~~659~~539 Mortgage escrow deposits 54,~~583~~290,~~398~~951 54,~~654~~376,~~637~~911 Prepaid expenses and other assets ~~900~~842,~~016~~005 1758,~~060,972~~693 ------------- ------------- Total assets $ 3425,~~906~~576,~~125~~099 $ 5127,~~182~~426,~~923~~999 ============= =============

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

~~=============~~------------- ~~=============~~------------- ~~DECEMBER~~June 25, ~~MARCH~~March 25, ~~2001~~2002 ~~2001~~2002* ------------- ------------- LIABILITIES AND PARTNERS' DEFICIT Liabilities Mortgage notes payable $ 1710,~~564~~891,~~057~~274 $ 2713,~~753~~137,~~150~~483 Purchase Money Notes payable (Note 2) 145,~~536~~513,~~004~~598 239,~~477~~861,~~968~~837 Due to selling partners (Note 2) 3314,~~799~~422,~~345~~825 5222,~~122~~957,~~189~~424 Deferred revenue on sale of properties 511,~~477~~217,~~535~~122 35,~~838~~905,~~789~~828 Accounts payable, accrued expenses and other liabilities ~~924~~3,~~118~~242,690 1587,~~644,571~~491 Tenants' security deposits payable ~~357~~263,~~998~~176 ~~481~~283,~~950~~920 Due to general partners of subsidiaries and their affiliates 98113,~~238~~095 98114,~~265~~744 Due to general partners and affiliates 3,~~325~~176,~~330~~170 23,~~978~~329,~~008~~471 ~~Distributions payable 0 1,402,535~~ ------------- ------------- Total liabilities 7648,~~082~~839,~~625~~950 ~~113~~56,~~797~~178,~~425~~198 ------------- ------------- Minority interest ~~234~~157,~~438~~030 ~~638~~222,~~628~~153 ------------- ------------- Commitments and contingencies (Note 5) Partners' deficit: Limited partners (4022,~~459~~649,~~304~~148) (6228,~~083~~146,~~074~~094) General partners (~~951~~771,~~634~~733) (1827,~~170,056~~258) ------------- ------------- Total partners' deficit (4123,~~410~~420,~~938~~881) (6328,~~253~~973,~~130~~352) ------------- ------------- Total liabilities and partners' deficit $ 3425,~~906~~576,~~125~~099 $ 5127,~~182~~426,~~923~~999 ============= =============

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

~~============================ =========================== THREE MONTHS ENDED NINE MONTHS ENDED DECEMBER 25, DECEMBER 25,~~ ---------------------------- ~~---------------------------~~Three ~~2001~~Months ~~2000~~Ended ~~2001~~June ~~2000~~25, ---------------------------- 2002 2001 --------------------------- Revenues: Rentals, net $ 21,~~591~~556,~~487~~843 $ 3,~~983~~358,~~695~~054 ~~$ 8,921,847 $ 13,075,890~~ Other ~~152~~163,~~337~~491 ~~284~~186,~~581~~115 ~~565,939 854,788~~ Gain (loss) on sale of property (Note 4) 7262,~~436,742~~373 3(1,~~009~~007,~~268~~538) ~~9,093,823 12,086,370~~ ------------ ------------ ~~------------ ------------~~ Total revenues 101,~~180~~982,~~566~~707 72,~~277~~536,~~544~~631 ~~18,581,609 26,017,048~~ ------------ ------------ ~~------------ ------------~~ Expenses Administrative and management ~~502~~339,~~271~~622 ~~780~~680,~~626~~838 ~~1,866,806 3,090,824~~ Administrative and management- related parties (Note 3) ~~448~~376,~~858~~451 ~~542~~484,~~231~~237 ~~1,408,288 1,633,430~~ Operating ~~485~~354,~~216~~203 ~~677~~803,~~657~~118 ~~1,846,807 2,296,161~~ Repairs and maintenance ~~602~~324,~~519~~355 1781,~~096,384~~397 ~~2,142,445 3,114,297~~ Taxes and insurance ~~311~~239,~~758~~802 ~~465~~409,~~042~~658 ~~1,109,541 1,511,625~~ Interest ~~781~~415,~~508~~661 1,~~149~~541,~~132~~543 ~~3,548,995 7,578,321~~ Depreciation ~~259~~128,~~492~~546 ~~786~~444,~~427~~788 ~~1,024,346 2,580,700~~ ------------ ------------ ~~------------ ------------~~ Total expenses 32,~~391~~178,~~622~~640 5,~~497~~145,~~499~~579 ~~12,947,228 21,805,358~~ ------------ ------------ ~~------------ ------------~~ Net ~~income~~loss before minority interest 6(195,~~788,944~~933) 1(2,~~780~~608,~~045~~948) ~~5,634,381 4,211,690~~ Minority interest in ~~(income)~~ loss of subsidiaries ~~(123~~64,~~311)~~728 ~~(831~~241,~~240)~~128 ~~227,267 (934,304)~~ ------------ ------------ ~~------------~~Loss ~~------------ Income~~ before extra-ordinary item 6(131,~~665,633~~205) ~~948~~(2,~~805 5~~367,~~861,648~~820) ~~3,277,386~~ Extraordinary item- forgiveness of indebtedness income (Note 4) 15,~~667~~683,~~561~~676 (43,~~646) 15~~839,~~980,544~~356 ~~14,118,140~~ ------------ ------------ ~~------------ ------------~~ Net income $ 85,~~333~~552,~~194~~471 $ ~~944~~1,~~159 $ 21~~471,~~842,192~~536 ~~$ 17,395,526~~ ============ ============ ~~============ ============~~ Limited Partners Share: ~~Income~~Loss before extraordinary item $ 6(129,~~598,977~~893) $ ~~939~~(2,~~317 $ 5~~344,~~803,032~~141) ~~$ 3,244,612~~ Extraordinary item 15,~~650~~626,~~885~~839 (43,~~600) 15~~800,~~820,738~~962 ~~13,976,959~~ ------------ ------------ ~~------------ ------------~~ Net income $ 85,~~249~~496,~~862~~946 $ ~~934~~1,~~717 $ 21~~456,~~623,770~~821 ~~$ 17,221,571~~ ============ ===========~~= ============ ============~~

