form10q_033110-cri1.htm

10-Q 1 form10q_033110-cri1.htm QUARTERLY REPORT form10q_033110-cri1.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-11149

CAPITAL REALTY INVESTORS, LTD.

(Exact Name of Issuer as Specified in its Charter)

District of Columbia	52-1219926
(State of Incorporation)	(I.R.S. Employer Identification No.)

11200 Rockville Pike
Rockville, MD	20852
(Address of Principal Executive Offices)	(ZIP Code)

(301) 468-9200

(Issuer’s Telephone Number, Including Area Code)

_____________________

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 o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o

Non-accelerated filer (Do not check if a smaller reporting company) o Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

CAPITAL REALTY INVESTORS, LTD.

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2010

		Page

Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Balance Sheets
	- March 31, 2010 and December 31, 2009	1
	Statements of Operations and Accumulated Losses
	- for the three months ended March 31, 2010 and 2009	2
	Statements of Cash Flows
	- for the three months ended March 31, 2010 and 2009	3
	Notes to Financial Statements
	- March 31, 2010 and 2009	4

Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	11

Item 4.	Controls and Procedures	15

Part II	OTHER INFORMATION

Item 5.	Other Information	15

Item 6.	Exhibits	16

Signature		17

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL REALTY INVESTORS, LTD.

BALANCE SHEETS

ASSETS

	March 31,		December 31,
	2010		2009
	(Unaudited)

Investments in and advances to partnerships	$	3,320,048	$	3,144,406
Cash and cash equivalents		3,690,054		3,850,033
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $179,667 and $178,047, respectively		79,488		81,108
Property purchase costs,
net of accumulated amortization of $46,570, and $46,154, respectively		20,275		20,691

Total assets	$	7,109,865	$	7,096,238

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses	$	45,444		$	21,886

Total liabilities		45,444			21,886

Commitments and contingencies

Partners' capital:

Capital paid in:
General Partners		14,000			14,000
Limited Partners		24,837,000			24,837,000

		24,851,000			24,851,000

Less:
Accumulated distributions to partners		(15,509,272	)		(15,509,272	)
Offering costs		(2,689,521	)		(2,689,521	)
Accumulated gain		412,214			422,145

Total partners' capital		7,064,421			7,074,352

Total liabilities and partners' capital	$	7,109,865		$	7,096,238

The accompanying notes are an integral part

of these financial statements.

-1-

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF OPERATIONS

AND ACCUMULATED LOSSES

(Unaudited)

	For the three months ended
	March 31,
	2010			2009

Share of income from partnerships	$	175,642		$	125,203

Other revenue and expenses:

Revenue:
Interest		3,967			13,195


Expenses:
General and administrative		83,026			89,332
Professional fees		80,676			59,715
Management fee		23,802			23,802
Amortization of deferred costs		2,036			2,036

		189,540			174,885

Total other revenue and expenses		(185,573	)		(161,690	)

Net (loss)		(9,931	)		(36,487	)

Accumulated gain, beginning of period		422,145			624,163

Accumulated gain, end of period	$	412,214		$	587,676



Net (loss) allocated to General Partners (3%)	$	(298	)	$	(1,095	)


Net (loss) allocated to Limited Partners (97%)	$	(9,633	)	$	(35,392	)


Net (loss) per unit of Limited Partner Interest,
based on 24,747 units outstanding	$	(.39	)	$	(1.43	)

The accompanying notes are an integral part

of these financial statements.

-2-

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF CASH FLOWS

(Unaudited)

	For the three months ended
	March 31,
	2010			2009

Cash flows from operating activities:
Net (loss)	$	(9,931	)	$	(36,487	)

Adjustments to reconcile net (loss) to net cash
used in operating activities:
Share of income from partnerships		(175,642	)		(125,203	)
Amortization of deferred costs		2,036			2,036

Changes in assets and liabilities:
Decrease (increase) in other assets		--			5,704
Increase in accounts payable and accrued expenses		23,558			5,272

Net cash used in operating activities		(159,979	)		(148,678	)

Cash flows from investing activities:

Receipt of distribution from partnership		--			7,219

Net cash provided by investing activities		--			7,219

Cash flows from financing activities:

Distribution paid to Limited Partners		--			(2,524,194	)

Net cash used in financing activities		--			(2,524,194	)

Net (decrease) in cash and cash equivalents		(159,979	)		(2,665,653	)

Cash and cash equivalents, beginning of period		3,850,033			7,265,038

Cash and cash equivalents, end of period	$	3,690,054		$	4,599,385

The accompanying notes are an integral part

of these financial statements.

