-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SAl43TE8Jixc4opHTI6XgjHqiKxs0oDlaGj2fhd++znWmv7H/l/EqsI5iio2k+fM kj7P9yyIwub8RqDCiW83pw== 0000810663-97-000050.txt : 19971114 0000810663-97-000050.hdr.sgml : 19971114 ACCESSION NUMBER: 0000810663-97-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L P IV CENTRAL INDEX KEY: 0000845035 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 043044617 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19765 FILM NUMBER: 97714732 BUSINESS ADDRESS: STREET 1: 101 ARCH ST 16TH FLR CITY: BOSTON STATE: MA ZIP: 02110-1106 BUSINESS PHONE: 6174393911 MAIL ADDRESS: STREET 2: 101 ARCH STREET 16TH FL CITY: BOSTON STATE: MA ZIP: 021101106 10-Q 1 QH4 2Q98 November 14, 1997 Securities and Exchange Commission Filer Support, Edgar Operation Center, Stop 0-7 6432 General Green Way Alexandria, VA 22312 Re: Boston Financial Qualified Housing Tax Credits L.P. IV Report on Form 10-Q for Quarter Ended September 30, 1997 File No. 0-19765 Gentlemen: Pursuant to the requirements of section 15(d) of the Securities Exchange Act of 1934, there is filed herewith a copy of subject report. Very truly yours, /s/Patricia Olsen-Goldberg Patricia Olsen-Goldberg Controller QH4-10Q2.DOC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (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 30, 1997 ------------------------------------------- OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to For Quarter Ended September 30, 1997 Commission file number 0-19765 -------------------- ------------ Boston Financial Qualified Housing Tax Credits L.P. IV (Exact name of registrant as specified in its charter) Massachusetts 04-3044617 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 Arch Street, Boston, Massachusetts 02110-1106 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 439-3911 ---------------------- 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 . BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Combined Financial Statements Combined Balance Sheets - September 30, 1997 (Unaudited) and March 31, 1997 1 Combined Statements of Operations (Unaudited) - For the Three and Six Months Ended September 30, 1997 and 1996 2 Combined Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Six Months Ended September 30, 1997 4 Combined Statements of Cash Flows (Unaudited) - For the Six Months Ended September 30, 1997 and 1996 5 Notes to Combined Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II - OTHER INFORMATION Items 1-6 15 SIGNATURE 16 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED BALANCE SHEETS - September 30, 1997 and March 31, 1997
September 30, March 31, 1997 1997 (Unaudited) Assets Cash and cash equivalents $ 334,278 $ 288,153 Marketable securities, at fair value 929,259 1,056,590 Accounts receivable, net of allowance for bad debt of $325,132 and $337,793, respectively 20,565 23,778 Tenant security deposits 96,390 98,963 Investments in Local Limited Partnerships, net of reserve for valuation of $844,000 and $945,277, respectively (Note 1) 18,915,763 19,593,420 Rental property at cost, net of accumulated depreciation and reserve for valuation of $5,561,288 and $5,670,590, respectively 14,401,767 15,217,196 Mortgagee escrow deposits 103,266 106,501 Deferred charges, net of $166,715 and $156,662 of accumulated amortization, respectively 199,129 209,182 Other assets 57,938 38,270 ------------- ------------ Total Assets $ 35,058,355 $ 36,632,053 ============= ============ Liabilities and Partners' Equity Mortgage notes payable $ 10,341,914 $11,111,888 Accounts payable to affiliates 453,018 390,926 Accounts payable and accrued expenses 357,099 366,076 Interest payable 637,270 507,457 Tenant security deposits payable 89,310 89,709 Payable to affiliated Developer 2,482,000 2,482,000 ------------- ------------ Total Liabilities 14,360,611 14,948,056 ------------- ------------ Minority interest in Local Limited Partnerships 382,911 421,489 ------------- ------------ General, Initial and Investor Limited Partners' Equity 20,313,540 21,267,760 Net unrealized gains (losses) on marketable securities 1,293 (5,252) ------------- ------------ Total Partners' Equity 20,314,833 21,262,508 ------------- ------------ Total Liabilities and Partners' Equity $ 35,058,355 $ 36,632,053 ============= ============
The accompanying notes are an integral part of these combined financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED STATEMENTS OF OPERATIONS (Unaudited) For the Three and Six Months Ended September 30, 1997 and 1996
