10-Q 1 f10q_secondquarter-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 September 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)

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

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

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

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

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)

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

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

See accompanying notes to consolidated financial statements. 9 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) Note 1 - General The consolidated financial statements for the six months ended September 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 September 25. All subsidiaries have fiscal quarters ending June 30. Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from July 1 through September 25. The Partnership's fiscal quarter ends on September 25 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. Increases (decreases) in the capitalization of consolidated subsidiaries attributable to minority interest arise from cash contributions and cash distributions to the minority interest partners. Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. Such losses aggregated approximately $0 and $0 and $5,000 and $17,000 for the three and six months ended September 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 September 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 September 25, 2002, the results of operations for the three and six months ended September 25, 2002 and 2001, and cash flows for the six months ended September 25, 2002 and 2001, respectively. However, the operating results for the six months ended September 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 recorded at the Partnership level. As of September 25, 2002, and March 25, 2002, Purchase Money Notes aggregated approximately $5,442,000 and $9,757,000, respectively. 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 September 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 September 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 $14,699,000 and $22,909,000 as of September 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. 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. 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 through November 2002. Further extensions, until such properties are sold, are currently in the discussion stage. The Partnership is working with the Local General and Purchase Money Note holders to refinance or sell the properties. No assurance can be given that management's efforts will be successful. Based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to meet the outstanding balances of principal, accrued interest and extension fees. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the selling partner's recourse, in the event of nonpayment, would be to foreclose on the Partnership's interests in the respective subsidiary partnerships. 12 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) Distributions aggregating approximately $3,231,000 and $3,884,000 were made to the Partnership for the six months ended September 25, 2002 and 2001, respectively, of which $2,317,000 and $3,355,000, 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 September 25, 2002 (Unaudited) Note 3 - Related Party Transactions The costs incurred to related parties for the three and six months ended September 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 $2,918,000 and $2,847,000 were accrued and unpaid as of September 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. 14 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) (b) The Partnership reimburses the General Partners and their affiliates for actual Partnership operating expenses incurred by the General Partners and their affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the partnership agreement. Another affiliate of the 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 $40,000 and $95,000 were accrued and unpaid as of September 25, 2002 and March 25, 2002, respectively. (c) C/R Special Partnership, the special limited partner, owning a .01% interest, is entitled to receive a local administrative fee of up to $2,500 per year from each subsidiary partnership. Note 4 - Sale of Properties General ------- The Partnership is currently in the process of disposing of its investments. It is anticipated that this process will take a number of years. As of September 25, 2002, the Partnership has disposed of fifty-four of its sixty-one original investments. Five additional investments are listed for sale and the Partnership anticipates that the two 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. 15 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed a new entity: Cambridge Advantaged Liquidating L.L.C. (the "Trust"), a Delaware limited liability company which is wholly-owned by the Partnership. On July 21, 1999, the Partnership contributed its limited partnership interest in Decatur Apartments, Ltd., Florence Apartments, Ltd., Saraland Apartments, Ltd., Dickens Ferry Apartments, Ltd., Boonie Doone Apartments, Ltd., University Gardens Apartments, Ltd., and Southside Village Apartments, Ltd., to the Trust. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership, therefore, there should not be any tax effect to the limited partners of the Partnership. As of September 25, 2002 all of these properties were sold except for Saraland Apartments, Ltd. Information Regarding Dispositions. ----------------------------------- On February 14, 2002, the property and the related assets and liabilities of Nottingham Woods Apartments ("Nottingham") were sold to an unaffiliated third party for $1,900,000, resulting in a gain of approximately $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 the related assets and liabilities of Robindale East Apartments ("Robindale") were sold to an unaffiliated third party for $10,000, 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. 16 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) On April 30, 2002, the property and the related assets and liabilities of Shelton Beach Apartments ("Northpointe I") were sold to an unaffiliated third party for $2,333,333, resulting in a gain of approximately $598,000. The Partnership used approximately $1,124,000 of proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, resulting in forgiveness of indebtedness income of approximately $2,115,000. On April 30, 2002, the property and the related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a gain of approximately $394,000. The Partnership used approximately $570,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,119,000, resulting in forgiveness of indebtedness income of approximately $1,549,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $145,000. No proceeds were used to settle the Purchase Money Note and accrued interest thereon, resulting in forgiveness of indebtedness income of approximately $2,645,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #2 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $351,000. No proceeds were used to settle the Purchase Money Note and accrued interest thereon, resulting in forgiveness of indebtedness income of approximately $1,725,000. 17 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) 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. On May 30, 2002, the property and the related assets and liabilities of Lexington Village ("Lexington") were sold to an affiliate of the Local General Partner for approximately $1,350,000, resulting in a gain of approximately $425,000. The Partnership used approximately $375,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, resulting in forgiveness of indebtedness income of approximately $3,070,000. On July 31, 2002, an unaffiliated third party agreed to purchase the limited partnership interests in Cabarrus Arms Associates ("Cabarrus Arms") for an agreed upon price of $25,000. Such purchase is expected to be finalized in early 2003. No assurance can be given that the closing will actually occur. On July 31, 2002, an unaffiliated third party agreed to purchase the limited partnership interests in Hathaway Court Associates ("Hathaway") for an agreed upon price of $50,000. Such purchase is expected to be finalized in early 2003. No assurance can be given that the closing will actually occur. On July 31, 2002, an unaffiliated third party agreed to purchase the limited partnership interests of Summer Arms Associates ("Summer Arms") for an agreed upon price of $25,000. Such purchase is expected to be finalized in early 2003. No assurance can be given that the closing will actually occur. 