-----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, HNrxkvUINpDYYUByFhzMIosyr6BsPntEA4s4GXyaSrtaZrFVwgtynvDwRaTRtD6O 4YEhazTCfs+FGxCa2fVdxQ== 0000810663-98-000050.txt : 19980814 0000810663-98-000050.hdr.sgml : 19980814 ACCESSION NUMBER: 0000810663-98-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98686143 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 1Q99 August 13, 1998 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 June 30, 1998 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/Dianne Groark Dianne Groark Assistant Controller QH4-10Q1.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 June 30, 1998 -------------------------------------- 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 June 30, 1998 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 - June 30, 1998 (Unaudited) and March 31, 1998 1 Combined Statements of Operations (Unaudited) - For the Three Months Ended June 30, 1998 and 1997 2 Combined Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Three Months Ended June 30, 1998 3 Combined Statements of Cash Flows (Unaudited) - For the Three Months Ended June 30, 1998 and 1997 4 Notes to Combined Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Items 1-6 13 SIGNATURE 14 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED BALANCE SHEETS - June 30, 1998 and March 31, 1998
June 30, March 31, 1998 1998 (Unaudited) Assets Cash and cash equivalents $ 394,803 $ 386,059 Marketable securities, at fair value 1,088,068 985,849 Accounts receivable, net of allowance for bad debt of $315,015 and $314,316, respectively 38,997 12,759 Tenant security deposits 93,557 85,340 Investments in Local Limited Partnerships, net of reserve for valuation of $2,724,482 (Note 1) 15,815,653 15,959,055 Rental property at cost, net of accumulated depreciation 13,692,531 13,846,553 Mortgagee escrow deposits 155,381 114,300 Deferred charges, net of accumulated amortization of $181,795 and $176,768, respectively 184,049 189,076 Other assets 19,313 29,133 ------------- ------------- Total Assets $ 31,482,352 $ 31,608,124 ============= ============= Liabilities and Partners' Equity Mortgage notes payable $ 9,696,482 $ 9,720,859 Accounts payable to affiliates 648,890 602,600 Accounts payable and accrued expenses 379,100 340,574 Interest payable 691,673 627,412 Tenant security deposits payable 81,351 84,131 Payable to affiliated Developer 2,482,000 2,482,000 ------------- ------------- Total Liabilities 13,979,496 13,857,576 ------------- ------------- Minority interest in Local Limited Partnerships 416,657 432,469 ------------- ------------- General, Initial and Investor Limited Partners' Equity 17,082,940 17,316,902 Net unrealized gains on marketable securities 3,259 1,177 ------------- ------------- Total Partners' Equity 17,086,199 17,318,079 ------------- ------------- Total Liabilities and Partners' Equity $ 31,482,352 $ 31,608,124 ============= =============
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 Months Ended June 30, 1998 and 1997
1998 1997 ------------- ---------- Revenue: Rental $ 435,763 $ 452,882 Investment 25,368 24,709 Other 81,886 74,488 ------------- ------------- Total Revenue 543,017 552,079 ------------- ------------- Expenses: Asset management fee, related party 49,626 57,480 General and administrative (includes reimbursement to affiliate in the amounts of $25,218 and $48,279, respectively) 64,744 90,575 Bad debt expense 699 17,556 Rental operations, exclusive of depreciation 219,332 256,956 Property management fee, related party 28,346 32,552 Interest 245,143 257,839 Depreciation 157,338 186,690 Amortization 21,620 27,869 ------------- ------------- Total Expenses 786,848 927,517 ------------- ------------- Loss before equity in losses of Local Limited Partnerships and minority interest in losses of Local Limited Partnerships (243,831) (375,438) Equity in losses of Local Limited Partnerships (Note 1) (5,943) (369,352) Minority interest in losses of Local Limited Partnerships 15,812 19,840 ------------- ------------- Net Loss $ (233,962) $ (724,950) ============= ============= Net Loss allocated: To General Partners $ (2,340) $ (7,250) To Limited Partners (231,622) (717,700) ------------- ------------- $ (233,962) $ (724,950) ============= ============= Net Loss per Limited Partnership Unit (68,043 Units) $ (3.40) $ (10.55) ============= ============
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 Three Months Ended June 30, 1998
Initial Investor Net General Limited Limited Unrealized Partners Partners Partners Gains Total Balance at March 31, 1998 $ (417,917) $ 5,000 $ 17,729,819 $ 1,177 $ 17,318,079 Net change in net unrealized gains on marketable securities available for sale - - - 2,082 2,082 Net Loss (2,340) - (231,622) - (233,962) ------------- ------------- ------------- ------------- ------------- Balance at June 30, 1998 $ (420,257) $ 5,000 $ 17,498,197 $ 3,259 $ 17,086,199 ============= ============== ============= ============= =============
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 Three Months Ended June 30, 1998 and 1997
