-----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, Sk8UONYalou1HyAuDOEOO7mNs8BkI5zOFUskQCqkOFXR5XjwxyerCiH4PxXvbZgv RfXzU1ip02wbh8LvFTpa3A== 0000810663-99-000057.txt : 19991115 0000810663-99-000057.hdr.sgml : 19991115 ACCESSION NUMBER: 0000810663-99-000057 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99747669 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 9/99 10QSB November 12, 1999 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 September 30, 1999 File Number 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-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 September 30, 1999 ------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to For Quarter Ended September 30, 1999 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 Sheet - September 30, 1999 (Unaudited) 1 Combined Statements of Operations (Unaudited) - For the Three and Six Months Ended September 30, 1999 and 1998 2 Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Six Months Ended September 30, 1999 4 Combined Statements of Cash Flows (Unaudited) - For the Six Months Ended September 30, 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 11 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 September 30, 1999 (Unaudited)
Assets Cash and cash equivalents $ 427,352 Marketable securities, at fair value 732,263 Accounts receivable, net of allowance for bad debts of $5,800 97,516 Tenant security deposits 81,963 Investments in Local Limited Partnerships, net of reserve for valuation of $2,094,646 (Note 1) 14,972,568 Rental property at cost, net of accumulated depreciation 11,512,190 Mortgagee escrow deposits 226,945 Deferred charges, net of accumulated amortization of $6,702 205,052 Other assets 31,779 Total Assets $ 28,287,628 ============= Liabilities and Partners' Equity Mortgage notes payable $ 8,320,488 Accounts payable to affiliates 155,180 Accounts payable and accrued expenses 97,222 Interest payable 46,179 Tenant security deposits payable 70,255 Payable to affiliated Developer 2,482,000 ------------- Total Liabilities 11,171,324 Minority interest in Local Limited Partnership 272,684 ------------- General, Initial and Investor Limited Partners' Equity 16,846,035 Net unrealized losses on marketable securities (2,415) ------------- Total Partners' Equity 16,843,620 Total Liabilities and Partners' Equity $ 28,287,628 ============= 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, 1999 and 1998
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ------------- ------------- ------------- -------------- Revenue: Rental $ 422,698 $ 431,967 $ 843,840 $ 867,730 Investment 18,856 26,636 36,797 52,004 Other 63,475 17,299 149,257 99,185 ------------- --------------- ------------- -------------- Total Revenue 505,029 475,902 1,029,894 1,018,919 ------------- --------------- ------------- -------------- Expenses: Asset management fee, related party 42,935 49,626 89,604 99,252 General and administrative (includes reimbursements to an affiliate in the amounts of $51,774 and $50,508 in 1999 and 1998, respectively) 144,009 43,145 211,599 107,889 Bad debt expense (5,694) 244,895 215,345 245,594 Rental operations, exclusive of depreciation 180,969 201,950 348,990 421,282 Property management fee, related party 22,016 24,770 43,293 53,116 Interest 138,660 226,398 339,609 471,541 Depreciation 137,653 146,774 275,307 304,112 Amortization 21,480 21,626 208,577 43,246 ------------- --------------- ------------- -------------- Total Expenses 682,028 959,184 1,732,324 1,746,032 ------------- --------------- ------------- -------------- Loss before equity in (losses) income of Local Limited Partnerships, minority interest, loss on liquidation of interests in Local Limited Partnerships and gain on transfer of assets (176,999) (483,282) (702,430) (727,113) Equity in (losses) income of Local Limited Partnerships (Note 1) (125,146) (14,470) 73,420 (20,413) Minority interest in losses of Local Limited Partnerships 4,446 83,081 112,933 98,893 Loss on liquidation of interests in Local Limited Partnerships (Note 2) - (3,750) (6,486) (3,750) ------------- --------------- ------------- -------------- Net loss before gain on transfer of assets (297,699) (418,421) (522,563) (652,383) Gain on transfer of assets (Note 2) - 589,338 218,408 589,338 ------------- --------------- ------------- -------------- Net Income (Loss) $ (297,699) $ 170,917 $ (304,155) $ (63,045) ============= =============== ============= ============== 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, 1999 and 1998
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ------------- ------------- ------------- -------------- Net Income (Loss) allocated: To General Partners $ (2,976) $ 1,709 $ (3,041) $ (631) To Limited Partners (294,723) 169,208 (301,114) (62,414) ------------- --------------- ------------- -------------- $ (297,699) $ 170,917 $ (304,155) $ (63,045) ============= =============== ============= ============== Net Loss before gain on transfer of of assets item per Limited Partnership Unit (68,043 Units) $ (4.33) $ (6.09) $ (7.60) $ (9.49) ============ ============ ============ ============= Gain on transfer of assets per Limited Partnership Unit (68,043 Units) $ - $ 8.57 $ 3.18 $ 8.57 ============= ============= ============= ============== Net Income (Loss) per Limited Partnership Unit (68,043 Units) $ (4.33) $ 2.48 $ (4.42) $ (0.92) ============ ============= ============ ============= 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, 1999