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1997 1996 1997 1996 ------------- ------------- ------------- --------- Revenue: Rental $ 454,767 $ 446,852 $ 907,649 $ 890,572 Investment 21,300 17,625 46,009 46,574 Other 14,803 67,321 89,291 81,022 ------------- --------------- ------------- -------------- Total Revenue 490,870 531,798 1,042,949 1,018,168 ------------- --------------- ------------- -------------- Expenses: Asset management fee, related party 57,480 64,343 114,960 128,686 General and administrative, includes reimbursements to an affiliate in the amounts of $79,932 and $70,051 in 1997 and 1996, respectively 80,097 108,460 170,672 168,854 Bad debt expense 132,983 44,779 150,539 245,173 Rental operations, exclusive of depreciation 256,447 260,084 513,403 534,619 Property management fee, related party 32,475 46,561 65,027 65,300 Interest 256,635 269,574 514,474 539,952 Depreciation 186,691 201,330 373,381 379,195 Amortization 27,877 25,380 55,746 58,058 ------------- --------------- ------------- -------------- Total Expenses 1,030,685 1,020,511 1,958,202 2,119,837 ------------- --------------- ------------- -------------- Loss before equity in losses of Local Limited Partnerships, minority interest, loss on liquidation of interests in Local Limited Partnerships and extraordinary item (539,815) (488,713) (915,253) (1,101,669) Equity in losses of Local Limited Partnerships (159,532) (523,395) (528,884) (1,101,654) Minority interest in losses of Local Limited Partnerships 18,738 20,937 38,578 43,968 Loss on liquidation of interests in Local Limited Partnerships (Note 2) (2,538) - (2,538) - ------------- --------------- ------------- -------------- Net Loss before extraordinary item (683,147) (991,171) (1,408,097) (2,159,355) Extraordinary gain on cancellation of indebtedness (Note 2) 453,877 - 453,877 - ------------- --------------- ------------- -------------- Net Loss $ (229,270) $ (991,171) $ (954,220) $ (2,159,355) ============= =============== ============= ============== Net Loss allocated: To General Partners $ (2,293) $ (9,912) $ (9,542) $ (21,594) To Limited Partners (226,977) (981,259) (944,678) (2,137,761) ------------- --------------- ------------- -------------- $ (229,270) $ (991,171) $ (954,220) $ (2,159,355) ============= =============== ============= ==============
The accompanying notes are an integral part of these combined financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED STATEMENTS OF OPERATIONS (Unaudited) For the Three and Six Months Ended September 30, 1997 and 1996
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1997 1996 1997 1996 ------------- ------------- ------------- --------- Net Loss before extraordinary item per Limited Partnership Unit (68,043 Units) $ (9.94) $ (14.42) $ (20.48) $ (31.42) ============ ============== ============ ============ Extraordinary item per Limited Partnership Unit (68,043 Units) $ 6.60 $ - $ 6.60 $ - ============= =============== ============ ============= Net Loss per Limited Partnership Unit (68,043 Units) $ (3.34) $ (14.42) $ (13.88) $ (31.42) ============ ============== ============ =============
The accompanying notes are an integral part of these combined financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY) (Unaudited) For the Six Months Ended September 30, 1997
Net Initial Investor Unrealized General Limited Limited Gains Partners Partners Partners (Losses) Total Balance at March 31, 1997 $ (378,408) $ 5,000 $ 21,641,168 $ (5,252) $ 21,262,508 Net change in net unrealized losses on marketable securities available for sale - - - 6,545 6,545 Net Loss (9,542) - (944,678) - (954,220) ---------- ------- ------------ --------- ------------- Balance at September 30, 1997 $ (387,950) $ 5,000 $ 20,696,490 $ 1,293 $ 20,314,833 ========== ======= ============ ========= =============
The accompanying notes are an integral part of these combined financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED STATEMENTS OF CASH FLOWS (Unaudited) For the Six Months Ended September 30, 1997 and 1996
1997 1996 ------------ ------- Net cash used for operating activities $ (111,535) $ (30,449) ----------- ----------- Cash flows from investing activities: Investments in Local Limited Partnerships - 3,331 Purchases of marketable securities (198,988) (437,069) Proceeds from sales and maturities of marketable securities 332,353 681,156 Cash distributions received from Local Limited Partnerships 164,576 67,145 Advances to Local Limited Partnerships (49,061) (385,352) Purchase of rental property and equipment (39,561) (89,412) ----------- ----------- Net cash provided by (used for) investing activities 209,319 (160,201) ----------- ----------- Cash flows from financing activities: Payment of mortgage principal (68,780) (117,020) Advances from affiliate 17,121 37,493 ----------- ----------- Net cash used for financing activities (51,659) (79,527) ----------- ----------- Net increase (decrease) in cash and cash equivalents 46,125 (270,177) Cash and cash equivalents, beginning 288,153 414,451 ----------- ----------- Cash and cash equivalents, ending $ 334,278 $ 144,274 =========== =========== Supplemental disclosure: Cash paid for interest $ 357,828 $ 225,631 =========== ===========
