March 31, 1999
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Apartments Associates, L.P.
Report on Form 10-KSB for Year Ended December 31, 1998
File No. 0-10057
Dear Sir/Madam:
Pursuant to the requirements of Rule 901(d) of Regulation S-T, enclosed is one
copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
BFA10KSB.DOC
<PAGE>
The total number of pages contained in this report and any exhibits or
attachments hereto is ___. Index for Exhibits appears on Page ___.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission file
December 31, 1998 number
0-10057
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(Exact name of registrant as specified in its charter)
Delaware 04-2734133
(State of organization) (I.R.S. Employer
Identification No.)
101 Arch Street, 16th Floor
Boston, Massachusetts 02110-1106
(Address of Principal executive office) (Zip Code)
Registrant's telephone number, including area code 617/439-3911
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
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
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
K-14
Boston Financial Apartments Associates, L.P.
(A Limited Partnership)
1998 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1 Business K-2
Item 2 Properties K-5
Item 3 Legal Proceedings K-6
Item 4 Submission of Matters to a
Vote of Security Holders K-6
PART II
Item 5 Market for the Registrant's Units
and Related Security Holder Matters K-7
Item 6 Management's Discussion and Analysis
or Plan of Operation K-7
Item 7 Financial Statements and Supplementary Data K-9
Item 8 Disagreements on Accounting and Financial
Disclosure K-9
PART III
Item 9 Directors and Executive Officers of the
Registrant K-10
Item 10 Management Remuneration K-11
Item 11 Security Ownership of Certain Beneficial
Owners and Management K-11
Item 12 Certain Relationships and Related Transactions K-11
PART IV
Item 13 Exhibits, Financial Statement Schedules and
Reports on Form 8-K K-12
SIGNATURES K-14
<PAGE>
PART I
Item 1. Business
Boston Financial Apartments Associates, L.P. (the "Partnership") is a limited
partnership formed on July 21, 1981 under the Uniform Limited Partnership Act of
the State of Delaware. The Partnership raised $21,910,000 of equity ("Gross
Proceeds") through the sale of limited partnership interests of $1,000 per unit
with a minimum purchase of five units. Such amounts exclude five unregistered
units previously acquired for $1,000 each by the initial limited partner, an
affiliate of the general partners.
The Partnership has invested as a limited partner in other limited partnerships
("Local Limited Partnerships") which own and operate multi-family residential
properties ("Properties") which are assisted by federal, state or local
government agencies pursuant to programs which do not significantly restrict
distributions to owners or the rate of return on investments in such Properties.
The investment objectives of the Partnership include the following: (i) to
preserve and protect the Partnership's capital; (ii) to provide capital
appreciation through appreciation in value of the Properties; (iii) to provide
"tax losses" during the early years of the Partnership's operations which the
Limited Partner may use to offset income from other sources; (iv) to provide
annual cash distributions to Partners derived from distributions to the
Partnership from Local Limited Partnerships; and (v) to build additional equity
through reduction of mortgage loans of the Local Limited Partnerships. There can
be no assurance that the Partnership will attain any or all of these investment
objectives.
After completing its program of investment in Local Limited Partnerships during
1983, the Partnership purchased interests in 15 Local Limited Partnerships, each
of which owned a Property with first mortgage financing provided under the
Section 221(d)(4) insurance program of the United States Department of Housing
and Urban Development ("HUD"). The original cost of real estate owned by Local
Limited Partnerships, inclusive of equity payments by the Partnership, was
$86,660,000.
On December 31, 1993, the Partnership transferred its interest in Captain's
Landing Associates, Ltd. to an unrelated party for a nominal amount. Also, on
January 12, 1994, Oakwood Terrace Associates, Ltd. was sold in a foreclosure
auction conducted by HUD. As a result of the foreclosure, the Partnership
disposed of its interest in the property. The Managing General Partner of
Overland Station Investment Company sold the property on January 12, 1995. From
the sale, the Partnership received $1,274,833 which was used to pay down an
acquisition note payable and make a distribution. In addition, on March 24,
1996, the Local General Partner of Mountain View, Ltd. and Woodmeade South, Ltd.
placed both of the properties into Chapter 11 bankruptcy, which resulted in the
Partnership relinquishing its interests in these Local Limited Partnerships. On
June 3, 1997, the mortgagee for Oakdale Manor foreclosed on the property which
resulted in the Partnership relinquishing its equity interest in this Local
Limited Partnership. A more detailed discussion of the transactions is contained
under Property Dispositions in Item 2 of this Report on Form 10-K.