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)

~~============================ NINE MONTHS ENDED DECEMBER 25,~~ ---------------------------- ~~2001 2000~~ -------------- Limited General Total Partners Partners -------------- ~~Cash flows from operating activities: Net income $ 21,842,192 $ 17,395,526~~ ------------ ------------ ~~Adjustments to reconcile net income to net cash (used in) provided by operating activities: Gain on sale of properties (Note 4) (9,093,823) (12,086,370) Extraordinary item~~-~~forgiveness~~--- ofBalance ~~indebtedness income (Note 4) (15,980,544) (14,118,140) Depreciation 1,024,346 2,580,700 Minority interest in (loss) income of subsidiaries (227,267) 934,304 Decrease in cash~~-~~restricted~~ ~~for~~March ~~tenants' security deposits 10~~26,~~481~~ ~~29,490~~2002 $(~~Increase) decrease in mortgage escrow deposits (296~~28,~~468) 907~~973,~~804 Increase in prepaid expenses and other assets (325,882~~352) $(~~345~~28,~~907) Increase in due to selling partners 3~~146,~~059,794 7,087,052 Payments of interest to selling partners (94,019~~094) ~~(3,370,496)~~$ (~~Decrease) increase in accounts payable, accrued expenses and other liabilities (1,~~827,~~887~~258) ~~1,366,869~~Net ~~Increase~~income ~~(decrease) in tenants' security deposits payable 3~~5,~~177 (58~~552,~~337)~~471 ~~Increase in due to general partners of subsidiaries and their affiliates 383 558~~5,~~299 Decrease in due to general partners of subsidiaries and their affiliates (410) (468~~496,~~852)~~946 ~~Increase in due to general partners and affiliates 514~~55,~~178~~525 ~~73,998~~ ------------- ------------- ~~Total adjustments (23,233,941) (16,909,586)~~ ------------ Balance -~~-----------~~ ~~Net~~June ~~cash~~25, ~~(used~~2002 in$(23,420,881)~~provided~~ ~~by operating activities~~ $(122,~~391~~649,~~749~~148) ~~485~~$ (771,~~940~~733) ~~------------~~============= ~~------------~~============= ============

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) (continued)

~~============================ NINE MONTHS ENDED DECEMBER 25,~~ ---------------------------- ~~2001~~Three ~~2000~~Months Ended June 25, ---------------------------- ~~Cash~~2002 ~~flows~~2001 from investing activities: Proceeds from sale of properties 12,203,542 7,357,350 Acquisitions of property and equipment (312,006) (1,227,478) (Increase) decrease in mortgage escrow deposits (823,988) 148,735 ------------ ---------------- ~~Net~~Cash ~~cash~~flows ~~provided~~from byoperating ~~investing~~ activities: 11Net income $ 5,~~067~~552,~~548~~471 6$ 1,~~278~~471,~~607~~536 ------------- ------------- ~~Cash~~Adjustments ~~flows~~to ~~from~~reconcile ~~financing~~net ~~activities:~~income ~~Increase~~to net cash (used in) ~~purchase~~provided ~~money~~by ~~notes~~operating ~~payable~~activities: 0(Gain) ~~5,209~~loss ~~Principal~~on ~~payment~~sale of ~~mortgage~~properties ~~notes~~(Note ~~payable~~4) (8262,~~164,825~~373) (21,~~450~~007,~~025)~~538 ~~Principal~~Extraordinary ~~payments~~item-forgiveness of ~~purchase~~indebtedness ~~money~~income ~~notes~~(Note ~~payable~~4) (35,~~507~~683,~~870~~676) (13,~~862~~839,~~733~~356) ~~Decrease~~Depreciation 128,546 444,788 Minority interest in ~~capitalization~~loss of ~~minority~~subsidiaries ~~interest~~ (~~176~~64,~~923~~728) (~~813~~241,~~247~~128) ~~------------~~(Increase) ~~------------~~decrease ~~Net~~in cash-restricted ~~used~~for intenants' ~~financing~~security ~~activities~~deposits (1117,~~849,618~~261) (5,~~120,796~~968 Decrease (increase) ~~------------~~in ~~------------~~mortgage ~~Net~~escrow deposits 110,963 (~~decrease~~184,165) ~~increase~~Increase in ~~cash~~prepaid expenses and ~~cash~~other ~~equivalents~~assets (2151,~~173,819~~009) 1(190,~~643,751~~635) ~~Cash~~Increase ~~and~~in ~~cash~~due ~~equivalents~~to -selling ~~beginning~~partners ~~of period 4~~364,~~943,694~~044 41,~~095~~452,~~787~~585 ~~------------~~Payments ~~------------~~of ~~Cash~~interest ~~and~~to ~~cash~~selling ~~equivalents~~partners -(25,471) ~~end~~0 ofIncrease ~~period~~in $accounts 2payable,~~769,875~~ $accrued 5expenses and other liabilities 2,~~739~~145,~~538~~375 ~~============~~590,254 ~~============~~(Decrease) ~~Supplemental~~increase ~~disclosures~~in oftenants' ~~noncash~~security ~~activities:~~deposits ~~Increase~~payable in(16) ~~property~~5,030 ~~and~~Decrease ~~equipment~~in -due ~~held~~to ~~for~~general ~~sale~~partners ~~reclassified~~of ~~from~~subsidiaries ~~property~~ and ~~equipment~~their $affiliates ~~5,764,304~~0 $(410) ~~19,012,555~~ (Decrease) increase in ~~property~~due ~~and~~to ~~equipment,~~general ~~net~~partners ofand ~~accumulated~~affiliates ~~depreciation~~ (165,~~114~~601) (2143,~~343)~~917 ~~Increase~~------------- in------------- ~~deferred~~Total ~~revenue~~adjustments on(3,521,207) ~~sale~~(805,614) of------------- ~~properties~~------------- ~~reclassified~~Net ~~from~~cash ~~purchase~~provided ~~money~~by ~~notes~~operating ~~payable~~activities ~~and due to selling partners 5~~2,~~407~~031,~~677~~264 13665,~~489,268~~922 ------------- -------------

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~~Months ~~ENDED~~Ended ~~DECEMBER~~June 25, ---------------------------- 2002 2001 ~~2000~~ ---------------------------- ~~Forgiveness~~Cash offlows ~~indebtedness~~from ~~income~~investing ~~(Note 4)~~activities: ~~Decrease~~Proceeds infrom ~~deferred~~sale ~~revenue~~of ~~from~~properties ~~sale~~2,945,677 1,188,000 Acquisitions of property and equipment (36,~~839~~273) (128,~~356~~004) 0Increase ~~Decrease~~ in ~~purchase~~mortgage ~~money~~escrow ~~note~~deposits ~~payable~~ (1422,~~479,557~~977) (7426,~~741,369~~028) ~~Decrease~~------------- in------------- ~~due~~Net tocash ~~selling~~provided ~~partners~~by ~~(10~~investing activities 2,~~661~~516,~~631)~~427 (5633,~~616,053)~~968 ~~Decrease~~------------- in------------- ~~due~~Cash toflows ~~general~~from ~~partners~~financing ofactivities: ~~subsidiaries~~Principal ~~and~~payment ~~their~~of ~~affiliates~~mortgage 0notes payable (~~558~~2,~~299~~246,209) ~~Decrease~~(1,467,227) inPrincipal ~~accounts~~payments ~~payable,~~of ~~accrued~~purchase ~~expenses~~money ~~and~~notes ~~other~~payable ~~liabilities~~(1,924,613) 0 (~~162~~1,~~419~~776,591) Decrease in ~~due~~capitalization toof ~~general~~minority ~~partners~~interest ~~and~~(395) ~~affiliates 0~~ (403,~~000~~373) ~~Summarized~~------------- ~~below~~------------- ~~are~~Net ~~the~~cash ~~components~~used ofin ~~the~~financing ~~gain~~activities on(4,171,217) ~~sale~~(3,247,191) of------------- ~~property:~~------------- ~~Decrease~~Net increase (decrease) in ~~property~~cash and ~~equipment~~cash equivalents 376,474 ~~and~~(1,947,301) ~~property~~Cash and ~~equipment~~cash equivalents -~~held~~ ~~for~~beginning ~~sale~~of 13period 4,~~005~~967,~~337~~577 154,~~075~~943,~~070~~694 ~~Decrease~~------------- in------------- Cash and cash equivalents - ~~restricted~~end ~~for~~of ~~tenants'~~period ~~security~~$ ~~deposits 141~~5,~~512~~344,051 83$ 2,~~961~~996,393 ~~Decrease~~============= in============= ~~mortgage~~Supplemental ~~escrow~~disclosures ~~deposits~~of ~~1,191,695~~noncash ~~696,164~~activities: ~~Decrease~~Increase in ~~prepaid~~property ~~expenses~~and equipment - held for sale reclassified from property and ~~other~~equipment ~~assets~~$ ~~486,838~~0 ~~168~~$ 2,~~567~~182,138 Decrease in ~~purchase~~property ~~money~~and ~~notes~~equipment, ~~payable~~net of accumulated depreciation (2,~~355,100~~735) (51,~~172,016~~677) ~~Decrease~~Increase in ~~due~~deferred torevenue ~~selling~~on ~~partners~~sale ~~(6,817,633)~~of ~~(9,854,311)~~properties ~~Decrease~~reclassified infrom ~~accounts~~purchase ~~payable,~~money ~~accrued~~notes ~~expenses~~payable and ~~other~~due ~~liabilities~~to ~~(224,675)~~selling ~~(474~~partners 11,~~477)~~245,818 0 Decrease in ~~tenant's~~Purchase ~~security~~Money ~~deposits~~Notes payable ~~(127~~2,~~129)~~423,626 ~~(95~~562,~~837)~~052 Decrease in due to ~~general~~selling partners ~~and affiliates (166~~8,~~856)~~824,927 ~~0 Decrease in mortgage notes payable 0 (5~~4,~~156~~687,~~141)~~164

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