The accompanying notes are an integral part of these combined financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to Combined Financial Statements (Unaudited) The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto included with the Partnership's 10-K for the year ended March 31, 1997. In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Partnership's financial position and results of operations. The results of operations for the periods may not be indicative of the results to be expected for the year. Certain amounts in the prior year financial statements have been restated herein to conform to the current year presentation. 1. Investments in Local Limited Partnerships The Partnership uses the equity method to account for its limited partnership interests in twenty-four Local Limited Partnerships (excluding the Combined Entities) which own and operate multi-family housing complexes, most of which are government-assisted. The Partnership, as Investor Limited Partner pursuant to the various Local Limited Partnership Agreements which contain certain operating and distribution restrictions, has generally acquired a 99% interest in the profits, losses, tax credits and cash flows from operations of each of the Local Limited Partnerships. Upon dissolution, proceeds will be distributed according to each respective partnership agreement. The following is a summary of investments in Local Limited Partnerships, excluding the Combined Entities, at September 30, 1997:
Capital contributions paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 43,001,951 Cumulative equity in losses of Local Limited Partnerships (includes cumulative unrecognized losses of $1,590,448) (24,696,948) Cash distributions received from Local Limited Partnerships (1,654,855) Investments in Local Limited Partnerships before adjustment 16,650,148 Excess of investment cost over the underlying net assets acquired: Acquisition fees and expenses 3,901,255 Accumulated amortization of acquisition fees and expenses (791,640) Investments in Local Limited Partnerships 19,759,763 Reserve for valuation of investments in Local Limited Partnerships (844,000) $ 18,915,763
The Partnership's share of the net losses of the Local Limited Partnerships, excluding the Combined Entities, for the six months ended September 30, 1997 is $1,159,425. For the six months ended September 30, 1997, the Partnership has not recognized $694,575 of equity in losses relating to eight Local Limited Partnerships where cumulative equity in losses and cumulative distributions exceeded its total investments in these Local Limited Partnerships. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to Combined Financial Statements (continued) (Unaudited) 2. Liquidation of Interests in Local Limited Partnerships The Managing General Partner has transferred all of the assets of ten of the Texas Partnerships, subject to their liabilities, to unaffiliated entities. The transfers of Grandview Terrace Apartments, Pecan Hills Apartments, Seagraves Garden Apartments, Hilltop Apartments and Bent Tree Housing were effective February 21, 1996, February 29, 1996, March 8, 1996, June 6, 1996 and November 20, 1996, respectively. Justin Place Apartments and Valley View Apartments were transferred July 9, 1997, Nacona Terrace Apartments and Royal Creste Apartments were transferred August 6, 1997, and Pine Manor Apartments was transferred on October 28, 1997. Transfer of one of the remaining two Texas Partnerships is expected to take place in the fourth quarter of 1997. The Partnership will retain its interest in Gateway Village. For financial reporting purposes, loss on liquidation of interests in Local Limited Partnerships of $2,538 and extraordinary gain on cancellation of indebtedness of $453,877 were recognized in the period ended September 30, 1997 as a result of the transfer of Justin Place Apartments and Valley View Apartments. The loss on the transfers of Nacona Terrace Apartments and Royal Creste Apartments had previously been reserved for in the provision for valuation of investment in Local Limited Partnerships. For tax purposes, these events will result in both Section 1231 Gain and cancellation of indebtedness income. In addition, the transfer of ownership will result in a nominal amount of recapture of tax credits, since the Texas Partnerships represent only 3% of the Partnership's tax credits. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to Combined Financial Statements (continued) (Unaudited) 3. Supplemental Combining Schedules Balance Sheets
