-----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, BfdQ4/qgXt81kdMjNfYi5WAoc4w/hNAgidD3iEP0oUdZeW5DRv61Aa5603jUM5xq X6v7Px4uddGptmP0O7qiKg== 0000810663-98-000070.txt : 19981110 0000810663-98-000070.hdr.sgml : 19981110 ACCESSION NUMBER: 0000810663-98-000070 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981109 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: 98740335 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 9/98 10-Q November 9, 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 September 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/Stephen Guilmette Stephen Guilmette Assistant Controller QH4-Q2.DOC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 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 ------------------ -------------------- 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, 1998 (Unaudited) and March 31, 1998 1 Combined Statements of Operations (Unaudited) - For the Three and Six Months Ended September 30, 1998 and 1997 2 Combined Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Six Months Ended September 30, 1998 4 Combined Statements of Cash Flows (Unaudited) - For the Six Months Ended September 30, 1998 and 1997 5 Notes to Combined Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II - OTHER INFORMATION Items 1-6 16 SIGNATURE 17 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) COMBINED BALANCE SHEETS - September 30, 1998 and March 31, 1998
September 30, March 31, 1998 1998 (Unaudited) Assets Cash and cash equivalents $ 261,468 $ 386,059 Marketable securities, at fair value 1,288,202 985,849 Accounts receivable, net of allowance for bad debt of $305,048 and $314,316, respectively 43,542 12,759 Tenant security deposits 82,580 85,340 Investments in Local Limited Partnerships, net of reserve for valuation of $2,724,482 (Note 1) 15,099,243 15,286,237 Rental property at cost, net of accumulated depreciation 13,140,037 14,519,371 Mortgagee escrow deposits 176,963 114,300 Deferred charges, net of accumulated amortization of $186,821 and $176,768, respectively 179,023 189,076 Other assets 55,569 29,133 ------------- ------------- Total Assets $ 30,326,627 $ 31,608,124 ============= ============= Liabilities and Partners' Equity Mortgage notes payable $ 8,589,308 $ 9,720,859 Accounts payable to affiliates 672,058 602,600 Accounts payable and accrued expenses 296,990 340,574 Interest payable 599,700 627,412 Tenant security deposits payable 82,488 84,131 Payable to affiliated Developer 2,482,000 2,482,000 ------------- ------------- Total Liabilities 12,722,544 13,857,576 ------------- ------------- Minority interest in Local Limited Partnerships 333,576 432,469 ------------- ------------- General, Initial and Investor Limited Partners' Equity 17,253,857 17,316,902 Net unrealized gains on marketable securities 16,650 1,177 ------------- ------------- Total Partners' Equity 17,270,507 17,318,079 ------------- ------------- Total Liabilities and Partners' Equity $ 30,326,627 $ 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 and Six Months Ended September 30, 1998 and 1997
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ------------- ------------- ------------- -------------- Revenue: Rental $ 431,967 $ 454,767 $ 867,730 $ 907,649 Investment 26,636 21,300 52,004 46,009 Other 17,299 14,803 99,185 89,291 ------------- --------------- ------------- -------------- Total Revenue 475,902 490,870 1,018,919 1,042,949 ------------- --------------- ------------- -------------- Expenses: Asset management fee, related party 49,626 57,480 99,252 114,960 General and administrative (includes reimbursements to an affiliate in the amounts of $50,508 and $79,932 in 1998 and 1997, respectively) 43,145 80,097 107,889 170,672 Bad debt expense 244,895 132,983 245,594 150,539 Rental operations, exclusive of depreciation 201,950 256,447 421,282 513,403 Property management fee, related party 24,770 32,475 53,116 65,027 Interest 226,398 256,635 471,541 514,474 Depreciation 146,774 186,691 304,112 373,381 Amortization 21,626 27,877 43,246 55,746 ------------- --------------- ------------- -------------- Total Expenses 959,184 1,030,685 1,746,032 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 (483,282) (539,815) (727,113) (915,253) Equity in losses of Local Limited Partnerships (Note 1) (14,470) (159,532) (20,413) (528,884) Minority interest in losses of Local Limited Partnerships 83,081 18,738 98,893 38,578 Loss on liquidation of interests in Local Limited Partnerships (Note 3) (3,750) (2,538) (3,750) (2,538) ------------- --------------- ------------- -------------- Net loss before extraordinary item (418,421) (683,147) (652,383) (1,408,097) Extraordinary gain on cancellation of indebtedness (Note 3) 589,338 453,877 589,338 453,877 ------------- --------------- ------------- -------------- Net Income (Loss) $ 170,917 $ (229,270) $ (63,045) $ (954,220) ============= =============== ============= ============== 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 (continued) (Unaudited) For the Three and Six Months Ended September 30, 1998 and 1997
