-----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, R4xLgCJ1960B5HLdCZg6pHYhHeG5BylZkq1J20+6ncvef2FbMrqlpKLEAvyWGIir x3NPkf9TPhpeYuKZpzPJsQ== 0000810663-00-000005.txt : 20000214 0000810663-00-000005.hdr.sgml : 20000214 ACCESSION NUMBER: 0000810663-00-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000211 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-19765 FILM NUMBER: 532792 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 10QSB 1 QH4 12/99 10QSB February 11, 2000 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-QSB for Quarter Ended December 31, 1999 File No. 0-19765 Gentlemen: Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, there is filed herewith is one copy of subject report. Very truly yours, /s/Stephen Guilmette Stephen Guilmette Assistant Controller QH4-Q3.DOC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1999 ------------------------------------------ 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 Identification No.) incorporation or organization) 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 Sheet - December 31, 1999 (Unaudited) 1 Combined Statements of Operations (Unaudited) - For the Three and Nine Months Ended December 31, 1999 and 1998 2 Combined Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Nine Months Ended December 31, 1999 4 Combined Statements of Cash Flows (Unaudited) - For the Nine Months Ended December 31, 1999 and 1998 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 SHEET December 31, 1999 (Unaudited)
Assets Cash and cash equivalents $ 274,479 Marketable securities, at fair value 825,856 Accounts receivable, net of allowance for bad debt of $5,800 100,061 Tenant security deposits 109,625 Investments in Local Limited Partnerships, net of reserve for valuation of $455,400 (Note 2) 15,038,687 Rental property at cost, net of accumulated depreciation 19,794,687 Mortgage escrow deposits 1,244,674 Deferred charges, net of accumulated amortization of $12,352 398,881 Other assets 26,798 Total Assets --------------- $ 37,813,748 =============== Liabilities and Partners' Equity Mortgage notes payable (Note 5) $ 15,153,800 Accounts payable to affiliates 2,108,437 Accounts payable and accrued expenses 179,774 Interest payable 46,053 Tenant security deposits payable 99,501 Other Liabilities 409,766 --------------- Total Liabilities 17,997,331 Minority interests in Local Limited Partnerships 913,887 --------------- General, Initial and Investor Limited Partners' Equity 18,906,714 Net unrealized losses on marketable securities (4,184) Total Partners' Equity 18,902,530 --------------- Total Liabilities and Partners' Equity $ 37,813,748 =============== 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 For the Three and Nine Months Ended December 31, 1999 and 1998 (Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, December 31, December 31, 1999 1998 1999 1998 ------------- --------------- ------------- ------------ Revenue: Rental $ 674,546 $ 447,639 $ 1,518,386 $ 1,315,369 Investment 16,987 26,770 53,784 78,774 Other (13,797) 20,775 135,460 119,960 ------------- --------------- ------------- -------------- Total Revenue 677,736 495,184 1,707,630 1,514,103 ------------- --------------- ------------- -------------- Expenses: Asset management fee, related party 46,669 49,626 136,273 148,878 General and administrative, (includes reimbursements to an affiliate in the amounts of $80,468 and $77,714 in 1999 and 1998, respectively) 94,420 87,090 306,019 194,979 Bad debt expense - 268,501 215,345 514,095 Rental operations, exclusive of depreciation 398,744 210,187 747,734 631,469 Property management fee, related party 33,554 24,169 76,847 77,285 Interest 252,210 225,556 591,819 697,097 Depreciation 220,090 146,774 495,397 450,886 Amortization 21,947 21,586 230,524 64,832 ------------- --------------- ------------- -------------- Total Expenses 1,067,634 1,033,489 2,799,958 2,779,521 ------------- --------------- ------------- -------------- Loss before equity in income of Local Limited Partnerships, minority interest, loss on liquidation of interests in Local Limited Partnerships gain on transfer of assets and gain on cancellation of indebtedness (389,898) (538,305) (1,092,328) (1,265,418) Equity in income of Local Limited Partnerships (Note 2) 229,008 119,413 302,428 99,000 Minority interest in (income) losses of Local Limited Partnerships (260,431) 15,388 (147,498) 114,281 Loss on liquidation of interests in Local Limited Partnerships (Note 3) - - (6,486) (3,750) ------------- --------------- ------------- -------------- Net loss before gain on transfer of assets and extraordinary item (421,321) (403,504) (943,884) (1,055,887) Gain on transfer of assets (Note 3) - - 218,408 589,338 Extrordinary gain on cancellation of Indebtedness 2,482,000 - 2,482,000 - ------------- --------------- ------------- -------------- Net