Table A on the following page lists the Local Limited Partnerships in which the
Partnership invested. Other significant information with respect to such Local
Limited Partnerships can be found in Item 2 of this Report on Form 10-K.
<PAGE>
Table A
PARTNERSHIP DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Total
Original Equity $ Total
Date Property and Debt -- Original
Local Limited Property Interest Completion Occupancy Number of Local Limited Equity
Partnerships (A) Location Acquired Date at 12/31/98 (B) Apt. Units Partnerships (C) and Debt
- - ---------------- -------- -------- ---- --------------- ---------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bear Creek Asheville, NC 08/25/83 1974 96% 140 $ 3,089,000 3.56%
Buttonwood Tree Wichita, KS 03/29/82 1982 94% 216 8,341,000 9.62%
Captain's Landing (D) Galveston, TX 10/14/82 1984 n/a 174 5,392,000 6.22%
Chelsea Village Indianapolis, IN 07/02/82 1983 90% 246 9,179,000 10.59%
Mountain View (D) Johnson City, TN 12/08/82 1983 n/a 60 2,249,000 2.60%
Oakdale Manor (D) Beaumont, TX 05/05/83 1981 n/a 152 4,905,000 5.66%
Oakwood Terrace (D) Chattanooga, TN 08/13/82 1983 n/a 100 3,254,000 3.75%
Overland Station (D) Boise, ID 02/24/82 1978 n/a 160 4,480,000 5.17%
Park Hill Lexington, KY 04/22/82 1980 97% 132 3,935,000 4.54%
Pheasant Ridge Moline, IL 07/07/82 1978 95% 216 5,526,000 6.38%
The Woods of Castleton Indianapolis, IN 05/28/82 1983 94% 260 9,824,000 11.34%
Westpark Plaza Chico, CA 04/05/82 1979 99% 240 7,519,000 8.68%
Woodbridge Bloomington, IN 07/09/82 1983 93% 140 5,321,000 6.14%
Woodmeade South (D) Knoxville, TN 04/07/82 1983 n/a 242 8,619,000 9.95%
Youngstown Hagerstown, MD 02/18/83 1984 96% 120 5,027,000 5.80%
------ ------------- ---------
2,598 $86,660,000 100.00%
===== ============= =======
</TABLE>
(A) The Partnership's interest in profits and losses of each Local Limited
Partnership arising from normal operations is approximately 99%, except
for Youngstoun and Oakdale Manor, for which the percentages are
approximately 97% and 90%, respectively. Profits and losses arising from
certain capital transactions are allocated in accordance with the
respective Local Limited Partnership Agreements.
(B) Property Occupancy is shown as of each Local Limited Partnership's
respective fiscal year end which is December 31, 1998.
(C) Includes equity contributed to the Local Limited Partnership plus the
outstanding principal balance of its mortgage loan at the date of
purchase (or, in the case of new construction projects, at HUD Final
Endorsement) and any notes made by the Partnership as part of its
original purchase.
(D) The Partnership no longer holds an investment interest in Captain's
Landing, Mountain View, Oakwood Terrace, Overland Station, Woodmeade
South and Oakdale Manor as of December 31, 1998.
<PAGE>
As defined in the Partnership Agreement, Reserves were established to be used
for working capital of the Partnership and contingencies related to the
ownership of Local Limited Partnership interests. Approximately $1,022,000 of
the Gross Proceeds was originally designated as Reserves and invested in various
securities to fund the ongoing operations of the Partnership. As of December 31,
1998, the General Partner has designated approximately $1,053,000 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.
Each Local Limited Partnership has, as its general partners ("Local General
Partners"), one or more individuals or entities not affiliated with the
Partnership or its General Partners. In accordance with the partnership
agreements under which such entities are organized ("Local Limited Partnership
Agreements"), the Partnership depends on the Local General Partners for the
management of each Local Limited Partnership. The following Local Limited
Partnerships represent more than 10% of the total original investment of the
Partnership in Local Limited Partnerships, exclusive of disposed properties,
having a common Local General Partner or affiliated group of Local General
Partners: (i) the Castleton, Chelsea and Woodbridge Local Limited Partnerships,
representing 42.74% of the total original investment, exclusive of disposed
properties, have affiliates of Gene B. Glick Company, Inc. as Local General
Partners; (ii) the Buttonwood Tree Local Limited Partnership, representing
12.24% of the total original investment, exclusive of disposed properties, has
Anderson Management Company as Local General Partner; (iii) the Bear Creek and
Youngstoun Apartments, Phase II Local Limited Partnerships, representing 14.30%
of the total original investment, exclusive of disposed properties, have Alco
Group Limited Partners as Local General Partners; and (iv) the Westpark Local
Limited Partnership, representing 15.24% of the total original investment,
exclusive of disposed properties, has affiliates of Federal Properties
Investment Company as the Local General Partner. The Local General Partners of
the other Local Limited Partnerships were identified in the Acquisition Reports.