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ------------- ------------- ------------- -------------- Net Income (Loss) allocated: To General Partners $ 1,709 $ (2,293) $ (631) $ (9,542) To Limited Partners 169,208 (226,977) (62,414) (944,678) ------------- --------------- ------------- -------------- $ 170,917 $ (229,270) $ (63,045) $ (954,220) ============= =============== ============= ============== Net Loss before extraordinary item per Limited Partnership Unit (68,043 Units) $ (6.09) $ (9.94) $ (9.49) $ (20.48) ============= =============== ============ ============== Extraordinary item per Limited Partnership Unit (68,043 Units) $ 8.57 $ 6.60 $ 8.57 $ 6.60 ============= ============= ============= ============== Net Income (Loss) per Limited Partnership Unit (68,043 Units) $ 2.48 $ (3.34) $ (0.92) $ (13.88) ============= ============= ============ ============= 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, 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 ------------- ------------- ------------- ------------- ------------- Comprehensive Loss: Net Loss (631) - (62,414) - (63,045) Change in net unrealized gains on marketable securities available for sale - - - 15,473 15,473 ------------- ------------- ------------- ------------- ------------- Comprehensive Loss (631) - (62,414) 15,473 (47,572) ------------- ------------- ------------- ------------- ------------- Balance at September 30, 1998 $ (418,548) $ 5,000 $ 17,667,405 $ 16,650 $ 17,270,507 ============= ============= ============= ============= ============= 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, 1998 and 1997
1998 1997 ------------- ------------- Net cash provided by (used for) operating activities $ 13,146 $ (111,535) ------------- ------------- Cash flows from investing activities: Purchases of marketable securities (575,056) (198,988) Proceeds from sales and maturities of marketable securities 287,956 332,353 Cash distributions received from Local Limited Partnerships 209,795 164,576 Advances to Local Limited Partnerships (509) (49,061) Additions to rental property (17,730) (39,561) ------------- ------------- Net cash provided by (used for) investing activities (95,544) 209,319 ------------- ------------- Cash flows from financing activities: Advances from affiliates 4,484 17,121 Payment of mortgage principal (46,677) (68,780) ------------- -------------- Net cash used for financing activities (42,193) (51,659) ------------- ------------- Net increase (decrease) in cash and cash equivalents (124,591) 46,125 Cash and cash equivalents, beginning 386,059 288,153 ------------- ------------- Cash and cash equivalents, ending $ 261,468 $ 334,278 ============= ============= Supplemental disclosure: Cash paid for interest $ 332,896 $ 357,828 ============= ============= 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. Certain amounts in prior year financial statements have been reclassified herein to conform to current year presentation. 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 of the Local Limited Partnerships that is included in the accompanying combined financial statements is as of June 30, 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 September 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 (excludes cumulative unrecognized losses of $3,526,215) (25,530,045) Cash distributions received from Local Limited Partnerships (2,018,254) Investments in Local Limited Partnerships before adjustment 15,453,652 Excess of investment cost over the underlying net assets acquired: Acquisition fees and expenses 3,025,727 Accumulated amortization of acquisition fees and expenses (655,654) Investments in Local Limited Partnerships 17,823,725 Reserve for valuation of investments in Local Limited Partnerships (2,724,482) --------------- $ 15,099,243 ---------------