Income (Loss) $ 2,060,679 $ (403,504) $ 1,756,524 $ (466,549) ============= =============== ============= ============== 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) For the Three and Nine Months Ended December 31, 1999 and 1998 (Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, December 31, December 31, 1999 1998 1999 1998 ------------- --------------- ------------- ------------- Net Income (Loss) allocated: To General Partners $ 20,606 $ (4,034) $ 17,565 $ (4,665) To Limited Partners 2,040,073 (399,470) 1,738,959 (461,884) ------------- --------------- ------------- -------------- $ 2,060,679 $ (403,504) $ 1,756,524 $ (466,549) ============= =============== ============= ============== Net Loss before gain on cancellation of indebtedness item per Limited Partnership Unit (68,043 Units) $ (6.13) $ (5.87) $ (13.73) $ (15.36) ============= =============== ============= ============== Gain on transfer of assets per Limited Partnership Unit (68,043 Units) $ - $ - $ 3.18 $ 8.57 ============= =============== ============== =============== Extraordinary gain per Limited Partnership Unit (68,043 Units) $ 36.11 $ - $ 36.11 $ - ============= =============== ============= ============== Net Income (Loss) per Limited Partnership Unit (68,043 Units) $ 29.98 $ (5.87) $ 25.56 $ (6.79) ============= =============== ============= ============== 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) For the Nine Months Ended December 31, 1999 (Unaudited)
Net Initial Investor Unrealized General Limited Limited Gains Partners Partners Partners (Losses) Total Balance at March 31, 1999 $ (419,584) $ 5,000 $ 17,564,774 $ 3,473 $ 17,153,663 ------------- ------------- ------------- ------------- ------------- Comprehensive Income: Net change in net unrealized gains on marketable securities available for sale - - - (7,657) (7,657) Net Income 17,565 - 1,738,959 - 1,756,524 ------------- ------------- ------------- ------------- ------------- Comprehensive Income 17,565 - 1,738,959 (7,657) 1,748,867 ------------- ------------- ------------- ------------- ------------- Balance at December 31, 1999 $ (402,019) $ 5,000 $ 19,303,733 $ (4,184) $ 18,902,530 ============= ============= ============= ============= ============= 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 For the Nine Months Ended December 31, 1999 and 1998 (Unaudited)
1999 1998 ------------- ------------- Net cash used for operating activities $ (589,074) $ (774,856) ------------- ------------- Net cash provided by investing activities 322,666 500,654 ------------- ------------- Net cash provided by financing activities 137,352 30,498 ------------- ------------- Net decrease in cash and cash equivalents (129,056) (243,704) Cash and cash equivalents, beginning 403,535 386,059 ------------- ------------- Cash and cash equivalents, ending $ 274,479 $ 142,355 ============= ============= Supplemental disclosure: Cash paid for interest $ 1,077,590 $ 645,759 ============= ============= 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-QSB 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 Form 10-K for the year ended March 31, 1999. 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 of the Local Limited Partnerships that is included in the accompanying combined financial statements is as of September 30, 1999 and 1998. 1. Significant Accounting Policies On July 21, 1999, an affiliate of the Partnership's Managing General Partner became the Local General Partner of Bentley Court II, Limited Partnership ("Bentley"), a Local Limited Partnership in which the Partnership has invested. Since the Local General Partner of Bentley is an affiliate of the Partnership, these combined financial statements include all activity of Bentley effective as of on July 21, 1999. All significant intercompany balances and transactions have been eliminated. 2. Investments in Local Limited Partnerships The Partnership uses the equity method to account for its limited partnership interests in twenty-three 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 December 31, 1999: Capital contributions paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 36,676,500 Cumulative equity in losses of Local Limited Partnerships (excludes cumulative unrecognized losses of $9,955,068) (20,662,766) Cash distributions received from Local Limited Partnerships (2,349,113) Investments in Local Limited Partnerships before adjustment 13,664,621
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 2. Investments in Local Limited Partnerships (continued)
Excess of investment cost over the underlying net assets acquired: Acquisition fees and expenses 2,398,439 Accumulated amortization of acquisition fees and expenses (568,973) Investments in Local Limited Partnerships 15,494,087 Reserve for valuation of investments in Local Limited Partnerships (455,400) $ 15,038,687