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. 18 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) 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. 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. 19 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2002 (Unaudited) 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. 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 fall. 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 $3,233,000 and $2,662,000, were accrued and unpaid as of September 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 $3,231,000 and $3,884,000 were made to the Partnership for the six months ended September 25, 2002 and 2001, respectively, of which $2,317,000 and $3,355,000, respectively, were used to pay principal and interest on the Purchase Money Notes. During the six months ended September 25, 2002, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $2,674,000. This increase was due to proceeds from the sale of properties ($10,760,000) which exceeded principal payment of mortgage notes payable ($5,544,000), principal payments of Purchase Money Notes payable ($2,068,000), acquisitions of property and equipment ($105,000), an increase in mortgage escrow deposits ($195,000) decrease in capitalization of minority interest ($172,000) and cash used in operating activities ($2,000). Included in the adjustments to reconcile the net income to cash used in operating activities are gain on sale of properties ($2,222,000), forgiveness of indebtedness income ($16,789,000) and depreciation ($250,000). 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 September 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, Robindale East, Northpointe I, Northpointe II, Huntley #1, Huntley #2 and Lexington 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 and six months ended September 25, 2002 and 2001, excluding the Sold Assets, gain on sale of properties, forgiveness of indebtedness income, administrative and management, administrative and management-related parties, repairs and maintenance, and interest expense. The majority of Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, depreciation and mortgage interest. In addition, the Partnership incurred interest expense relating to the Purchase Money Notes which were issued when the Local Partnerships Interests were acquired. 22 Rental income decreased approximately 60% and 57% for the three and six months ended September 25, 2002 as compared to 2001. Excluding the Sold Assets, rental income increased approximately 5% and 3% for the three and six months ended September 25, 2002 as compared to 2001, primarily due to rental rate increases. Other income decreased approximately $151,000 and $174,000 for the three and six months ended September 25, 2002, as compared to 2001. Excluding the Sold Assets, other income decreased approximately $25,000 and $37,000 primarily due to a decrease in interest income in 2002 at the Local Partnerships and Partnership level as a result of lower interest rates. Administrative and management decreased approximately $378,000 and $719,000 for the three and six months ended September 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense decreased approximately $4,000 and $64,000, primarily due to a decrease in legal expense at the Partnership level. Administrative and management-related parties decreased approximately $121,000 and $229,000 for the three and six months ended September 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense decreased approximately $39,000 and $52,000 primarily due to a decrease in expense allocations at the Partnership level. Repairs and maintenance decreased approximately $534,000 and $991,000 for the three and six months ended September 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense decreased approximately $63,000 and $39,000 primarily due to an insurance refund received for prior repairs at one Local Partnership in 2002. 23 Interest expense decreased approximately $894,000 and $2,020,000 for the three and six months ended September 25, 2002 as compared to 2001. Excluding the Sold Assets, such expense decreased approximately $56,000 and $164,000, primarily due to a decrease in the prime interest rate in 2002. Operating, taxes and insurance, and depreciation decreased approximately $365,000 and $814,000, $56,000 and $226,000, and $199,000 and $515,000, respectively, for the three and six months ended September 25, 2002 as compared to 2001, primarily due to decreases relating to the Sold Assets. Summer Arms, Cabarrus, Nu-Elm, Hathaway and Pinewood are not being depreciated during the period ended September 25, 2002 because they are classified as assets held for sale. 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 Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer of Related Beta Corporation and Assisted Housing, Inc., each of which is a general partner of Cambridge Advantaged Properties Limited Partnership (the "Partnership"), have evaluated the Partnership's disclosure controls and procedures relating to the Partnership's quarterly report on Form 10-Q for the period ending September 25, 2002 as filed with Securities and Exchange Commission and have judged such controls and procedures to be effective as of September 25, 2002 (the "Evaluation Date"). There have been no significant changes in the internal controls or in other factors that could significantly affect internal controls relating to the Partnership since the Evaluation Date. 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 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 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: October 28, 2002 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: October 28, 2002 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: ASSISTED HOUSING ASSOCIATES, INC., a General Partner Date: October 28, 2002 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: October 28, 2002 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: CAMBRIDGE AND RELATED ASSOCIATES LIMITED PARTNERSHIP By: Related Beta Corporation, Date: October 28, 2002 By: /s/ Alan P. Hirmes ------------------- Alan P. Hirmes, President (principal executive and financial officer) Date: October 28, 2002 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) CERTIFICATION I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, General Partners of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending September 25, 2002 of the Partnership; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the Partnership and we have: a) designed such disclosure controls and procedures to ensure the material information relating to the Partnership is made known to us, particularly during the period in which this quarterly report was being prepared; b) evaluated the effectiveness of the Partnership's disclosure controls and procedures as of September 25, 2002 (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the Partnership's auditors and to the board of directors of the General Partners: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Partnership's ability to record, process, summarize and report financial data and have identified for the Partnership's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer October 28, 2002 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Cambridge Advantaged Properties Limited Partnership (the "Partnership") on Form 10-Q for the period ending September 25, 2002 as filed with the Securities and Exchange Commission 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. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer October 28, 2002

CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP 10-Q