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 six months ended September 30, 1998 is $1,037,305. For the six months ended September 30, 1998, the Partnership has not recognized $1,080,821 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 In June, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The Statement, which is effective for fiscal years beginning after December 15, 1997, requires that the Partnership display an amount representing total comprehensive income for the period in its financial statements. The Partnership adopted the new standard effective April 1, 1998. 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. Grandview Terrace Apartments, Pecan Hills Apartments, Seagraves Garden Apartments, Hilltop Apartments, Bent Tree Housing, Justin Place Apartments, Valley View Apartments, Nacona Terrace Apartments, Royal Creste Apartments and Pine Manor Apartments were transferred prior to March 31, 1998 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 financial reporting purposes, loss on liquidation of interest in Local Limited Partnerships of $3,750 and extraordinary gain on cancellation of indebtedness of $589,338 were recognized in the six months ended September 30, 1998 as a result of the transfer of Pinewood Terrace Apartments. For tax purposes, these events result in both Section 1231 Gain and cancellation of indebtedness income. In addition, the transfer of ownership results 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. 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 having an affiliate admitted to Bentley Court as the managing general partner thereof. As previously reported, Audobon Apartments and Brown Kaplan, both of which are located in Massachusetts are operating below break-even. Both properties receive subsidies through the State Housing Assistance Rental Program (SHARP), which are an important part of their annual income. As originally conceived, the SHARP subsidy was scheduled to decline over time to match increases in net operating income. However, increases in net operating income failed to keep pace with the decline in the SHARP subsidy. Many of the SHARP properties (including Audobon Apartments and Brown Kaplan) sought restructuring workouts with the lender, Massachusetts BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 4. Litigation (continued) Housing Finance Agency (MHFA), that included additional subsidies in the form of Operating Deficit Loans (ODL's). In July, 1997, MHFA refused to close the restructuring for Brown Kaplan. Effective October 1, 1997, MHFA, which provided the SHARP subsidies, withdrew funding of the ODL's from its portfolio of 77 subsidized properties. Properties unable to make full debt service payments were declared in default by the Agency. The Managing General Partner has joined a group of SHARP property owners called the responsible SHARP Owners, Inc. (RSO) and is negotiating with MHFA and the Local General Partners of Audobon and Brown Kaplan to find a solution to the problems that will result from the withdrawn subsidies. Given the existing operating deficits and the dependence on these subsidies, Audobon Apartments and Brown Kaplan may default on their mortgage obligation in the near future. On September 16, 1998, the Partnership joined with the RSO and about 20 other SHARP property owners and filed suit against the MHFA (Mass. Sup. Court Civil Action #98-4720). Among other things, the suit seeks to enforce the MHFA's previous financial commitments to the SHARP properties. The lawsuit is complex and in its early stages, so no predications can be made at this time as to the ultimate outcome. In the meantime, the Managing General Partner intends to continue to participate in the RSO's efforts to negotiate a resolution of this matter with MHFA. 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. IV (A) (B) Eliminations (A) Assets Cash and cash equivalents $ 104,810 $ 156,658 $ - $ 261,468 Marketable securities, at fair value 1,288,202 - - 1,288,202 Accounts receivable, net 123,557 23,474 (103,489) 43,542 Tenant security deposits - 82,580 - 82,580 Investments in Local Limited Partnerships, net 16,471,448 - (1,372,205) 15,099,243 Rental property at cost, net - 12,483,447 656,590 13,140,037 Mortgagee escrow deposits - 176,963 - 176,963 Deferred charges, net - 179,023 - 179,023 Other assets 20,757 34,812 - 55,569 ------------- ------------- ------------- ------------- Total Assets $ 18,008,774 $ 13,136,957 $ (819,104) $ 30,326,627 ============= ============= ============= ============= Liabilities and Partners' Equity Mortgage notes payable $ - $ 8,589,308 $ - $ 8,589,308 Accounts payable to affiliates 644,818 130,729 (103,489) 672,058 Accounts payable and accrued expenses 93,449 203,541 - 296,990 Interest payable - 599,700 - 599,700 Tenant security deposits payable - 82,488 - 82,488 Payable to affiliated Developer - 2,482,000 - 2,482,000 ------------- ------------- ------------- ------------- Total