~~THREE MONTHS ENDED NINE MONTHS ENDED DECEMBER 25, DECEMBER 25,~~ ---------- ---------- -------- Three Months Ended June 25, -- ---------- ~~2001 2000 2001 2000~~ ---------- ------ 2002 2001 ---- ---------- -------------- ~~Partnership~~Forgiveness ~~manage-~~of ~~ment~~indebtedness ~~fees~~income (aNote 4): $Increase ~~271,000~~in $deferred ~~280,000~~revenue $from ~~813~~sale of property 5,~~000~~683,676 $3,839,356 ~~840~~Summarized below are the components of the gain on sale of property: Decrease in property and equipment,~~000~~ ~~Expense~~and ~~reimburse~~property and equipment-held ~~ment~~for ~~(b)~~sale 282,~~001 47~~094,~~768~~557 ~~112~~2,~~143 123~~074,~~169~~284 ~~Local~~Decrease ~~administra~~in cash - ~~tive~~restricted ~~fee~~for ~~(c)~~tenants' ~~14,000~~security ~~16,000~~deposits 4222,~~000~~422 4817,~~000~~230 ~~----------~~Decrease ~~----------~~in ~~----------~~mortgage ~~----------~~escrow ~~Total~~deposits ~~general~~397,974 ~~and~~283,223 ~~administrative-~~Decrease ~~General~~in ~~Partners~~prepaid ~~313~~expenses and other assets 67,~~001~~697 ~~343~~325,~~768~~849 ~~967~~Decrease in due to selling partners (48,~~143~~245) 1(185,~~011,169~~354) ~~----------~~(Increase) ~~----------~~decrease ~~----------~~in ~~----------~~accounts ~~Property~~payable, ~~manage-~~accrued ~~ment~~expenses ~~fees~~and ~~incurred~~other toliabilities ~~affiliates~~258,976 of(236,407) ~~the~~Decrease ~~subsidiary~~in ~~partnerships~~tenant's ~~general~~security ~~partners~~deposits ~~135,857~~payable ~~198~~(20,~~463~~728) ~~441~~(17,~~145~~230) ~~622,261~~Decrease ~~----------~~in ~~----------~~due ~~----------~~to ~~---------- Total~~ general partners and ~~administrative-~~affiliates ~~related~~(87,700) ~~parties~~(66,057) $Decrease ~~448,858~~in $due ~~542,231~~to ~~$1,408,288~~general ~~$1,633,430~~partners ~~==========~~of ~~==========~~subsidiaries ~~==========~~and ~~==========~~their affiliates (1,649) 0

See accompanying notes to consolidated financial statements. 9 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) Note 1 - General The consolidated financial statements for the three months ended June 25, 2002 and 2001 include the accounts of Cambridge Advantaged Properties Limited Partnership (the "Partnership") and fourteen and thirty 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 $5,000 and $20,000 for the three months ended June 25, 2002 and 2001, 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. 10 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) 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, 2002. 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, 2002, and the results of operations and cash flows for the three months ended June 25, 2002 and 2001. However, the operating results for the three months ended June 25, 2002 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, 2002 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 is recorded at the Partnership level. The Purchase Money Notes generally provided for compound interest at rates which, in general, ranged from 9% to 10% per annum through August 31, 1989. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). Purchase Money Notes at June 25, 2002 and March 25, 2002 include $4,336,417 of interest accrued through August 31, 1989. 11 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) 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 $14,423,000 and $22,909,000 as of June 25, 2002 and March 25, 2002, 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. The Purchase Money Notes with seven year extensions have all been sold. Additionally, an oral agreement was reached in August 2001 to extend the maturity dates of the remaining Purchase Money Notes to September 2002 through October 2003. 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. Of such fees incurred, $71,737 was accrued and added to the Purchase Money Notes balance. The extension fees are being amortized over the term of the extensions. 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. 12 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) Distributions aggregating approximately $3,046,000 and $2,200,000 were made to the Partnership for the three months ended June 25, 2002 and 2001, respectively, of which $2,173,000 and $1,777,000, 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, 2002 (Unaudited) Note 3 - Related Party Transactions The costs incurred to related parties for the three months ended June 25, 2002 and 2001 were as follows:

(a) After all other expenses of the Partnership are paid, an annual partnership management fee of up to .5% of invested assets is payable to the Partnership's General Partners and affiliates. Partnership management fees owed to the General Partners amounting to approximately $2,839,000 and $2,847,000 were accrued and unpaid as of June 25, 2002 and March 25, 2002, 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 partnerships' performance. Expense reimbursements and asset monitoring fees owed to the General Partners amounting to approximately $46,000 and $95,000 were accrued and unpaid as of June 25, 2002 and March 25, 2002, respectively. 14 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) (c) C/R Special Partnership, the special limited partner, owning a .01% interest, is entitled to receive a local administrative fee of up to $2,500 per year from each subsidiary partnership. Note 4 - Sale of Properties General ------- The Partnership is currently in the process of disposing of its investments. It is anticipated that this process will take a number of years. As of June 25, 2002, the Partnership has disposed of fifty-four of its sixty-one original investments. Four additional investments are listed for sale and the Partnership anticipates that the three remaining investments will be listed for sale by December 31, 2002. There can be no assurance as to when the Partnership will dispose of its last remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions including changes in tax laws, it is unlikely that the proceeds received by the Partnership from such sales will be sufficient to return their original investment. Moreover, the Local General Partners and holders of the Purchase Money Notes generally have decision-making rights with respect to the sale of each property which therefore makes it more cumbersome for the General Partners to sell each property. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed a new entity: Cambridge Advantaged Liquidating L.L.C. (the "Trust"), a Delaware limited liability company which is wholly-owned by the Partnership. 15 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) On July 21, 1999, the Partnership contributed its limited partnership interest in Decatur Apartments, Ltd., Florence Apartments, Ltd., Saraland Apartments, Ltd., Dickens Ferry Apartments, Ltd., Boonie Doone Apartments, Ltd., University Gardens Apartments, Ltd., and Southside Village Apartments, Ltd., to the Trust. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership, therefore, there should not be any tax effect to the limited partners of the Partnership. As of June 25, 2002 all of these properties were sold except for Saraland Apartments, Ltd. Information Regarding Dispositions. ----------------------------------- On February 14, 2002, the property and related assets and liabilities of Nottingham Woods Apartments were sold to an unaffiliated third party for $1,900,000, resulting in a gain of approximately $799,000. The Partnership used approximately $472,000 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 of approximately $2,779,000. On February 15, 2002, the property and related assets and liabilities of Robindale East Apartments were sold to an unaffiliated third party for $735,519, resulting in a loss of approximately $536,000. 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. On April 30, 2002, the property and 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 $417,000. The Partnership used approximately $1,032,000 of proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, which is included in accounts payable, accrued expenses and other liabilities at June 25, 2002 and will result in forgiveness of indebtedness income of approximately $2,188,000 during the quarter ended September 25, 2002. 