Boston Financial Qualified Housing Tax Credits Combined Combined L.P. IV (A) Entities (B) Eliminations (A) Assets Cash and cash equivalents $ 251,952 $ 82,326 $ - $ 334,278 Marketable securities, at fair value 929,259 - - 929,259 Accounts receivable, net 397,543 20,565 (397,543) 20,565 Tenant security deposits - 96,390 - 96,390 Investments in Local Limited Partnerships, net 19,219,988 - (304,225) 18,915,763 Rental property at cost, net - 14,401,767 - 14,401,767 Mortgagee escrow deposits - 103,266 - 103,266 Deferred charges, net - 199,129 - 199,129 Other assets 21,995 35,943 - 57,938 --------------- --------------- ------------- ------------ Total Assets $ 20,820,737 $ 14,939,386 $ (701,768) $ 35,058,355 =============== =============== ============= ============ Liabilities and Partners' Equity Mortgage notes payable $ - $ 10,341,914 $ - $ 10,341,914 Accounts payable to affiliates 440,161 410,400 (397,543) 453,018 Accounts payable and accrued expenses 65,743 291,356 - 357,099 Interest payable - 637,270 - 637,270 Tenant security deposits payable - 89,310 - 89,310 Payable to affiliated Developer - 2,482,000 - 2,482,000 --------------- --------------- ------------- ------------ Total Liabilities 505,904 14,252,250 (397,543) 14,360,611 --------------- --------------- ------------- ------------ Minority interest in Local Limited Partnerships - - 382,911 382,911 --------------- --------------- ------------- ------------ General, Initial and Investor Limited Partners' Equity 20,313,540 687,136 (687,136) 20,313,540 Net unrealized losses on marketable securities 1,293 - - 1,293 --------------- --------------- ------------- ------------ Total Partners' Equity 20,314,833 687,136 (687,136) 20,314,833 --------------- --------------- ------------- ------------ Total Liabilities and Partners' Equity $ 20,820,737 $ 14,939,386 $ (701,768) $ 35,058,355 =============== =============== ============= ============
(A) As of September 30, 1997. (B) As of June 30, 1997. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to Combined Financial Statements (continued) (Unaudited) 3. Supplemental Combining Schedules (continued) Statements of Operations For the Three Months Ended September 30, 1997
Boston Financial Qualified Housing Tax Credits Combined Combined L.P. IV (A) Entities (B) Eliminations (A) Revenue: Rental $ - $ 454,767 $ - $ 454,767 Investment 17,756 3,544 - 21,300 Other 1,880 12,923 - 14,803 --------------- --------------- ------------- ------------ Total Revenue 19,636 471,234 - 490,870 --------------- --------------- ------------- ------------ Expenses: Asset management fees, related party 57,480 - - 57,480 General and administrative 80,097 - - 80,097 Bad debt expense 132,983 - - 132,983 Rental operations, exclusive of depreciation - 256,447 - 256,447 Property management fee, related party - 32,475 - 32,475 Interest - 256,635 - 256,635 Depreciation - 186,691 - 186,691 Amortization 22,850 5,027 - 27,877 --------------- --------------- ------------- ------------ Total Expenses 293,410 737,275 - 1,030,685 --------------- --------------- ------------- ------------ Loss before equity in losses of Local Limited Partnerships, minority interest, loss on liquidation of interests in Local Limited Partnerships and extraordinary item (273,774) (266,041) - (539,815) Equity in losses of Local Limited Partnerships 47,042 - (206,574) (159,532) Minority interest in losses of Local Limited Partnerships - - 18,738 18,738 Loss on liquidation of interests in Local Limited Partnerships (2,538) - - (2,538) --------------- --------------- ------------- ------------ Net Loss before extraordinary item (229,270) (266,041) (187,836) (683,147) Extraordinary gain on cancellation of indebtedness - 453,877 - 453,877 --------------- --------------- ------------- ------------ Net Income (Loss) $ (229,270) $ 187,836 $ (187,836) $ (229,270) =============== =============== ============= ============
(A) For the three months ended September 30, 1997. (B) For the three months ended June 30, 1997. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to Combined Financial Statements (continued) (Unaudited) 3. Supplemental Combining Schedules (continued) Statements of Operations For the Six Months Ended September 30, 1997
Boston Financial Qualified Housing Tax Credits Combined Combined L.P. IV (A) Entities (B) Eliminations (A) Revenue: Rental $ - $ 907,649 $ - $ 907,649 Investment 39,558 6,451 - 46,009 Other 67,539 21,752 - 89,291 --------------- --------------- ------------- ------------ Total Revenue 107,097 935,852 - 1,042,949 --------------- --------------- ------------- ------------ Expenses: Asset management fees, related party 114,960 - - 114,960 General and administrative 170,672 - - 170,672 Bad debt expense 150,539 - - 150,539 Rental operations, exclusive of depreciation - 513,403 - 513,403 Property management fee, related party - 65,027 - 65,027 Interest - 514,474 - 514,474 Depreciation - 373,381 - 373,381 Amortization 45,693 10,053 - 55,746 --------------- --------------- ------------- ------------ Total Expenses 481,864 1,476,338 - 1,958,202 --------------- --------------- ------------- ------------ Loss before equity in losses of Local Limited Partnerships, minority interest, loss on liquidation of interests in Local Limited Partnerships and extraordinary item (374,767) (540,486) - (915,253) Equity in losses of Local Limited Partnerships (576,915) - 48,031 (528,884) Minority interest in losses of Local Limited Partnerships - - 38,578 38,578 Loss on liquidation of interests in Local Limited Partnerships (2,538) - - (2,538) --------------- --------------- ------------- ------------ Net Loss before extraordinary item (954,220) (540,486) 86,609 (1,408,097) Extraordinary gain on cancellation of indebtedness - 453,877 - 453,877 --------------- --------------- ------------- ------------ Net Loss $ (954,220) $ (86,609) $ 86,609 $ (954,220) =============== =============== ============= ============