Liabilities 738,267 12,087,766 (103,489) 12,722,544 ------------- ------------- ------------- ------------- Minority interest in Local Limited Partnerships - - 333,576 333,576 ------------- ------------- ------------- ------------- General, Initial and Investor Limited Partners' Equity 17,253,857 1,049,191 (1,049,191) 17,253,857 Net unrealized gains on marketable securities 16,650 - - 16,650 ------------- ------------- ------------- ------------- Total Partners' Equity 17,270,507 1,049,191 (1,049,191) 17,270,507 ------------- ------------- ------------- ------------- Total Liabilities and Partners' Equity $ 18,008,774 $ 13,136,957 $ (819,104) $ 30,326,627 ============= ============= ============= =============
(A) As of September 30, 1998. (B) As of June 30, 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 For the Three Months Ended September 30, 1998 Boston Financial Qualified Housing Combined Tax Credits Entities Combined L.P. IV (A) (B) Eliminations (A) Revenue: Rental $ - $ 431,967 $ - $ 431,967 Investment 19,242 7,394 - 26,636 Other 3,497 13,802 - 17,299 ------------ ------------- ------------- ------------- Total Revenue 22,739 453,163 - 475,902 ------------ ------------- ------------- ------------- Expenses: Asset management fees, related party 49,626 - - 49,625 General and administrative 43,145 - - 43,145 Bad debt expense 244,895 - - 244,896 Rental operations, exclusive of depreciation - 201,950 - 201,950 Property management fee, related party - 24,770 - 24,770 Interest - 226,398 - 226,398 Depreciation - 146,774 - 146,774 Amortization 16,600 5,026 - 21,626 ------------ ------------- ------------- ------------- Total Expenses 354,266 604,918 - 959,184 ------------ ------------- ------------- ------------- Loss before equity in income (losses) of Local Limited Partnerships, minority interest, loss on liquidation of interest in Local Limited Partnership and extraordinary item (331,527) (151,755) - (483,282) Equity in income (losses) of Local Limited Partnerships 506,194 - (520,664) (14,470) Minority interest in income (losses) of Local Limited Partnerships - - 83,081 83,081 Loss on liquidation of interest in Local Limited Partnership (3,750) - - (3,750) ------------ ------------- ------------- ------------- Net income (loss) before extraordinary item 170,917 (151,755) (437,583) (418,421) Extraordinary gain on cancellation of indebtedness - 589,338 - 589,338 ------------ ------------- ------------- ------------- Net Income $ 170,917 $ 437,583 $ (437,583) $ 170,917 ============ ============= ============= =============
(A) For the three months ended September 30, 1998. (B) For the three months ended June 30, 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 For the Six Months Ended September 30, 1998 Boston Financial Qualified Housing Combined Tax Credits Entities Combined L.P. IV (A) (B) Eliminations (A) Revenue: Rental $ - $ 867,730 $ - $ 867,730 Investment 36,136 15,868 - 52,004 Other 74,399 24,786 - 99,185 ------------ ------------- ------------- ------------- Total Revenue 110,535 908,384 - 1,018,919 ------------ ------------- ------------- ------------- Expenses: Asset management fees, related party 99,252 - - 99,252 General and administrative 107,889 - - 107,889 Bad debt expense 245,594 - - 245,594 Rental operations, exclusive of depreciation - 421,282 - 421,282 Property management fee, related party - 53,116 - 53,116 Interest - 471,541 - 471,541 Depreciation - 304,112 - 304,112 Amortization 33,193 10,053 - 43,246 ------------ ------------- ------------- ------------- Total Expenses 485,928 1,260,104 - 1,746,032 ------------ ------------- ------------- ------------- Loss before equity in income of Local Limited Partnerships, minority interest, loss of liquidation of interest in Local Limited Partnership and extraordinary item (375,393) (351,720) - (727,113) Equity in income of Local Limited Partnerships 316,098 - (336,511) (20,413) Minority interest in income of Local Limited Partnerships - - 98,893 98,893 Loss on liquidation of interest in Local Limited Partnership (3,750) - - (3,750) ------------ ------------- ------------- ------------- Net loss before extraordinary item (63,045) (351,720) (237,618) (652,383) Extraordinary gain on cancellation of indebtedness - 589,338 - 589,338 ------------ ------------- ------------- ------------- Net Income (Loss) $ (63,045) $ 237,618 $ (237,618) $ (63,045) ============ ============= ============= =============