16 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) On April 30, 2002, the property and related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a gain of approximately $286,000. The Partnership used approximately $517,000 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, which is included in accounts payable, accrued expenses and other liabilities at June 25, 2002 and will result in forgiveness of indebtedness income of approximately $1,591,000 during the quarter ended September 25, 2002. On May 9, 2002, the property and related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, resulting in a loss of approximately $391,000. The Partnership will receive and use approximately $865,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,645,000, which is included in accounts payable, accrued expenses and other liabilities at June 25, 2002 and will result in forgiveness of indebtedness income of approximately $1,780,000 during the quarter ended September 25, 2002. On May 9, 2002, the property and 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 $82,000. The Partnership will receive and use approximately $865,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,725,000, which is included in accounts payable, accrued expenses and other liabilities at June 25, 2002 and will result in forgiveness of indebtedness income of approximately $859,000 during the quarter ended September 25, 2002. On May 21, 2002, Pinewood Village ("Conifer 317") entered into a purchase and sale agreement with an unaffiliated third party purchaser for a purchase price of $2,000,000. The closing is expected to occur in late 2002. No assurance can be given that the closing will actually occur. 17 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) On May 30, 2002, the property and 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 $343,000. The Partnership will use approximately $592,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, which is included in accounts payable, accrued expenses and other liabilities at June 25, 2002 and will result in forgiveness of indebtedness income of approximately $2,853,000 during the quarter ended September 25, 2002. Note 5 - Commitments and Contingencies The following disclosures include changes and/or additions to disclosures regarding the subsidiary partnerships which were included in the Partnership's Annual Report on Form 10-K for the year ended March 25, 2002. Southwest Apartments Ltd. (the Gossers) ------------------------------------------- In or around November 1999, the Partnership received correspondence from an attorney representing Dr. and Mrs. Bob Gosser, (the "Gossers") who are allegedly the holders of beneficial interests in Purchase Money Notes issued by the Partnership in connection with the Partnership's acquisition of limited partnership interests in Southwest Apartments, Ltd. Local partnership in December 1984. Those Purchase Money Notes issued by the Partnership have, on their face, matured and have not been paid in full. The Partnership thereafter entered into a settlement agreement with the Gossers which contemplated the sale of the real property owned by Southwest Apartments, Ltd. and an allocation of the proceeds from the sale between the Gossers, the Partnership and others. Subsequently, the Partnership sold its partnership interest in Southwest Apartments, Ltd. to Marshall B. Coffman, subject to the agreement with the Gossers and pursuant to which Coffman agreed to indemnify the Partnership in the event of a suit brought by the Gossers. On April 29, 2002, counsel for the Gossers threatened to bring suit against the Partnership and Coffman unless Coffman complied with the obligations set forth in the agreement. The Partnership promptly placed Coffman on notice that in the event the Partnership is sued by the Gossers, the Partnership will seek to hold Coffman liable pursuant to the indemnification given by him for all damages sustained by the Partnership including but not limited to its attorneys' fees. 18 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) Saraland Apartments, Ltd. ------------------------- Saraland Apartments, Ltd. ("Saraland") has been placed on the Environmental Protection Agency's (EPA) "Superfund Cleanup List". During the year ended December 31, 1996, the tenants of Saraland were moved to temporary housing to facilitate cleanup of the site. However, as of February 1997, the EPA, along with other agencies, concluded that the apartment residents should not return to the site, and the tenants were permanently relocated. The EPA has since concluded that the apartments will have to be demolished in order to accomplish the removal of contamination that has been found to exist underneath the buildings. On March 21, 2001, Saraland filed a petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The schedules list total assets valued at $924 and liabilities of $12,962,501. The value of the land is listed as undetermined and the Department of Housing and Urban Development ("HUD") possesses a secured claim related