1998 1997 ------------- --------- Net cash used for operating activities $ (24,925) $ (2,305) ------------- ------------- Cash flows from investing activities: Purchases of marketable securities (274,831) (49,094) Proceeds from sales and maturities of marketable securities 174,177 87,240 Cash distributions received from Local Limited Partnerships 182,783 64,034 Advances to Local Limited Partnerships (32,613) (60,980) Purchase of rental property (3,316) (29,537) ------------- ------------- Net cash provided by investing activities 46,200 11,663 ------------- ------------- Cash flows from financing activities: Advances from affiliates 11,846 - Payment of mortgage principal (24,377) (40,811) ------------- ------------- Net cash used for financing activities (12,531) (40,811) ------------- ------------- Net increase (decrease) in cash and cash equivalents 8,744 (31,453) Cash and cash equivalents, beginning 386,059 288,153 ------------- ------------- Cash and cash equivalents, ending $ 394,803 $ 256,700 ============= ============= Supplemental disclosure: Cash paid for interest $ 180,882 $ 171,208 ============= =============
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, 1998. 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. The Managing General Partner has elected to report results of the Local Limited Partnerships on a 90 day lag basis, because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information about the Local Limited Partnerships that is included in the accompanying combined financial statements is as of March 31, 1998 and 1997. 1. Investments in Local Limited Partnerships The Partnership uses the equity method to account for its limited partnership interests in twenty-six 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 June 30, 1998:
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 $3,034,536) (25,517,582) Cash distributions received from Local Limited Partnerships (1,991,242) ------------ Investments in Local Limited Partnerships before adjustment 15,493,127 Excess of investment cost over the underlying net assets acquired: Acquisition fees and expenses 3,899,388 Accumulated amortization of acquisition fees and expenses (852,380) ------------ Investments in Local Limited Partnerships 18,540,135 Reserve for valuation of investments in Local Limited Partnerships (2,724,482) ------------ $ 15,815,653
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 1. Investments in Local Limited Partnerships (continued) The Partnership's share of the net losses of the Local Limited Partnerships, excluding the Combined Entities, for the three months ended June 30, 1998 is $533,168. For the three months ended June 30, 1998, the Partnership has not recognized $589,142 of equity in losses relating to thirteen Local Limited Partnerships where cumulative equity in losses and cumulative distributions exceeded its total investments in these Local Limited Partnerships. 2. Effect of Recently Issued Accounting Standard The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. The Partnership has adopted the new standard effective April 1, 1998. The adoption of this standard had no effect on the Partnership's net income or partner's equity. Comprehensive loss was $231,880 and $722,511 for the quarters ended June 30, 1998 and 1997, respectively. Comprehensive loss includes the change in net unrealized gains and losses on marketable securities available for sale of $2,082 and $2,439 for the quarters ended June 30, 1998 and 1997, respectively. 3. Liquidation of Interests in Local Limited Partnerships The Managing General Partner has transferred all of the assets of eleven 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, Pine Manor Apartments was transferred on October 28, 1997 and Pinewood Terrace Apartments was transferred on July 9, 1998. The transfer of the remaining Texas Partnership, Gateway Village, is expected to take place in January 1999. For tax purposes, these events 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. 4. Litigation Bentley Court is involved in an audit by the IRS in which the IRS is questioning the treatment of certain items and included findings for non-compliance in 1993. On behalf of the Partnership, the Managing General Partner hired attorneys to respond to the IRS. The Managing General Partner was recently advised that the local general partner for this property has been indicted on various criminal charges. The Managing General Partner has not yet obtained a copy of this indictment. In the opinion of management, there is a risk that Bentley Court will suffer some tax credit recapture or credit disallowance. However, management cannot quantify the risk at this time. The Managing General Partner is in the process of removing the Local General Partner of Bentley Court and replacing him with an affiliate of the Managing General Partner. The Partnership is not a party to any other pending legal or administrative proceeding, and to the best of its knowledge, no legal or administrative proceeding is threatened or contemplated against it. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 5. Supplemental Combining Schedules