(A) For the six months ended September 30, 1997. (B) For the six months ended June 30, 1997. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to Combined Financial Statements (continued) (Unaudited) 3. Supplemental Combining Schedules (continued) Statements of Cash Flows
Boston Financial Qualified Housing Tax Credits Combined Combined L.P. IV (A) Entities (B) Eliminations (A) Net cash provided by (used for) operating activities $ (154,975) $ 43,440 $ - $ (111,535) ----------- ------------ ------------ ------------ Cash flows from investing activities: Purchases of marketable securities (198,988) - - (198,988) Proceeds from sales and maturities of marketable securities 332,353 - - 332,353 Cash distributions received from Local Limited Partnerships 164,576 - - 164,576 Advances to Local Limited Partnerships (107,741) - 58,680 (49,061) Purchase of rental property - (39,561) - (39,561) ----------- ------------ ------------ ------------ Net cash provided by (used for) investing activities 190,200 (39,561) 58,680 209,319 ----------- ------------ ------------ ------------ Cash flows from financing activities: Payment of mortgage principal - (68,780) - (68,780) Advances from affiliate - 75,801 (58,680) 17,121 ----------- ------------ ------------ ------------ Net cash provided by (used for) financing activities - 7,021 (58,680) (51,659) ----------- ------------ ------------ ------------ Net increase in cash and cash equivalents 35,225 10,900 - 46,125 Cash and cash equivalents, beginning 216,727 71,426 - 288,153 ----------- ------------ ------------ ------------ Cash and cash equivalents, ending $ 251,952 $ 82,326 $ - $ 334,278 =========== ============ ============ ============
(A) For the six months ended September 30, 1997. (B) For the six months ended June 30, 1997. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Partnership (including the Combined Entities) had an increase in cash and cash equivalents of $46,125 from $288,153 at March 31, 1997 to $334,278 at September 30, 1997. The increase is mainly attributable to proceeds from sales and maturities of marketable securities in excess of purchases of marketable securities and cash distributions received from Local Limited Partnerships. These increases were offset by cash used for operations, repayment of mortgage principal and purchase of rental property by the Combined Entities. The Managing General Partner initially designated 4% of the Gross Proceeds as Reserves. The Reserves were established to be used for working capital of the Partnership and contingencies related to the ownership of Local Limited Partnership interests. Funds totaling approximately $1,115,000 have been withdrawn from the reserve account to pay legal fees relating to various property issues. This amount includes approximately $1,060,000 for the Texas Partnerships. To date, Reserve funds in the amount of $304,000 have been used to make additional capital contributions to a Local Limited Partnership. To date, the Partnership has used approximately $974,000 of operating funds to replenish reserves. At September 30, 1997, approximately $1,153,000 of cash, cash equivalents and marketable securities has been designated as Reserves. Management believes that the investment income earned on the Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Partnership's ongoing operations. Reserves may be used to fund Partnership operating deficits, if the Managing General Partner deems funding appropriate. If Reserves are not adequate to cover the Partnership's operations, the Partnership will seek other financing sources including, but not limited to, the deferral of Asset Management Fees to an affiliate of the Managing General Partner or working with Local Limited Partnerships to increase cash distributions. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Partnership's management might deem it in its best interests to voluntarily provide such funds in order to protect its investment. To date, in addition to the $1,115,000 noted above, the Partnership has also advanced approximately $762,000 to the Texas Partnerships to fund operating deficits. Approximately $360,000 has also been advanced to two other Local Limited Partnerships. Since the Partnership invests as a limited partner, the Partnership has no contractual obligation to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, at September 30, 1997, the Partnership had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for. Cash Distributions No cash distributions were made during the six months ended September 30, 1997. Results of Operations