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 Loss: Net change in net unrealized gains on marketable securities available for sale - - - (5,888) (5,888) Net Loss (3,041) - (301,114) - (304,155) ------------- ------------- ------------- ------------- ------------- Comprehensive Loss (3,041) - (301,114) (5,888) (310,043) ------------- ------------- ------------- ------------- ------------- Balance at September 30, 1999 $ (422,625) $ 5,000 $ 17,263,660 $ (2,415) $ 16,843,620 ============= ============= ============= ============= ============= 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, 1999 and 1998
1999 1998 ------------- ------------- Net cash provided by (used for) operating activities $ (506,982) $ 13,146 Net cash provided by (used for) investing activities 339,900 (95,544) Net cash provided by (used for) financing activities 233,365 (42,193) ------------- ------------- Net increase (decrease) in cash and cash equivalents 66,283 (124,591) Cash and cash equivalents, beginning 361,069 386,059 ------------- ------------- Cash and cash equivalents, ending $ 427,352 $ 261,468 ============= ============= Supplemental disclosure: Cash paid for interest $ 825,254 $ 332,896 ============= ============= 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 June 30, 1999 and 1998. 1. Investments in Local Limited Partnerships The Partnership uses the equity method to account for its limited partnership interests in twenty-four Local Limited Partnerships (excluding the Combined Entity) 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 Entity, at September 30, 1999: Capital contributions paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 41,676,500 Cumulative equity in losses of Local Limited Partnerships (excludes cumulative unrecognized losses of $9,924,247) (24,579,156) Cash distributions received from Local Limited Partnerships (2,337,972) Investments in Local Limited Partnerships before adjustment 14,759,372 Excess of investment cost over the underlying net assets acquired: Acquisition fees and expenses 2,999,362 Accumulated amortization of acquisition fees and expenses (691,520) Investments in Local Limited Partnerships 17,067,214 Reserve for valuation of investments in Local Limited Partnerships (2,094,646) $ 14,972,568
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 Entity, for the six months ended September 30, 1999 totaled $920,383. For the six months ended September 30, 1999, the Partnership has not recognized $1,112,248 of equity in losses relating to fourteen Local Limited Partnerships where cumulative equity in losses and cumulative distributions exceeded its total investments in these Local Limited Partnerships. 2. 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, loss on liquidation of interest in Local Limited Partnership of $6,486 and gain on transfer of assets of $218,408 were recognized in the six months ended September 30, 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. 3. 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) 4. Supplemental Combining Schedules Balance Sheets
Boston Financial Qualified Housing Combined Tax Credits Entity Combined L.P. IV (A) (B) Eliminations (A) Assets Cash and cash equivalents $ 364,290 $ 92,636 $ (29,574) $ 427,352 Marketable securities, at fair value 732,263 - - 732,263 Accounts receivable, net 83,316 14,200 - 97,516 Tenant security deposits - 81,963 - 81,963 Investments in Local Limited Partnerships, net 15,852,096 - (879,528) 14,972,568 Rental property at cost, net - 10,886,795 625,395 11,512,190 Mortgagee escrow deposits - 226,945 - 226,945 Deferred charges, net - 205,052 - 205,052 Other assets 8,429 23,350 - 31,779 ------------- ------------- ------------- ------------- Total Assets $ 17,040,394 $ 11,530,941 $ (283,707) $ 28,287,628 ============= ============= ============= ============= Liabilities and Partners' Equity Mortgage notes payable $ - $ 8,320,488 $ - $ 8,320,488 Accounts payable to affiliates 147,788 7,392 - 155,180 Accounts payable and accrued expenses 37,026 60,196 - 97,222 Interest payable - 46,179 - 46,179 Tenant security deposits payable - 70,255 - 70,255 Payable to affiliated Developer - 2,482,000 - 2,482,000 ------------- ------------- ------------- ------------- Total Liabilities 184,814 10,986,510 - 11,171,324 ------------- ------------- ------------- ------------- Minority interest in Local Limited Partnerships - - 272,684 272,684 ------------- ------------- ------------- ------------- General, Initial and Investor Limited Partners' Equity 16,857,995 544,431 (556,391) 16,846,035 Net unrealized losses on marketable securities (2,415) - - (2,415) ------------- ------------- ------------- ------------- Total Partners' Equity 16,855,580 544,431 (556,391) 16,843,620 ------------- ------------- ------------- ------------- Total Liabilities and Partners' Equity $ 17,040,394 $ 11,530,941 $ (283,707) $ 28,287,628 ============= ============= ============= =============
(A) As of September 30, 1999. (B) As of June 30, 1999. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 4. Supplemental Combining Schedules (continued) Statements of Operations For the Six Months Ended September 30, 1999