-3-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

1. BASIS OF PRESENTATION

In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the accompanying unaudited financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of Capital Realty Investors, Ltd. (the Partnership) as of March 31, 2010, and the results of its operations and its cash flows for the three month periods ended March 31, 2010 and 2009. The results of operations for the interim period ended March 31, 2010, are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q. Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such instructions. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's annual report on Form 10-K at December 31, 2009.

On August 18, 2006, the Partnership filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, and mailed it to Limited Partners to solicit consents for approval of an amendment of the Partnership’s Limited Partnership Agreement to permit the Managing General Partner, CRI, to be eligible to receive an increased property disposition fee from the Partnership on the same basis as such fees could be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell properties in which the Partnership holds interests, to the extent that CRI markets and sells the Partnership’s assets instead of such persons (a “Disposition Fee”).

The record date for voting was August 1, 2006, and the final voting deadline was October 17, 2006. The Managing General Partner received consent from a majority of Limited Partners for the increased Disposition Fee. A tabulation of votes received by the voting deadline follows.

FOR

AGAINST

ABSTAIN

TOTAL

Units of

limited

partner

Interest

Percent

Interest

Percent

Interest

Percent

Interest

Percent

12,856

51.95%

2,914

11.77%

375

1.52%

16,145

65.24%

-4-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a. Advance to Local Partnership

As of both March 31, 2010 and December 31, 2009, the Partnership had advanced funds, including accrued interest, totaling $872,636, to ARA Associates -- Shangri-La Ltd. (Shallowford Oaks). For financial reporting purposes, these loans have been reduced to zero by the Partnership as a result of losses at the Local Partnership level during prior years.

b. Property matters

Baltic Plaza

On June 24, 2001, the Local Managing General Partner entered into a contract to sell the property owned by Sencit Baltic Associates (Baltic Plaza). On December 19, 2002, Baltic Plaza was sold. Cash proceeds received by the Partnership totaled $2,053,358. As part of the consideration, the Local Partnership took back a 30-year purchase money note in the principal amount of $2,300,000, collateralized by the partnership interests of the general partner of the maker/purchaser. The Local Partnership assigned the purchase money note to an escrow for the benefit of its partners (with CRI serving as escrow agent), so that the Local Partnership entity could be dissolved. The purchase money note bears interest at 4.6% compounded annually, and requires a minimum annual payment equal to 50% of the maker/purchaser’s annual audited cash flow, as defined, with the balance of unpaid principal, if any, plus accrued interest, due and payable on December 31, 2032. As of June 9, 2010, no payments of principal or interest have been received on this purchase money note. The Partnership’s 98% beneficial interest in this purchase money note is reflected in the accompanying balance sheets at March 31, 2010 and December 31, 2009, at its original principal balance of $2,300,000 plus estimated accrued but unpaid interest, all discounted to $619,000 to provide for an effective interest rate commensurate with the investment risk. The resulting discounted amount has been fully reserved due to uncertainty of collection of the purchase money note and related interest.

-5-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

c. Completed sales

Court Place

On March 31, 2008, the Partnership’s interest in Court Place Associates (Court Place) was sold. The sale resulted in net gain on disposition of investment in partnerships of $0 for financial statement purposes in 2008 and in gain of $70,099 for federal tax purposes. In accordance with the terms of the Partnership Agreement, in April 2008, the Managing General Partner was paid a disposition fee of $246,690 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships at March 31, 2008.