(A) For the six months ended September 30, 1998. (B) For the six months ended June 30, 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. IV (A) (B) Eliminations (A) Net cash provided by (used for) operating activities $ (80,217) $ 93,363 $ - $ 13,146 ------------- -------------- ------------- ------------- Cash flows from investing activities: Purchases of marketable securities (575,056) - - (575,056) Proceeds from sales and maturities of marketable securities 287,956 - - 287,956 Cash distributions received from Local Limited Partnerships 209,795 - - 209,795 Advances to Local Limited Partnerships (10,476) - 9,967 (509) Additions to rental property - (17,730) - (17,730) ------------- ------------- ------------- ------------- Net cash used for investing activities (87,781) (17,730) 9,967 (95,544) ------------- ------------- ------------- ------------- Cash flows from financing activities: Advances from affiliate - 14,451 (9,967) 4,484 Payment of mortgage principal - (46,677) - (46,677) ------------- ------------- ------------- ------------- Net cash used for financing activities - (32,226) (9,967) (42,193) ------------- ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents (167,998) 43,407 - (124,591) Cash and cash equivalents, beginning 272,808 113,251 - 386,059 ------------- ------------- ------------- ------------- Cash and cash equivalents, ending $ 104,810 $ 156,658 $ - $ 261,468 ============= ============= ============= =============
(A) For the six months ended September 30, 1998. (B) For the six months ended June 30, 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 a decrease in cash and cash equivalents of $124,591 from $386,059 at March 31, 1998 to $261,468 at September 30, 1998. The decrease is mainly attributable to purchases of marketable securities in excess of proceeds from sales and maturities of marketable securities, repayment of mortgage principal and additions to rental property by the Combined Entities. The decrease is offset by cash provided by operations and cash distributions received from Local Limited Partnerships. 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 $1,163,000 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 $1,233,000 of operating funds to replenish Reserves. At September 30, 1998, approximately $1,367,000 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 $1,163,000 noted above, the Partnership has also advanced approximately $732,000 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 September 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 six months ended September 30, 1998. Results of Operations The Partnership's results of operations for the six months ended September 30, 1998 resulted in a net loss of $63,045 as compared to a net loss of $954,220 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 one of the combined Entities in the fourth quarter of calendar 1997 and another of the Combined Entities in the third quarter of calendar 1998. 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 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. As previously reported, Audobon Apartments and Brown Kaplan, both of which are located in Massachusetts, are operating below break-even. Both properties receive subsidies through the State Housing Assistance Rental Program (SHARP), which are an important part of their annual income. As originally conceived, the SHARP subsidy was scheduled to decline over time to match increases in net operating income. However, increases in net operating income failed to keep pace with the decline in the SHARP subsidy. Many of the SHARP properties (including Audobon Apartments and Brown Kaplan) sought restructuring workouts with the lender, Massachusetts Housing Finance Agency, (MHFA) that included additional subsidies in the form of Operating Deficit Loans (ODL's). In July, 1997, MHFA refused to close the restructuring for Brown Kaplan. Effective October 1, 1997, MHFA, which provided the SHARP subsidies, withdrew funding of the ODL's from its portfolio of 77 subsidized properties. Properties unable to make full debt service payments were declared in default by MHFA. The Managing General Partner has joined a group of SHARP property owners called the responsible SHARP Owners, Inc. (RSO) and is negotiating with MHFA and the Local General Partners of Audobon and Brown Kaplan to find a solution to the problems that will result from the withdrawn subsidies. Given the existing operating deficits and the dependence on these subsidies, Audobon Apartments and Brown Kaplan may default on their mortgage obligation in the near future. On September 16, 1998, the Partnership joined with the RSO and about 20 other SHARP property owners and filed suit against the MHFA (Mass. Sup. Court Civil Action #98-4720). Among other things, the suit seeks to enforce the MHFA's previous financial commitments to the SHARP properties. The lawsuit is complex and in its early stages, so no predications can be made at this time as to the ultimate outcome. In the meantime, the Managing General Partner intends to continue to participate in the RSO's efforts to negotiate a resolution of this matter with MHFA. 