Balance Sheets Boston Financial Qualified Housing Combined Tax Credits Entities Combined L.P. II (A) (B) Eliminations (A) Assets Cash and cash equivalents $ 272,150 $ 122,653 $ - $ 394,803 Marketable securities, at fair value 1,088,068 - - 1,088,068 Accounts receivable, net 390,589 18,930 (370,522) 38,997 Tenant security deposits - 93,557 - 93,557 Investments in Local Limited Partnerships, net 16,010,604 - (194,951) 15,815,653 Rental property at cost, net - 13,692,531 - 13,692,531 Mortgagee escrow deposits - 155,381 - 155,381 Deferred charges, net - 184,049 - 184,049 Other assets 18,936 377 - 19,313 ------------- ------------- ------------- ------------- Total Assets $ 17,780,347 $ 14,267,478 $ (565,473) $ 31,482,352 ============= ============= ============= ============= Liabilities and Partners' Equity Mortgage notes payable $ - $ 9,696,482 $ - $ 9,696,482 Accounts payable to affiliates 594,885 424,527 (370,522) 648,890 Accounts payable and accrued expenses 99,263 279,837 - 379,100 Interest payable - 691,673 - 691,673 Tenant security deposits payable - 81,351 - 81,351 Payable to affiliated Developer - 2,482,000 - 2,482,000 ------------- ------------- ------------- ------------- Total Liabilities 694,148 13,655,870 (370,522) 13,979,496 ------------- ------------- ------------- ------------- Minority interest in Local Limited Partnerships - - 416,657 416,657 ------------- ------------- ------------- ------------- General, Initial and Investor Limited Partners' Equity 17,082,940 611,608 (611,608) 17,082,940 Net unrealized gains on marketable securities 3,259 - - 3,259 ------------- ------------- ------------- ------------- Total Partners' Equity 17,086,199 611,608 (611,608) 17,086,199 ------------- ------------- ------------- ------------- Total Liabilities and Partners' Equity $ 17,780,347 $ 14,267,478 $ (565,473) $ 31,482,352 ============= ============= ============= =============
(A) As of June 30, 1998. (B) As of March 31, 1998. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 5. Supplemental Combining Schedules (continued) Statements of Operations
Boston Financial Qualified Housing Combined Tax Credits Entities Combined L.P. II (A) (B) Eliminations (A) Revenue: Rental $ - $ 435,763 $ - $ 435,763 Investment 16,894 8,474 - 25,368 Other 70,902 10,984 - 81,886 ------------ ------------- ------------- ------------- Total Revenue 87,796 455,221 - 543,017 ------------ ------------- ------------- ------------- Expenses: Asset management fees, related party 49,626 - - 49,626 General and administrative 64,744 - - 64,744 Bad debt expense 699 - - 699 Rental operations, exclusive of depreciation - 219,332 - 219,332 Property management fee, related party - 28,346 - 28,346 Interest - 245,143 - 245,143 Depreciation - 157,338 - 157,338 Amortization 16,593 5,027 - 21,620 ------------ ------------- ------------- ------------- Total Expenses 131,662 655,186 - 786,848 ------------ ------------- ------------- ------------- Loss before equity in losses of Local Limited Partnerships and minority interest in losses of Local Limited Partnerships (43,866) (199,965) - (243,831) Equity in losses of Local Limited Partnerships (190,096) - 184,153 (5,943) Minority interest in losses of Local Limited Partnerships - - 15,812 15,812 ------------ ------------- ------------- ------------- Net Loss $ (233,962) $ (199,965) $ 199,965 $ (233,962) ============ ============= ============= =============
(A) For the three months ended June 30, 1998. (B) For the three months ended March 31, 1998. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 5. Supplemental Combining Schedules (continued) Statements of Cash Flows
Boston Financial Qualified Housing Combined Tax Credits Entities Combined L.P. II (A) (B) Eliminations (A) Net cash provided by (used for) operating activities $ (50,174) $ 25,249 $ - $ (24,925) ------------- ------------- ------------- ------------- Cash flows from investing activities: Purchases of marketable securities (274,831) - - (274,831) Proceeds from sales and maturities of marketable securities 174,177 - - 174,177 Cash distributions received from Local Limited Partnerships 182,783 - - 182,783 Advances to Local Limited Partnerships (32,613) - - (32,613) Purchase of rental property - (3,316) - (3,316) ------------- ------------- ------------- ------------- Net cash provided by (used for) investing activities 49,516 (3,316) - 46,200 ------------- ------------- ------------- ------------- Cash flows from financing activities: Advances from affiliates - 11,846 - 11,846 Payment of mortgage principal - (24,377) - (24,377) ------------- ------------- ------------- ------------- Net cash used for financing activities - (12,531) - (12,531) ------------- ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents (658) 9,402 - 8,744 Cash and cash equivalents, beginning 272,808 113,251 - 386,059 ------------- ------------- ------------- ------------- Cash and cash equivalents, ending $ 272,150 $ 122,653 $ - $ 394,803 ============= ============= ============= =============