Linden Place

On January 1, 2008, the Partnership’s interest in Linden Place Associates (Linden Place) was sold. The sale resulted in net gain on disposition of investment in partnerships of $2,796,506 for financial statement purposes in 2008 and in gain of $5,153,743 for federal tax purposes. In accordance with the terms of the Partnership Agreement, in January 2008, the Managing General Partner was paid a disposition fee of $917,500 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships in January 2008. In May 2008, the Partnership received a cash flow distribution of $39,265 which was accrued and included in net gain on disposition of investment in partnerships at March 31, 2008.

Park Glen

On March 31, 2008, the Partnership’s interest in Park Glen Associates (Park Glen) was sold. The sale resulted in net gain on disposition of investment in partnerships of $38,518 for financial statement purposes in 2008 and in gain of $2,220,956 for federal tax purposes. In accordance with the terms of the Partnership Agreement, in April 2008, the Managing General Partner was paid a disposition fee of $300,610 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships at March 31, 2008.

Warner House

On March 31, 2008, the Partnership’s interest in Warner House Partnership (Warner House) was sold. The sale resulted in net gain on disposition of investment in partnerships of $140,193 for financial statement purposes in 2008 and in gain of $1,529,981 for federal tax purposes.

-6-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

d. Summarized financial information

Combined statements of operations for the six Local Partnerships in which the Partnership was invested as of March 31, 2010 and 2009, respectively, follow. The combined statements have been compiled from information supplied by the management agents of the properties and are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership’s share of income from partnerships related to cash distributions recorded as income, and related to the Partnership’s share of Local Partnership net income.

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended
	March 31,
	2010					2009
	Equity					Equity
	Method		Suspended			Method		Suspended

Number of Local Partnerships		2		4			2		4

Revenue:
Rental	$	716,918	$	847,100		$	699,407	$	872,711
Other		58,242		13,569			45,895		23,041

Total revenue		775,160		860,669			745,302		895,752

Expenses:
Operating		369,308		619,606			369,653		598,203
Interest		109,696		157,671			133,820		162,331
Depreciation and amortization		116,916		91,585			121,427		94,564

Total expenses		595,920		868,862			624,900		855,098

Net income	$	179,240	$	(8,193	)	$	120,402	$	40,654

Cash distribution	$	--	$	--		$	--	$	7,219

Cash distribution recorded as income		--		--			--		7,219

Partnership’s share of Local
Partnership net income	$	175,642	$	--		$	117,984	$	--

Share of income from partnerships		$175,642					$125,203

-7-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective statements of operations and as cash receipts on the respective balance sheets. As of March 31, 2010 and 2009, the Partnership's share of cumulative losses to date for four of six Local Partnerships exceeded the amount of the Partnership's investments in those Local Partnerships by $4,980,039 and $4,897,909, respectively. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements.

3. RELATED PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for direct expenses in connection with managing the Partnership. For the three month periods ended March 31, 2010 and 2009, the Partnership paid $53,930 and $56,354, respectively. Such expenses are included in general and administrative expenses in the accompanying statements of operations.

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (Management Fee) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner a Management Fee of $23,802 for each of the three month periods ended March 31, 2010 and 2009.

-8-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

3. RELATED PARTY TRANSACTIONS - Continued

In accordance with the terms of the Partnership Agreement as in effect at the time, in March 2006 the Managing General Partner was paid a disposition fee of $86,000 related to the sale of Lihue Gardens in December 2005, which was accrued and netted against the related gain on disposition of investment in partnerships at December 31, 2005. Pursuant to approval of the Partnership’s Consent Solicitation Statement on October 17, 2006, the Managing General Partner may receive an increased property disposition fee from the Partnership on the same basis as such fees could be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell properties in which the Partnership holds interests to the extent that CRI markets and sells the Partnership’s assets instead of such persons. In accordance with the terms of the Partnership Agreement, in January 2007 the Managing General Partner was paid a disposition fee of $120,000 related to the sale of Sundance Apartments in December 2006, which was accrued and netted against the related gain on disposition of investment in partnerships at December 31, 2007. In accordance with the terms of the Partnership Agreement, in April 2007 the Managing General Partner was paid a disposition fee of $530,000 related to the sale of the Frederick Heights property, which was netted against the related gain on disposition of investment in partnerships at March 31, 2007. In accordance with the terms of the Partnership Agreement, in January 2008 the Managing General Partner was paid a disposition fee of $917,500 related to the sale of the Partnership’s interest in Linden Place, which was netted against the related gain on disposition of investment in partnerships at March 31, 2008. In accordance with the terms of the Partnership Agreement, in April 2008 the Managing General Partner was paid disposition fees of $246,690 and $300,610 related to the sales of the Partnership’s interests in Court Place and Park Glen, respectively, which were netted against the related gain on disposition of investment in partnerships.