The Partnership's share of the net losses of the Local Limited Partnerships, excluding the Combined Entities, for the nine months ended December 31, 1999 is $1,173,570. For the nine months ended December 31, 1999, the Partnership has not recognized $1,452,847 of equity in losses relating to twelve Local Limited Partnerships where cumulative equity in losses and cumulative distributions exceeded its total investments in these Local Limited Partnerships. 3. Liquidation of Interests in Local Limited Partnerships The Managing General Partner has transferred all of the assets of the Texas Partnerships, subject to their liabilities, to unaffiliated entities. The last Texas Partnership, Gateway Village, was transferred on May 27, 1999. For financial reporting purposes, a loss on liquidation of interest in Local Limited Partnership of $6,486 and a gain on transfer of assets of $218,408 were recognized in the nine months ended December 31, 1999 as a result of the transfer of Gateway Village. 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. 4. Rental Property Rental property includes real estate and personal property of Leawood Manor. In addition, the Partnership's combined balance sheet as of December 31, 1999 includes the assets of Bentley Court. Real estate and personal property belonging to Bentley are recorded at cost, the components of which are as follows at September 30, 1999: Buildings and Improvements $ 13,093,931 Land 362,623 ------------- 13,456,554 Less: accumulated depreciation 4,628,362 ------------- Total $ 8,828,192 ============= BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 5. Mortgage Payable As previously reported, mortgage notes payable includes the mortgage obligation of Leawood Manor. In addition, the Partnership's combined balance sheet as of December 31, 1999 includes the liabilities of Bentley Court. The 8.5% mortgage payable in the original amount of $6,971,600 is payable to Whitehall Funding, Inc. in monthly installments of $52,129 (including interest) through August 2031. The apartment project is pledged as collateral for the note. Under agreements with the mortgage lender and HUD, the partnership is required to make monthly escrow deposits for property taxes and insurance, mortgage insurance and replacement of project assets, and is subject to restrictions as to operating policies, rental charges, operating expenditures and distributions to partners. The liability of the partnership under the mortgage is limited to the underlying value of the real estate collateral plus other amounts deposited with the lender. The aggregate mortgage payable principle, as of December 31 1999, is due to the mortgagee as follows: Payment Due Dates Amount 1999 (remaining three months) $ 10,775 2000 45,456 2001 49,674 2002 53,847 2003 58,606 2004 and thereafter 6,637,521 ------------- $ 6,855,879 6. Litigation As previously reported, Bentley Court, located in Columbia, South Carolina, continues to generate deficits. Further, 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 retained counsel to appeal the findings in the IRS report in order to minimize the loss of credits. In June of 1998, the Managing General Partner was informed that an individual associated with the non-affiliated Local General Partner for this property was indicted on various criminal charges related to this IRS audit. This individual pled guilty to two of these counts and is now awaiting sentencing. In the opinion of Management, there is a substantial risk that Limited Partners will suffer significant tax credit recapture and/or credit disallowance as a result of the problems at this property. However, it is not possible to quantify the risk until the IRS completes its audits. Additionally, the Local General Partner was removed as general partner from the Local Limited Partnership and replaced with an affiliate of the Managing General Partner. In addition, the Managing General Partner terminated the property management company from management of the property and replaced it with a new property management group. The Managing General Partner will continue to monitor property operations closely. As a result of the continuing tax issues at this property, Management fully reserved the Partnership's investment in Bentley Court. 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) 7. 