Boston Financial Qualified Housing Combined Tax Credits Entities Combined L.P. IV (A) (B) Eliminations (A) Revenue: Rental $ - $ 843,840 $ - $ 843,840 Investment 26,582 10,215 - 36,797 Other 122,566 26,691 - 149,257 ------------ ------------- ------------- ------------- Total Revenue 149,148 880,746 - 1,029,894 ------------ ------------- ------------- ------------- Expenses: Asset management fees, related party 89,604 - - 89,604 General and administrative 199,639 - 11,960 211,599 Bad debt expense 215,345 - - 215,345 Rental operations, exclusive of depreciation - 348,990 - 348,990 Property management fee, related party - 43,293 - 43,293 Interest - 339,609 - 339,609 Depreciation - 275,307 - 275,307 Amortization 32,905 175,672 - 208,577 ------------ ------------- ------------- ------------- Total Expenses 537,493 1,182,871 11,960 1,732,324 ------------ ------------- ------------- ------------- Loss before equity in income of Local Limited Partnerships, minority interest, loss of liquidation of interest in Local Limited Partnership and gain on transfer of assets (388,345) (302,125) (11,960) (702,430) Equity in income of Local Limited Partnerships 102,636 - (29,216) 73,420 Minority interest in losses of Local Limited Partnerships - - 112,933 112,933 Loss on liquidation of interest in Local Limited Partnership (6,486) - - (6,486) ------------ ------------- ------------- ------------- Net loss before gain on transfer of assets (292,195) (302,125) 71,757 (522,563) Gain on transfer of Assets - 218,408 - 218,408 ------------ ------------- ------------- ------------- Net Loss $ (292,195) $ (83,717) $ 71,757 $ (304,155) ============ ============= ============= =============
(A) For the six months ended September 30, 1999. (B) For the six months ended June 30, 1999. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO COMBINED FINANCIAL STATEMENTS (continued) (Unaudited) 4. 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 used for operating activities $ (264,278) $ (242,704) $ - $ (506,982) Net cash provided by (used for) investing activities 385,496 (16,022) (29,574) 339,900 Net cash provided by financing activities - 233,365 - 233,365 ------------- ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents 121,218 (25,361) (29,574) 66,283 Cash and cash equivalents, beginning 243,072 117,997 - 361,069 ------------- ------------- ------------- ------------- Cash and cash equivalents, ending $ 364,290 $ 92,636 $ (29,574) $ 427,352 ============= ============= ============= =============
(A) For the six months ended September 30, 1999. (B) For the six months ended June 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, interest rates and unanticipated delays or expenses on the part of the Partnership and its suppliers in achieving year 2000 compliance. Liquidity and Capital Resources The Partnership (including the Combined Entity) had an increase in cash and cash equivalents of $66,283, from $361,069 at March 31, 1999 to $427,352 at September 30, 1999. The increase is primarily attributed to proceeds from a refinanced mortgage for the combined entity and cash distributions from Local Limited Partnerships. The increase is partially offset by cash used for operations, refinancing costs associated with the combined entity's refinanced mortgage and purchase of marketable securities in excess of proceeds. The Managing General Partner initially designated 4% of the Gross Proceeds as Reserves. The Reserves, as defined in the Partnership Agreement, 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 $1,302,000 have been withdrawn from the Reserve account to pay legal fees relating to various property issues. This amount includes approximately $1,106,000 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 $881,000 of operating funds to replenish Reserves. At September 30, 1999, approximately $1,052,000 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 $1,302,000 noted above, the Partnership has also advanced approximately $556,000 to the Texas Partnerships to fund operating deficits. Approximately $388,000 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, 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 six 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 (continued) Results of Operations The Partnership's results of operations for the six months ended September 30, 1999 resulted in a net loss of $304,155, as compared to a net loss of $63,045 for the same period in 1998. The increase in net loss is primarily due to a decrease in gains on transfers of assets, increases in general and administrative expense, and an increase in amortization due to the Combined Entity's mortgage refinancing. The increase is partially offset by a decrease in equity in losses of Local Limited Partnerships. The decrease in the 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 Partnership is expected to continue. Property Discussions Currently the Partnership consists of 25 properties. Most of the 25 Local Limited Partnerships have stable operations and are operating at break-even or are generating positive 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 certain 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. In particular, Audobon Apartments is experiencing significant operating deficits, which may affect the ability of the Partnership to retain its interest in Audobon through 1999. 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. 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. 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) 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. 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 June 30, 1999 was 89%. 