4. CASH DISTRIBUTIONS

On April 5, 2007, the Partnership declared a cash distribution of $7,374,606 ($298 per Unit) to the Limited Partners who were holders of record as of May 1, 2007 of which, on August 7, 2007, $6,818,248 was paid to the Limited Partners. From the distribution amount, in April 2008, $155,574 was paid to the state of Maryland for non-resident withholding, and the excess amount of taxes withheld of $403,464 was paid to Limited Partners in July 2008. This distribution consisted of proceeds received from the sales of Sundance Apartments and Frederick Heights.

On March 27, 2009, the Partnership paid a cash distribution of $2,524,194 ($102 per Unit) to the Limited Partners who were holders of record as of March 27, 2009. The distribution consisted of a portion of the proceeds received from the sales of Linden Place, Court Place, Park Glen and Warner House.

-9-

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

March 31, 2010 and 2009

(Unaudited)

5. CASH CONCENTRATION RISK

Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains three cash accounts at SunTrust Bank. As of March 31, 2010, the uninsured portion of the cash balances was $3,591,975.

# # #

-10-

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations

Capital Realty Investors, Ltd.'s (the Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.

Critical Accounting Policies

The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in the Partnership’s annual report on Form 10-K at December 31, 2009. The Partnership accounts for its investments in partnerships (Local Partnerships) by the equity method because the Partnership is a limited partner in the Local Partnerships. As such the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnerships. Environmental and operational trends, events and uncertainties that might affect the properties owned by the Local Partnerships would not necessarily have a significant impact on the Partnership’s application of the equity method of accounting, since the equity method has been suspended for four Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships. The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. If an asset were determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.

On August 18, 2006, the Partnership filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, and mailed it to Limited Partners to solicit consents for approval of an amendment of the Partnership’s Limited Partnership Agreement to permit the Managing General Partner, C.R.I., Inc., to be eligible to receive an increased property disposition fee from the Partnership on the same basis as such fees could be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell properties in which the Partnership holds interests, to the extent that CRI markets and sells the Partnership’s assets instead of such persons (a “Disposition Fee”).

-11-

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

FOR

AGAINST

ABSTAIN

TOTAL

Units of

limited

partner

Interest

Percent

Interest

Percent

Interest

Percent

Interest

Percent

12,856

51.95%

2,914

11.77%

375

1.52%

16,145

65.24%

General

C.R.I., Inc. (the Managing General Partner) continues to evaluate the Partnership's underlying apartment complexes to develop strategies that maximize the benefits to investors. Issues that are at the forefront of the Managing General Partner's strategic planning include: the expiration of Section 8 Housing Assistance Payment (HAP) contracts, the restrictions on properties with state housing agency financing or the U. S. Department of Agriculture’s Rural Development agency (RD) financing, the cessation of losses to the Partnership due to the complete depletion of low-income housing accelerated depreciation deductions on the Local Partnerships' properties, and the reduction of mortgage interest deductions as the mortgage loans move closer to maturity.

Most of the Local Partnerships in which the Partnership is invested have mortgage loans financed by various state housing agencies, and one Local Partnership has a mortgage loan financed by the RD agency. Four of the Local Partnerships have Section 8 HAP Contracts in place for all or substantially all of their apartment units, which Section 8 HAP Contracts are generally regulated by HUD (the state housing agencies, RD and HUD, collectively, the “Agencies”). Currently, these Section 8 HAP Contracts expire through 2026, and the Managing General Partner believes that, at expiration, the Agencies will strive to preserve the units as low income, or affordable, housing by exercising their rights under the mortgages and/or regulatory agreements to disallow prepayment of the mortgages or conversion of the units to market rate housing. The Managing General Partner continues to monitor the actions of the Agencies to assess how the Agencies will deal with expiring Section 8 HAP Contracts and what impact the Agencies' strategies will have on the operations of the Local Partnerships and, consequently, the impact on the Partnership's investments in the Local Partnerships.