In the event of bankruptcy or default of the Local General Partners, or other
conditions as expressed in the Local Limited Partnership Agreements, in certain
cases, an affiliate of the Partnership's Managing General Partner may elect to
become an additional Local General Partner.
The Properties owned by Local Limited Partnerships in which the Partnership has
invested are, and will continue to be, subject to competition from existing and
future apartment complexes in the same areas. The success of the Partnership
depends on many factors, most of which are beyond the control of the Partnership
and which cannot be predicted at this time. Such factors include general
economic and real estate market conditions, both on a national basis and in
those areas where the Properties are located, the availability and cost of
borrowed funds, real estate tax rates, operating expenses, energy costs and
government regulations. In addition, other risks inherent in real estate
investment may influence the ultimate success of the Partnership, including: (i)
possible reduction in rental income due to an inability to maintain high
occupancy levels or adequate rental levels; (ii) possible adverse changes in
general economic conditions and adverse local conditions, such as competitive
overbuilding, a decrease in employment or adverse changes in real estate laws,
including building codes; and (iii) possible future adoption of rent control
legislation which would not permit the full amount of increased costs to be
passed on to the tenants in the form of rent increases or which would suppress
the ability of the Local Limited Partnerships to generate operating cash flow.
In particular, changes in federal and state income tax laws affecting real
estate ownership or limited partnerships could have a material and adverse
effect on the business of the Partnership.
The Partnership has invested in highly leveraged Local Limited Partnerships.
Since debt service is a fixed expenditure as well as a significant portion of
the operating expenses of a property, changing economic forces cause large
fluctuations in cash flow from operations; that is, highly leveraged investments
carry greater risk. As a result, break-even operations require higher revenues,
but cash flow from operations increases quickly as operations improve over
break-even. Conversely, deficits increase quickly as operations fall below
break-even.
The Partnership is managed by BFTG Residential Properties, Inc., the Managing
General Partner of the Partnership. To economize on direct and indirect payroll
costs, the Partnership, which does not have any employees, reimburses The Boston
Financial Group Limited Partnership ("Boston Financial"), an affiliate of the
General Partners, for certain expenses and overhead costs. A complete discussion
of the management of the Partnership is set forth in Item 9 of this Report on
Form 10-K.
Item 2. Properties
The Partnership owns limited partnership interests in nine Local Limited
Partnerships which own and operates multi-family residential properties. The
Partnership also owns investments in securities in which some of its Reserves
are held.
Four of the Local Limited Partnerships are operating at deficits (net loss
adjusted for depreciation, mortgage principal payments and replacement reserve
payments). In past years, the Local General Partners funded these deficits
either through non-interest bearing project expense loans or subordinated loans,
repayable only out of cash flow or proceeds from a sale or refinancing of the
given project. Once a project achieves break-even, substantial amounts of cash
flow derived from its operations will be used to repay project expense loans and
subordinated loans until the loans are repaid in full. To address current
deficits or other financial difficulties, Local General Partners are working to
increase rental income and reduce operating expenses, working with the lenders
to refinance property mortgages or seeking other sources of capital. Management
may make voluntary advances from the Partnership's Reserves to a Local Limited
Partnership encountering operating difficulties if it is deemed to be in the
best interest of the Partnership to provide such funds.
As previously reported, the Local General Partner of Chelsea Village
successfully negotiated a refinancing in 1998. It is not expected that the
refinancing will generate taxable income to the Partnership.
As previously reported, the Local General Partner of Woods of Castleton
successfully refinanced the mortgage in the third quarter of 1997. The Managing
General Partner completed negotiations with the Local General Partner and agreed
to a modification of the Partnership Agreement in conjunction with the
refinancing. This modification granted the Local General Partner the potential
cash and residual benefits from the property in exchange for their input of the
capital required to complete the refinancing transaction. The modification also
includes provisions that allow the Partnership to exit from the Local Limited
Partnership at a time of its choosing. The Managing General Partner believes
that these concessions will have no material affect on the Partnership in the
future given the current value of the property.
Property Dispositions
As previously reported, on December 31, 1993, the Partnership transferred its
interest in Captain's Landing to an unrelated purchaser for an amount equal to
the Partnership's costs associated with the transfer. The transfer of the
interest resulted in a capital gain which could be used by the investors to
offset passive losses, both current and suspended.