to mortgages it holds in the estimated amount of $681,527. The filing was commenced in response to a nonjudicial foreclosure brought by HUD. The remaining liabilities consist of unsecured nonpriority claims, the bulk of which relate to a claim held by the U.S. Environmental Protection Agency ("USEPA") and Rentokil Initial Environmental Services, Inc., in the amount of $12,000,000. This claim relates to a lawsuit under Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act, which is currently pending in the District Court for the Southern District of Alabama (the "District Court") against Saraland and others who it claims are potentially responsible parties. Redwing Carriers, Inc., a codefendant in the USEPA lawsuit, has commenced an action, also in the District Court, to recover all or a pro rata share of its environmental response costs from Saraland and others. 19 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements June 25, 2002 (Unaudited) Another lawsuit, pending in Circuit Court, Mobile County, Alabama, was filed by the former tenants of Saraland against Saraland and Redwing and is also related to the environmental issues. The Debtor has filed an Amended Plan of Reorganization which will be considered by the Bankruptcy Court this summer. The plan provides for resolution of HUD, EPA and general unsecured claims. The plan also requires the holders of partnership interests, including the Partnership, to make new capital contributions to preserve their interests in the reorganized company. Due to the uncertainty of the outcome of these lawsuits, no loss contingency has been accrued in the accompanying financial statements. The Local Partnership has virtually abandoned the property, and is not making payments on its mortgage loan. 20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources ------------------------------- The Partnership's primary sources of funds are 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 $3,160,000 and $2,662,000, were accrued and unpaid as of June 25, 2002 and March 25, 2002, respectively. Without the General Partners' continued allowance of accrual without payment of certain fees and expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts but are under no obligation to do so. 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 $3,046,000 and $2,200,000 were made to the Partnership for the three months ended June 25, 2002 and 2001, respectively, of which $2,173,000 and $1,777,000, respectively, were used to pay principal and interest on the Purchase Money Notes. During the three months ended June 25, 2002, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $376,000. This increase was primarily due to cash provided by operating activities ($2,031,000) and proceeds from sale of properties ($2,946,000) which exceeded principal payment of mortgage notes payable ($2,246,000), principal payments of Purchase Money Notes payable ($1,925,000), acquisitions of property and equipment ($6,000) and an increase in mortgage escrow deposits ($423,000). Included in the adjustments to reconcile the net income to cash provided by operating activities are gain on sale of properties ($262,000), forgiveness of indebtedness income ($5,684,000) and depreciation ($129,000). For a discussion of Purchase Money Notes Payable, see Note 2 to the financial statements. 21 For a discussion of the sale of properties in which the Partnership owns direct and indirect interests, see Note 4 to the financial statements. Even though sales have resulted in net gains for tax purposes, the net sales proceeds have not been sufficient to permit 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. For a discussion of contingencies affecting certain Local Partnerships, see Note 5 to the financial statements. Since the maximum loss for which the Partnership would be liable is its net investment in the respective Local Partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way except that the Partnership would lose its investment in the properties and any potential proceeds from the sale or refinancing of the properties. Management is not aware of any trends or events, commitments or uncertainties which have not been otherwise disclosed, that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. The portfolio is diversified by the location of the properties around the United States so that if one area of the United States is experiencing downturns in the economy, the remaining properties in the portfolio may be experiencing upswings. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy. Results of Operations --------------------- During the periods ended June 25, 2002 and 2001, Bellfort, Fircrest, Cloisters (Sundown), Conifer 208, West Scenic, Tall Pines, Northwoods III (Windgate), Oakwood Manor, Ware Manor, Washington Highland, Seymour O'Brien, Autumn Ridge, Nottingham Woods and Robindale East sold their properties and the related assets and liabilities and the Partnership sold its Local Partnership Interest in Greenwood Manor, Henslee Heights, Hereford Manor, Malvern Manor, Southwest, Southside, University and Hackley (collectively the "Sold Assets"). The results of operations of the Partnership, as well as the Local Partnerships, remained fairly consistent during the three months ended June 25, 2002 and 2001, excluding the Sold Assets, gain on sale of properties, forgiveness of indebtedness income, administrative and management, interest and depreciation expense. The majority of Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, depreciation and mortgage interest. In addition, the Partnership incurred interest expense relating to the Purchase Money Notes which were issued when the Local Partnerships Interests were acquired. 22 Rental income decreased approximately 54% for the three months ended June 25, 2002 as compared to 2001. Excluding the Sold Assets, rental income decreased approximately 3% for the three months ended June 25, 2002 as compared to 2001, primarily due to expired leases at two Local Partnerships in anticipation of rehabilitation projects. Total expenses, excluding the Sold Assets, administrative and management, interest and depreciation, remained fairly consistent with a decrease of approximately 2% for the three months ended June 25, 2002 as compared to 2001. Administrative and management decreased approximately $341,000 for the three months ended June 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense decreased approximately $64,000, primarily due to a decrease in legal and accounting expenses at the Partnership level. Interest expense decreased approximately $1,126,000 for the three months ended June 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense decreased approximately $240,000, primarily due to a decrease in the prime interest rate in 2002. Depreciation decreased approximately $316,000 for the three months ended June 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense increased approximately $17,000, primarily due to the expiration of a sales contract at one Local Partnership. The Local Partnership was classified as an asset held for sale in 2001 and was not depreciated. Administrative and management-related parties, operating, repairs and maintenance and taxes and insurance decreased approximately $108,000, $449,000, $457,000 and $170,000, respectively, for the three months ended June 25, 2002 as compared to 2001, primarily due to decreases relating to the Sold Assets. Summer Arms, Cabarrus, Huntley #1, Huntley #2, Nu-Elm, Lexington, Shelton Beach and Northpointe II are not being depreciated during the period ended June 25, 2002 because they are classified as assets held for sale. 23 Gain on sale of properties and forgiveness of indebtedness income will continue to fluctuate as a result of the disposition of properties (see Note 4 of the financial statements). Item 3. Quantitative and Qualitative Disclosures about Market Risk None 24 PART II - OTHER INFORMATION Item 1. Legal Proceedings This information is incorporated by reference in Note 5 to the financial statements. Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 25 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 26, 2002 By:/s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: July 26, 2002 By:/s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: ASSISTED HOUSING ASSOCIATES, INC., a General Partner Date: July 26, 2002 By:/s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: July 26, 2002 By:/s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: CAMBRIDGE AND RELATED ASSOCIATES LIMITED PARTNERSHIP By:Related Beta Corporation, 26 Date: July 26, 2002 By:/s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: July 26, 2002 By:/s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer)

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