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 having an affiliate admitted as the Managing General Partner of Bentley Court. 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. In the opinion of management, there is a risk that Bentley Court will suffer some tax credit recapture or credit disallowance. 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) However, management 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. The Managing General Partner has 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), in order to reconstruct the units damaged by 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 continued to generate operating deficits which caused the default of the first mortgage. The Managing and Local General Partners were in negotiation with the lender in hopes of averting a foreclosure. However, the lender was not amenable to a cure of the mortgage and exercised its right to foreclose on the mortgage effective in August 1998. A foreclosure on this property will result in an estimated recapture of tax credits of $8.00 per unit, plus interest, and the allocation of taxable income to the Partnership. As previously reported, negotiations among the Managing General Partner, 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 in 1998, the transfer event of Pinewood Terrace will result in both Section 1231 Gain and cancellation of indebtedness income, in addition to estimated tax credit recapture of $2.80 per Unit. For tax purposes in 1999, the transfer event of Gateway Village will result in both Section 1231 Gain and cancellation of indebtedness income and an estimated tax credit recapture of $2.40 per Unit. 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 is working closely with the Local General Partner to develop a plan that will address these occupancy concerns. The Managing General Partner will continue to monitor the new management agent, property operations and marketing efforts. Impact of Year 2000 The Managing General Partner has assessed the Partnership's exposure to date sensitive computer software programs that may not be operative subsequent to 1999 and has executed a requisite course of action to minimize Year 2000 risk and ensure that neither significant costs nor disruption of normal business operations are encountered. However, due to the inherent uncertainty that all systems of outside vendors or other companies on which the Partnership and/or Local Limited Partnerships rely will be compliant, the Partnership remains susceptible to consequences of the Year 2000 issue. 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, 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: November 9, 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 SCH FOR FISCAL 1999 2ND QUARTER
5 6-MOS MAR-31-1999 SEP-30-1998 261,468 1,288,202 43,542 000 000 000 13,140,037 000 30,326,627 000 000 000 000 000 17,270,507 30,326,627 000 1,018,919 000 000 1,274,491 000 471,541 000 000 000 000 000 000 (63,045) (0.92) 000 Included in total assets: Investments in Local Limited Partnerships of $15,099,243, Deferred charges, net of $179,023, Tenant security deposits of $82,580, Mortgagee escrow deposits of $176,963 and other assets of $55,569. Included in Total Liabilities and Equity: Mortgage notes payable of $8,589,308, Accounts payable to affiliates of $672,058, Accounts payable and accrued expenses of $296,990, Interest payable of $599,700, Tenant security deposits payable of $82,488, Payable to affiliated developer of $2,482,000 and Minority interest in Local Limited Partnerships of $333,576. Total revenue includes: Rental of $867,730, Investment of $52,004 and Other of $99,185. Included in Other Expenses: Asset management fees of $99,252, General and administrative of $107,889, Rental operations, exclusive of depreciation of $421,282, Bad debt of $245,594, Property management fees of $53,116, Depreciation of $304,112 and Amortization of $43,246. Net loss reflects: Equity in losses of Local Limited Partnerships of $20,413, Minority interest in losses of Local Limited Partnerships of $98,893, Loss on liquidation of interest in Local Limited Partnership of $3,750 and Gain on transfer and liquidation of real estate of $589,338.
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