-12-

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

In connection with renewals of the Section 8 HAP Contracts under current law and policy, HUD has determined that the amount of rental assistance payments will be based on market rental instead of above market rentals (as may be the case under existing Section 8 HAP Contracts). The payments under the renewed Section 8 HAP Contracts may provide sufficient cash flow to permit owners of these properties to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD ("FHA"). To address the reduction in payments under Section 8 HAP Contracts as a result of this policy, HUD provides for the restructuring of mortgage loans insured by the FHA. An FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable by the borrower of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA-insured loan due to the reduction in the principal amount.

Sales of properties with state agency or RD financing will be extremely difficult. Since the Agencies are unlikely to allow mortgage prepayment and/or sale for a conversion to market rate housing, prospective buyers are generally limited to tax credit buyers or not-for-profit organizations.

As of March 31, 2010, the Partnership has no investment in Local Partnerships with Section 8 HAP Contracts expiring in 2010.

The Managing General Partner is working diligently on behalf of the Partnership to produce the best results possible under these difficult circumstances. While the Managing General Partner cannot predict the outcome for any particular property at this time, the Managing General Partner will continue to work with the Local Partnerships to develop strategies that maximize the benefits to investors.

Financial Condition/Liquidity

The Partnership's liquidity, with unrestricted cash resources of $3,690,054 as of March 31, 2010, along with anticipated future cash distributions from the Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs. As of June 9, 2010, there were no material commitments for capital expenditures.

The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the three month period ended March 31, 2010, existing cash resources was adequate to support net cash used in operating activities. Cash and cash equivalents decreased $159,979 during the three month period ended March 31, 2010, primarily due to operating expenses.

-13-

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Results of Operations

The Partnership recognized a smaller net loss for the three month period ended March 31, 2010 as compared to the first three months of 2009, primarily due to an increase in the share of income from partnerships. Interest revenue decreased due to lower rates earned in 2010. General and administrative expenses were consistent with the prior year, however, professional fees increased primarily due to higher audit costs.

For financial reporting purposes, the Partnership, as a limited partner in the Local Partnerships, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the three month periods ended March 31, 2010 and 2009, did not include losses of $68,813 and $27,579, respectively.

No other significant changes in the Partnership's operations have taken place during the three month period ended March 31, 2010.

Certain states may assert claims against the Partnership for failure to withhold and remit state income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the state tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.

-14-

Part I. FINANCIAL INFORMATION

Item 4.

Controls and Procedures

In February 2010, representatives of the Managing General Partner of the Partnership carried out an evaluation of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures, pursuant to Exchange Act Rules 13a-15 and 15d-15. The Managing General Partner does not expect that the Partnership’s disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2009, our disclosure controls and procedures were effective to ensure that (i) the information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, was recorded, processed, summarized or reported within the time periods specified in the SEC’s rules and forms and (ii) such information was accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In addition, there have been no significant changes in the Partnership’s internal control over financial reporting that occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Part II.

OTHER INFORMATION

Item 5.

Other Information

There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended March 31, 2010, but not reported, whether or not otherwise required by this Form 10-Q at March 31, 2010.

There is no established market for the purchase and sale of units of limited partner interest (Units) in the Partnership, although various informal secondary market services exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.

-15-

Part II.

OTHER INFORMATION

Item 5.

Other Information - Continued

Item 6. Exhibits

Exhibit No.

Description

31.1	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

All other items are not applicable.

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SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CAPITAL REALTY INVESTORS, LTD
		(Registrant)

		by: C.R.I., Inc.
		Managing General Partner




June 9, 2010		by: /s/ H. William Willoughby
DATE		H. William Willoughby
		Director, President, Secretary,
		Principal Financial Officer and
		Principal Account Officer

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