The Partnership's results of operations for the three and six months ended September 30, 1997 resulted in net losses of $229,270 and $954,220 as compared to net losses of $991,171 and $2,159,355 for the same periods in 1996. The decrease in net loss is primarily attributable to a decrease in equity in losses of Local Limited Partnerships, the recognition of extraordinary gain on cancellation of indebtedness for two of the Texas Partnerships, and a decrease in bad debt expense. The decrease in equity in losses of Local Limited Partnerships is due to an increase in losses not recognized by the Partnership for Local Limited Partnerships whose cumulative equity in losses and cumulative distributions exceeded its total investment in those partnerships. The decrease in bad debt expense is the result of advances made to one Local Limited Partnership during the six months ended September 30, 1996 which were reserved for, exceeding the direct write-off of advances made to four of the Texas Partnerships that were transferred during the six months ended September 30, 1997. The decreases in Equity in Losses of Local Limited Partnerships and bad debt expense are expected to continue. The transfer of Pine Manor Apartments on October 28, 1997 and the expected transfer of Pinewood Terrace Apartments in the fourth quarter of 1997 will result in extraordinary gain on cancellation of indebtedness. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Property Discussions Prior to the transfer of ten of the Texas Partnerships, Limited Partnership interests had been acquired in thirty-seven Local Limited Partnerships which are located in thirteen states, Washington, D.C. and Puerto Rico. Fifteen of the properties with 1,440 apartments were newly constructed, and twenty-two of the properties with 2,061 apartments were rehabilitated. Most of the Local Limited Partnerships have stable operations, are operating at break-even or are generating operating cash flow. A few properties are experiencing operating difficulties and cash flow deficits due to a variety of reasons. The Local General Partners of those properties have funded operating deficits through project expense loans, subordinated loans or payments from operating escrows. In instances where the Local General Partners have stopped funding deficits because their obligation to do so has expired or otherwise, the Managing General Partner is working with the Local General Partners to increase operating income, reduce expenses or refinance the debt at lower interest rates in order to improve cash flow. Audobon Apartments, located in Massachusetts, is operating below break-even primarily due to decreased rental subsidy assistance, increased operating expenses and adverse market conditions. The SHARP mortgage subsidy has been an important part of the property's annual income. However, effective October 1, 1997, the Massachusetts Housing Finance Agency (MHFA) which provided the SHARP subsidies, withdrew future SHARP mortgage subsidies from its portfolio of 77 SHARP subsidized properties. The Managing General Partner joined a group of interested parties and is working with MHFA to find a solution to the problems that will arise as a result of withdrawn subsidies. Given the dependence on the mortgage subsidy, it is possible that the property will default on its mortgage obligation by the end of the year. It is possible that Partnership Reserves will be used to support the property until these issues can be resolved. The Local General Partner has also obtained preliminary approval for releases from lender escrows to fund certain cash deficits. In addition to the SHARP issues, the Managing General Partner continues to work with the lender to develop a satisfactory workout. It is likely that a workout would require an advance from Partnership Reserves. Despite improving occupancy at BK Apartments, located in Jamestown, North Dakota, the property continues to generate operating deficits. The lender recently issued a default notice and is threatening to foreclose. Affiliates of the Managing General Partner continue to negotiate with the Local General Partner and lender to cure the mortgage default, complete required capital repairs and develop a plan that will ultimately transfer ownership of the properties to the Local General Partner. The plan includes provisions to maximize the Partnership's ability to retain tax credits going forward while minimizing the risk of recapture in the future. If negotiations are not successful, it is likely that a foreclosure will occur prior to the end of the fourth quarter which will result in recapture and the allocation of taxable income to the Partnership. Bentley Court, located in Columbia, South Carolina, continues to generate significant deficits despite the July 1996 debt refinancing. As we previously reported, an agreement was reached with the lender which enabled an affiliate of the Managing General Partner to become an additional General Partner and a substitute management agent, subject to lender approval, with the right to take control of the property, if it becomes necessary. In addition, the agreement stipulates that if the Local Limited Partnership defaults on the agreement the lender has the right to remove the management company. The Managing General Partner will continue to monitor property operations closely. Operating deficits are currently being funded by the Local General Partner. In addition, the IRS is conducting an administrative proceeding with respect to the Local Limited Partnership. Although the findings are preliminary, it is possible that this report will result in a material adverse effect on the Partnership. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Property Discussions (continued) At Findlay Market (Cincinnati, Ohio), reconstruction of the property units damaged by fire was completed in December 1996, and lease-up continues. As previously reported, in order to reconstruct the units, the Partnership agreed to advance up to $345,000 to help cover the funding shortfall between the insurance proceeds, lender funding and a City grant. To date, the Partnership has advanced approximately $294,000 of this amount. However, the property continues to generate operating deficits which caused the default of the first mortgage. At this juncture, the lender is not amenable to a cure of the mortgage and is expected to exercise its rights to foreclose on the mortgage prior to the end of the year. Despite these indications, the Managing and Local General Partners continue to negotiate with the lender in hopes of averting the foreclosure. A foreclosure of this property will result in recapture of tax credits and the allocation of taxable income to the Partnership. The Managing General Partner has transferred all of the assets of ten of the Texas Partnerships, subject to their liabilities, to unaffiliated entities. The transfers of Grandview Terrace Apartments, Pecan Hills Apartments, Seagraves Garden Apartments, Hilltop Apartments and Bent Tree Housing were effective February 21, 1996, February 29, 1996, March 8, 1996, June 6, 1996 and November 20, 1996, respectively. Justin Place Apartments and Valley View Apartments were transferred on July 9, 1997, Nacona Terrace Apartments and Royal Creste Apartments were transferred August 6, 1997 and Pine Manor Apartments was transferred on October 28, 1997. Transfer of one of the remaining two Texas Partnerships is expected to take place in the fourth quarter of 1997. The Partnership will retain its interest in Gateway Village. For tax purposes, these events will result in both Section 1231 Gain and cancellation of indebtedness income. In addition, the transfer of ownership will result in a nominal amount of recapture of tax credits, since the Texas Partnerships represent only 3% of the Partnership's tax credits. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) PART II OTHER INFORMATION Items 1-5 Not applicable 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 ended September 30, 1997. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) SIGNATURE 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. DATED: November 14, 1997 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV By: Arch Street IV, Inc., its Managing General Partner /s/William E. Haynsworth William E. Haynsworth Managing Director, Vice President and Chief Operating Officer EX-27 2 QH4 FINANCIAL DATA SCHEDULE FOR FY 98 Q2
5 6-MOS MAR-31-1998 SEP-30-1997 334,278 929,259 20,565 000 000 000 14,401,767 000 35,058,355 000 000 000 000 000 20,314,833 35,058,833 000 1,042,949 000 000 1,443,728 000 514,474 000 000 000 000 453,877 000 (954,220) (13.88) 000 Included in total assets: Investments in Local Limited Partnerships of $18,915,763, Deferred charges, net $199,129, Tenant security deposits $96,390, Mortgagee escrow deposits $103,266 and other assets $57,938. Included in Total Liabilities and Equity: Mortgage notes payable of $10,341,914, Accounts payable to affiliates of $453,018, Accounts payable and accrued expenses of $357,099, Interest payable of $637,270, Tenant security deposits payable of $89,310, Payable to affiliated developer of $2,482,000 and Minority interest in Local Limited Partnerships of $382,911. Total revenue includes: Rental of $907,469, Investment of $46,009 and Other of $89,291. Included in Other Expenses: Asset management fees of $114,960, General and administrative of $170,672, Rental operations, exclusive of depreciation of $513,403, Bad debt of $150,539, Property management fees of $65,027, Depreciation of $373,381 and Amortization of $55,746. Net loss reflects: Equity in losses of Local Limited Partnerships of $528,884, Minority interest in losses of Local Limited Partnerships of $38,578, loss on liquidation of interests in Local Limited Partnerships of $2,538 and extraordinary gain on cancellation of indebtedness of $453,877.
-----END PRIVACY-ENHANCED MESSAGE-----