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 $ 127,713 $ 105,454 $ 41,312 $ 274,479 Marketable securities, at fair value 825,856 - - 825,856 Accounts receivable, net - 100,061 - 100,061 Tenant security deposits - 109,625 - 109,625 Investments in Local Limited Partnerships, net 17,997,164 - (2,958,477) 15,038,687 Rental property at cost, net - 19,628,277 166,410 19,794,687 Mortgagee escrow deposits - 1,244,674 - 1,244,674 Deferred charges, net - 398,881 - 398,881 Other assets 11,654 15,144 - 26,798 ------------- ------------- ------------- ------------- Total Assets $ 18,962,387 $ 21,602,116 $ (2,750,755) $ 37,813,748 ============= ============= ============= ============= Liabilities and Partners' Equity Mortgage notes payable $ - $ 15,153,800 $ - $ 15,153,800 Accounts payable to affiliates 199,495 2,045,037 (136,095) 2,108,437 Accounts payable and accrued expenses 56,514 123,260 - 179,774 Interest payable - 46,053 - 46,053 Tenant security deposits payable - 99,501 - 99,501 Other Liabilities - 409,766 - 409,766 ------------- ------------- ------------- ------------- Total Liabilities 256,009 17,877,417 (136,095) 17,997,331 ------------- ------------- ------------- ------------- Minority interest in Local Limited Partnerships - - 913,887 913,887 ------------- ------------- ------------- ------------- General, Initial and Investor Limited Partners' Equity 18,710,562 3,724,699 (3,528,547) 18,906,714 Net unrealized losses on marketable securities (4,184) - - (4,184) ------------- ------------- ------------- ------------- Total Partners' Equity 18,706,378 3,724,699 (3,528,547) 18,902,530 ------------- ------------- ------------- ------------- Total Liabilities and Partners' Equity $ 18,962,387 $ 21,602,116 $ (2,750,755) $ 37,813,748 ============= ============= ============= =============
(A) As of December 31, 1999. (B) As of September 30, 1999. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 7. Supplemental Combining Schedules (continued)
Statements of Operations Boston Financial Qualified Housing Combined Tax Credits Entities L.P. IV (A) (B) Eliminations Combined Revenue: Rental $ - $ 1,518,386 $ - $ 1,518,386 Investment 39,996 13,788 - 53,784 Other 88,595 46,865 - 135,460 ------------ ------------- ------------- ------------- Total Revenue 128,591 1,579,039 - 1,707,630 ------------ ------------- ------------- ------------- Expenses: Asset management fees, related party 136,273 - - 136,273 General and administrative 294,059 - 11,960 306,019 Bad debt expense 423,457 - (208,112) 215,345 Rental operations, exclusive of depreciation - 747,734 - 747,734 Property management fee, related party - 76,847 - 76,847 Interest - 591,819 - 591,819 Depreciation - 495,397 - 495,397 Amortization 49,202 181,322 - 230,524 ------------ ------------- ------------- ------------- Total Expenses 902,991 2,093,119 (196,152) 2,799,958 ------------ ------------- ------------- ------------- Loss before equity in income of Local Limited Partnerships, minority interest, loss on liquidation of interest in Local Limited Partnership, gain on transfer of assets and extraordinary item (774,400) (514,080) 196,152 (1,092,328) Equity in income of Local Limited Partnerships 2,341,258 - (2,038,830) 302,428 Minority interest in income of Local Limited Partnerships - - (147,498) (147,498) Loss on liquidation of interest in Local Limited Partnership (6,486) - - (6,486) ------------ ------------- ------------- ------------- Net (income) loss before gain on transfer of assets and extraordinary item 1,560,372 (514,080) (1,990,176) (943,884) Gain on transfer of assets - 218,408 - 218,408 Extraordinary gain on cancellation of indebtedness - 2,482,000 - 2,482,000 ------------ ------------- ------------- ------------- Net Income $ 1,560,372 $ 2,186,328 $ (1,990,176) $ 1,756,524 ============ ============= ============= =============
(A) For the nine months ended December 31, 1999. (B) For the nine months ended September 30, 1999. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 7. Supplemental Combining Schedules (continued)
Statements of Cash Flows Boston Financial Qualified Housing Combined Tax Credits Entities L.P. IV (A) (B) Eliminations Combined Net cash used for operating activities $ (322,643) $ (266,431) $ - $ (589,074) ------------- ------------- ------------- ------------- Net cash provided by (used for) investing activities 207,284 (62,025) 177,407 322,666 ------------- ------------- ------------- ------------- Net cash provided by financing activities - 273,447 (136,095) 137,352 ------------- ------------- ------------- ------------- Net decrease in cash and cash equivalents (115,359) (55,009) 41,312 (129,056) Cash and cash equivalents, beginning 243,072 160,463 - 403,535 ------------- ------------- ------------- ------------- Cash and cash equivalents, ending $ 127,713 $ 105,454 $ 41,312 $ 274,479 ============= ============= ============= =============