(A) For the three months ended June 30, 1998. (B) For the three months ended March 31, 1998. 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 $8,744 from $386,059 at March 31, 1998 to $394,803 at June 30, 1998. The increase is mainly attributable to cash distributions received from Local Limited Partnerships. The increase is offset by cash used for operations, purchases of marketable securities in excess of proceeds from sales and maturities of marketable securities, repayment of mortgage principal and purchases 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 $1,162,000 have been withdrawn from the Reserve account to pay legal fees relating to various property issues. This amount includes approximately $1,097,000 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 $1,209,000 of operating funds to replenish Reserves. At March 31, 1998, approximately $1,321,000 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 $1,162,000 noted above, the Partnership has also advanced approximately $754,000 to the Texas Partnerships to fund operating deficits. Approximately $389,000 has also been advanced to four 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 June 30, 1998, 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 three months ended June 30, 1998. Results of Operations The Partnership's results of operations for the three months ended June 30, 1998 resulted in a net loss of $233,962 as compared to a net loss of $724,950 for the same period in 1997. The decrease in net loss is primarily attributable to a decrease in equity in losses of Local Limited Partnerships and decreases in rental operations, interest, depreciation and general and administrative expenses. 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 equity in losses of Local Limited Partnerships is expected to continue. The decrease in rental operations, interest and depreciation expenses is attributable to the transfer of three of the Combined Entities in the third and fourth quarters of calendar 1997. The decrease in general and administrative expenses in due to a decrease in salary reimbursement expense due to the timing of payments. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions Prior to the transfer of eleven 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, operating at break-even or 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 in the near future. 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. For financial reporting purposes, the carrying value of this investment is zero. Another property affected by the withdrawal of the SHARP subsidies is Brown Kaplan, located in Boston, Massachusetts. Brown Kaplan is experiencing operating difficulties and cash flow deficits. The Local General Partner and Managing General Partner are working together to develop a Partnership strategy to deal with the property's deficits and MHFA's new SHARP policies. In addition, the Managing General Partner and Local General Partner are working with MHFA to find a solution to the problems that have and will arise as a result of withdrawn subsidies. Bentley Court, located in Columbia, South Carolina, continues to generate significant deficits despite the July 1996 debt refinancing. As previously reported, an agreement was set up with the lender which enabled an affiliate of the Managing General Partner to become an additional General Partner and 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 is now in the process of removing the Local General Partner of Bentley Court and replacing him with an affiliate of the Managing General Partner. In addition, the IRS finalized its report from an audit of the 1993 tax return for the project. The IRS report includes the questioning of the treatment of certain items and findings for non-compliance in 1993. Management understands that the audit now also focuses on 1994 and 1995 tax credits. On behalf of the Partnership, the Managing General Partner hired attorneys to appeal the findings in the IRS report in order to minimize the loss of credits. Recently, the Managing General Partner was informed that the Local General Partner for this property has been indicted on various criminal charges. The Managing General Partner has not yet obtained a copy of this indictment. In the opinion of management, there is a risk that Bentley Court will suffer some tax credit recapture or credit disallowance. However, management BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) cannot quantify the risk at this time. The Managing General Partner will continue to monitor property operations and the Local General Partner closely. Operating deficits are currently being funded by the Local General Partner. As a result of the continuing tax issues at this property, management has decided to fully reserve the Partnership's investment in Bentley Court. As previously reported, BK Apartments, located in Jamestown, North Dakota, has been generating operating deficits despite improved occupancy. The lender issued a default notice and threatened to foreclose. A