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. Impact of Year 2000 The Managing General Partner's plan to resolve year 2000 issues involves the following four phases: assessment, remediation, testing and implementation. To date, the Managing General Partner has fully completed an assessment of all information systems that may not be operative subsequent to 1999 and has begun the remediation, testing and implementation phase on both hardware and software systems. Because the hardware and software systems of both the Partnership and Local Limited Partnerships are generally the responsibility of obligated third parties, the plan 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) Impact of Year 2000 (continued) primarily involves ongoing discussions with and obtaining written assurances from these third parties that pertinent systems will be 2000 compliant. In addition, neither the Partnership nor the Local Limited Partnerships are incurring significant additional costs since such expenses are principally covered under service contracts with vendors. As of November 1999, the General Partner is in the final stages of its Year 2000 remediation plan and believes all major systems are compliant; any systems still being updated are not considered significant to the Partnership's operations. However, despite the likelihood that all significant year 2000 issues are expected to be resolved in a timely manner, the Managing General Partner has no means of ensuring that all systems of outside vendors or other entities that impact operations will be 2000 compliant. The Managing General Partner does not believe that the inability of third parties to address their year 2000 issues in a timely manner will have a material impact on the Partnership. However, the effect of non-compliance by third parties is not readily determinable. Management has also evaluated a worst case scenario projection with respect to the year 2000 and expects any resulting disruption of either the Managing General Partner's activities or any Local Limited Partnership's operations to be short-term inconveniences. Such problems, however, are not likely to fully impede the ability to carry out necessary duties of the Partnership. Moreover, because expected problems under a worst case scenario are not extensively detrimental, and because the likelihood that all systems affecting the Partnership will be compliant before 2000, the Managing General Partner has determined that a formal contingency plan that responds to material system failures is not necessary. Other Development Lend Lease Real Estate Investments, Inc., ("Lend Lease") the U.S. subsidiary of Lend Lease Corporation and the leading U.S. institutional real estate advisor, as ranked by assets under management, announced on July 29, 1999 it had reached a memorandum of understanding to acquire The Boston Financial Group Limited Partnership ("Boston Financial"). Lend Lease closed the acquisition of Boston Financial on November 3, 1999. Headquartered in New York and Atlanta, Lend Lease Corporation has regional offices in 12 cities nationwide. The company ranks as the leading U.S. manager of tax-exempt assets invested in real estate. Lend Lease is a subsidiary of Lend Lease Corporation, an international real estate and financial services group listed on the Australian Stock Exchange. Worldwide, Lend Lease Corporation operates from more than 30 cities on five continents: North America, Europe, Asia, Australia and South America. In addition to real estate investments, the Lend Lease Group operates in the areas of property development, project management and construction, and capital services (infrastructure). Financial services activities include funds management, life insurance, and wealth protection. 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, 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: November 12, 1999 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 Q2 FY 2000
5 6-MOS MAR-31-2000 SEP-30-1999 427,352 732,263 97,516 000 000 000 11,512,190 000 28,287,628 000 000 000 000 000 16,843,620 28,287,628 000 1,029,894 000 000 1,392,715 000 339,609 000 000 000 000 000 000 (304,155) (4.42) 000 Included in total assets: Investments in Local Limited Partnerships of $14,972,568, Deferred charges, net of $205,052, Tenant security deposits of $81,963, Mortgagee escrow deposits of $226,945 and other assets of $31,779. Included in Total Liabilities and Equity: Mortgage notes payable of $8,320,488, Accounts payable to affiliates of $155,180, Accounts payable and accrued expenses of $97,222, Interest payable of $46,179, Tenant security deposits payable of $70,255, Payable to affiliated developer of $2,482,000 and Minority interest in Local Limited Partnerships of $272,684. Included in Total revenue: Rental of $843,840, Investment of $36,797 and Other of $149,257. Included in Other Expenses: Asset management fees of $89,604, General and administrative of $211,599, Rental operations, exclusive of depreciation of $348,990, Bad debt of $215,345, Property management fees of $43,293, Depreciation of $275,307, and Amortization of $208,577. Included in Net loss: Equity in income of Local Limited Partnerships of $73,420, Minority interest in losses of Local Limited Partnerships of $112,933, Loss on liquidation of interest in Local Limited Partnership of $6,486 and Gain on transfer of assets of $218,408.
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