(A) For the nine months ended December 31, 1999. (B) For the nine months ended September 30, 1999. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and is including this statement for purposes of complying with these safe harbor provisions. Although the Partnership believes the forward-looking statements are based on reasonable assumptions, the Partnership can give no assurance that their expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, general economic and real estate conditions and interest rates. Liquidity and Capital Resources The Partnership (including the Combined Entities) had a decrease in cash and cash equivalents of $86,590, from $361,069 at March 31, 1999 to $274,479 at December 31, 1999. The decrease is primarily attributable to cash used for operations, refinancing costs associated with one of the combined entities and purchases of marketable securities in excess of proceeds. The decrease is partially offset by proceeds from a refinanced mortgage for one the combined entities, and cash distributions from Local Limited Partnerships. The Managing General Partner initially designated 4% of the Gross Proceeds as Reserves, as defined in the Partnership Agreement. 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 $1,332,000 have been withdrawn from the Reserve account to pay legal fees relating to various property issues. 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 $868,000 of operating funds to replenish Reserves. At December 31, 1999, approximately $884,000 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 may 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 interest to voluntarily provide such funds in order to protect its investment. The Partnership has advanced approximately $1,069,000 to Local Limited Partnerships to fund operating deficits. 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 December 31, 1999, 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 nine months ended December 31, 1999. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Partnership's results of operations for the nine months ended December 31, 1999 resulted in net income of $1,756,524, as compared to net losses of $466,549 in 1998. The decrease in net loss is primarily attributed to a $2,482,000 gain on cancellation of indebtedness, a decrease in bad debt, a decrease in interest expense, and an increase in equity in income of Local Limited Partnerships. The gain on cancellation of indebtedness resulted from the extingushment of certain developer fees payable to the former local general partner of Leawood Manor. The increase in income from Local Limited Partnerships is due to an increase in losses not recognized by the Partnerships for Local Limited Partnerships whose cumulative equity in losses and cumulative distributions exceeded its total investment in those partnerships. This increase in income is expected to continue. The decrease in net loss is partially offset by increases in general and administrative expenses and rental operations. Property Discussions 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. In particular, Audobon Apartments is experiencing significant operating deficits, which may affect the ability of the Fund to retain its interest in Audobon through 2000. A foreclosure would result in recapture of credits, the allocation of taxable income to the Partnership and loss of future benefits associated with this property. As previously reported, 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 predictions 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. Due to concerns regarding the long-term viability of Brown Kaplan, the Managing General Partner negotiated a plan with the Local General Partner that will ultimately transfer ownership of the property to the Local General Partner. The plan includes provisions to minimize the risk of recapture. Effective November 30, 1999, the Managing General Partner consummated the transfer of 49.5% of the Partnership's capital and profits in the properties to the Local General Partner. The Managing General Partner has the right to transfer the Partnership's remaining interest in the properties to the Local General Partner any time after one year has elapsed. In addition, effective November 30, 1999 a new investor was admitted to the lower tier partnership. This new investor will receive the remaining tax credits and a percentage of the losses for the property going forward. 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) The Local General Partner of Buena Vista, located in Buena Vista, Georgia and Greentree Village, located in Greenville, Georgia, expressed to the Managing General Partner some concerns over the long-term financial health of the properties. In response to these concerns and to reduce possible future risk, the Managing General Partner is in negotiations with the Local General Partner to develop a plan that will ultimately transfer ownership of the properties to the Local General Partner. The plan includes provisions to minimize the risk of recapture. As previously reported, Bentley Court, located in Columbia, South Carolina, continues to generate deficits. Further, 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 retained counsel to appeal the findings in the IRS report in order to minimize the loss of credits. In June of 1998, the Managing