workout agreement was negotiated and completed on November 10, 1997. The Managing General Partner is closely monitoring the workout plan with the Local General Partner. Furthermore, in November 1997, the Managing General Partner consummated a transfer of 50% of its interest in capital and profits of BK Apartments Limited Partnership to the Local General Partner. Included in this transfer is a put option. The put option grants the Managing General Partner the right to put the Partnership's remaining interest to the Local General Partner any time after one year has elapsed. The Partnership will retain its full share of tax credits until such time as the remaining interest is put to the Local General Partner. In addition, the Local General Partner has the right to call the remaining interest after the tax credit period has expired. As previously reported, at Findlay Market (Cincinnati, Ohio), reconstruction of the property units damaged by fire was competed in December 1996, and lease up continues. In order to reconstruct the units damaged by the fire, 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 $299,000 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 right to foreclose on the mortgage. Despite these indications, the Managing and Local General Partners continue to negotiate with the lender in hopes of averting a foreclosure. A foreclosure on this property will result in recapture of tax credits, plus interest and the allocation of taxable income to the Partnership. For financial reporting purposes, the carrying value of this investment has been written down to zero. As previously reported, negotiations between the Managing General Partner, the Lender and prospective buyer for the remaining two Texas Partnerships, Pinewood Terrace and Gateway Village, have continued and have resulted in the transfer of Pinewood Terrace Apartments on July 9, 1998. The transfer of Gateway Village Apartments is expected to take place in the first quarter of 1999. For tax purposes, the transfer events of Pinewood Terrace and Gateway Village will result in both Section 1231Gain and cancellation of indebtedness income. In addition, the transfer of ownership will result in a nominal amount of recapture of tax credits, since these two Texas Partnerships represent only 3% of the Partnership's tax credits. At 46 & Vincennes, located in Chicago, Illinois, operations are running below break-even due to occupancy problems. On April 1, 1998 the management agent was replaced with a new management agent. Occupancy as of June 30, 1998 was 82%. The Managing General Partner will continue to monitor the new management agent, property operations and marketing efforts. In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which is effective for fiscal years beginning after December 15, 1995, the Partnership has implemented policies and practices for assessing impairment of its real estate assets and investments in Local Limited Partnerships. Each asset is analyzed by real estate experts to determine if an impairment indicator exists. If so, the carrying value is compared to the future cash flows expected to be derived from the asset. If the total undiscounted cash flows are less than the carrying value, a provision to write down the asset to fair value will be charged against income. 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 June 30, 1998. 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: August 13, 1998 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV By: Arch Street IV, Inc., its Managing General Partner /s/Randolph G. Hawthorne Randolph G. Hawthorne Managing Director, Vice President and Chief Operating Officer EX-27 2 QH4 FINANCIAL DATA SCHEDULE FOR 1Q99
5 3-MOS MAR-31-1999 JUN-30-1998 394,803 1,088,068 38,997 000 000 000 13,692,531 000 31,482,352 000 000 000 000 000 17,086,199 31,482,352 000 543,017 000 000 541,705 000 245,143 000 000 000 000 000 000 (233,962) (3.40) 000 Included in total assets: Investments in Local Limited Partnerships of $15,815,653, Deferred charges, net of $184,049, Tenant security deposits of $93,557, Mortgagee escrow deposits of $155,381 and other assets of $19,313. Included in Total Liabilities and Equity: Mortgage notes payable of $9,696,482, Accounts payable to affiliates of $648,890, Accounts payable and accrued expenses of $379,100, Interest payable of $691,673, Tenant security deposits payable of $81,351, Payable to affiliated developer of $2,482,000 and Minority interest in Local Limited Partnerships of $416,657. Total revenue includes: Rental of $435,763, Investment of $25,368 and Other of $81,886. Included in Other Expenses: Asset management fees of $49,626, General and administrative of $64,744, Rental operations, exclusive of depreciation of $219,332, Bad debt of $699, Property management fees of $28,346, Depreciation of $157,338 and Amortization of $21,620. Net loss reflects: Equity in losses of Local Limited Partnerships of $5,943 and Minority interest in losses of Local Limited Partnerships of $15,812.
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