General Partner was informed that an individual associated with the non-affiliated Local General Partner for this property was indicted on various criminal charges related to this IRS audit. This individual pled guilty to two of these counts and is now awaiting sentencing. In the opinion of Management, there is a substantial risk that Limited Partners will suffer significant tax credit recapture and/or credit disallowance as a result of the problems at this property. However, it is not possible to quantify the risk until the IRS completes its audits. Additionally, the Local General Partner was removed as general partner from the Local Limited Partnership and replaced with an affiliate of the Managing General Partner. In addition, the Managing General Partner terminated the property management company from management of the property and replaced it with a new property management group. The Managing General Partner will continue to monitor property operations closely. 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, is 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 the Partnership's interest in capital and profits of BK Apartments Limited Partnership to the Local General Partner. Subsequently, effective June 17, 1999, the Local General Partner transferred its general partner interest and transferred 48.5% of its interest in capital and profits of BK Apartments Limited Partnership to a new, nonprofit general partner. Additionally, the Managing General Partner has the right to put the Partnership's remaining interest to the new Local General Partner any time after one year from the June 17, 1999 effective date has elapsed. The Partnership will retain its full share of tax credits until such time as the remaining interest is put to the new Local General Partner. In addition, the new Local General Partner has the right to call the remaining interest after the tax credit period has expired. As previously reported, 46 & Vincennes, located in Chicago, Illinois, has been operating below break-even due to occupancy problems. On April 1, 1998, the property management agent was replaced with a new management agent. For the last two quarters, occupancy has increased slightly and as of December 31, 1999 was 99%. Effective January 13, 2000, the Managing General Partner and Local General Partner was successful in gaining HUD's approval for a refinancing, thereby reducing the interest rate and increasing the loan maturity to a new 40 year term. The Managing General Partner continues to work closely with the Local General Partner and will continue to monitor the new management agent, property operations and marketing efforts. As previously reported, negotiations among the Managing General Partner, lender and prospective buyer for the last remaining Texas partnership, Gateway Village, continued and resulted in the transfer of Gateway Village in May, 1999. For tax purposes, the transfer event of Gateway Village resulted in both Section 1231 Gain and cancellation of indebtedness income, in addition to credit recapture of approximately $2.40 per unit for the 1999 tax year. 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 December 31, 1999. 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: February 11, 2000 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 FY 00 THIRD QTR
5 9-MOS MAR-31-2000 DEC-31-1999 274,479 825,856 100,061 000 000 000 19,794,687 000 37,813,748 000 000 000 000 000 18,902,530 37,813,748 000 1,707,630 000 000 2,208,139 000 591,819 000 000 000 000 000 000 1,756,524 25.56 000 Included in Total Assets: Investments in Local Limited Partnerships of $15,038,687, Deferred charges, net of $398,881, Tenant security deposits of $109,625, Mortgagee escrow deposits of $1,244,674 and other assets of $26,798. Included in Total Liabilities and Equity: Mortgage notes payable of $15,153,800, Accounts payable to affiliates of $2,108,437, Accounts payable and accrued expenses of $179,774, Interest payable of $46,053, Tenant security deposits payable of $99,501, Other Liabilities of $409,766 and Minority interest in Local Limited Partnerships of $913,887. Total revenue includes: Rental of $1,518,386, Investment of $53,784 and Other of $135,460. Included in Other Expenses: Asset management fees of $136,273, General and administrative of $306,019, Rental operations, exclusive of depreciation of $747,734, Bad debt of $215,345, Property management fees of $76,847, Depreciation of $495,397 and Amortization of $230,524. Net Income reflects: Equity in income of Local Limited Partnerships of $302,428, Minority interest in losses of Local Limited Partnerships of $147,498, Loss on liquidation of interest in Local Limited Partnership of $6,486, Gain on transfer of assets of $218,408 and Gain on transfer cancellation of indebtedness of $2,482,000.
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