As previously reported, HUD foreclosed on Oakwood Terrace on January 12, 1994.
The disposition of this interest did not have any effect on income for financial
reporting purposes, as the net investment balance of the interest is zero.
However, for tax purposes, a consequence of the foreclosure is that the
Partnership received allocations of capital gain and cancellation of debt
income. At the individual investor level, the capital gain and cancellation of
debt income could be offset by passive losses, both current and suspended.
The local general partner of Overland Station Investment Company sold the
property on January 12, 1995. From the sale, the Partnership has recognized
$2,067,424 of equity in income. This amount was offset by the recognition of
$18,627 of previously unrecognized equity in losses. Also, as a result of the
sale, the Partnership recognized a loss on the sale of Overland Station in the
amount of $773,964. This amount represented the remaining carrying value of the
Partnership's investment in the Local Limited Partnership.
The Partnership received proceeds from the Overland sale in the amount of
$1,274,833. The Partnership used a portion of the sales proceeds to pay down
$624,833 of an acquisition note payable and accrued interest which totaled
$685,833. The $61,000 balance of these obligations was canceled and was recorded
as income on the Partnership's financial statements. The Partnership distributed
the balance of the sales proceeds plus accrued interest in the amount of
$657,450.
Bankruptcy plans for Woodmeade South Apartments and Mountain View Apartments
became effective on March 24, 1996. In order for the Partnership to retain an
equity interest in these properties, the bankruptcy plan required that the
Partnership make additional contributions. Management of the Partnership decided
that additional contributions would not be in the best interest of the
Partnership. Consequently, the Partnership relinquished its equity interest in
these two Local Limited Partnerships. These bankruptcies did not have an effect
on the Partnership for financial reporting purposes since the Partnership is a
limited partner and the two Local Limited Partnerships had a carrying value of
zero. However, the Partnership was precluded from realizing any residual value
of the properties upon liquidation.
The new mortgagee for Oakdale Manor foreclosed on the property on June 3, 1997.
The only effect on the Partnership was cancellation of indebtedness income
related to a purchase note payable and its associated accrued interest. No
obligation was due on the purchase note payable as the note was collateralized
only by the Partnership's interest in Oakdale Manor, which, at June 3, 1997, had
a carrying value of zero. For tax purposes, the consequence of the foreclosure
was that investors may have had a capital and/or ordinary gain and resulting
taxable income as a result of the disposal of this Local Limited Partnership.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal or administrative
proceeding, and to the best of its knowledge, no legal or administrative
proceeding is threatened or contemplated against it.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
There is no public market for the Units, and it is not expected that any public
market will develop.
The Partnership Agreement does not impose on the Partnership or its General
Partners any obligation to obtain periodic appraisals of assets or to provide
Limited Partners with any estimates of the current value of Units, and the
Partnership does not currently obtain such appraisals or provide such estimates
of value.
The Second Amended and Restated Agreement and Certificate of Limited Partnership
of the Partnership, as amended (the "Partnership Agreement"), imposes certain
restrictions on the transfer of Units. For example, a transfer will not be
permitted if: (i) counsel for the Partnership is of the opinion that such
transfer would result, when considered with all other transfers within the
previous twelve months, in the Partnership's being considered to have been
terminated within the meaning of Section 708 of the Internal Revenue Code of
1986, as amended, or would result in the Partnership's being treated as a
corporation for Federal income tax purposes; (ii) counsel for the Partnership
shall determine that such transfer would violate any applicable federal or state
securities laws (including those pertaining to investor suitability standards);
or (iii) transferor or the transferee would thereafter hold less than five
Units, except for transfers by gift or inheritance, inter-family transfers,
transfers resulting from family dissolutions and certain other transactions. The
Partnership need not recognize any transfer of Units unless an instrument of
assignment complying with certain requirements set forth in the Partnership
Agreement is filed with the Partnership and recorded on the Partnership's books,
and the transferring parties reimburse the Partnership for any expenses incurred
by it in connection with the transfer. Limited Partners seeking to transfer
Units may also be subject to the securities laws of the state in which the
transfer is to take place, in that certain states have imposed restrictions on
the transfer of Units in the Partnership. For the years ended December 31, 1998
and 1997, a total of 839 and 30 Units, respectively, were transferred on the
resale market. There were 2,203 and 2,300 record holders of Units of the
Partnership at December 31, 1998 and 1997, respectively.
Cash distributions, when made, are paid annually. Cash available for
distribution has been and, in the future, will be derived almost exclusively
from distributions of cash flow from operations of the Local Limited
Partnerships. Such cash is not expected to be significant in 1999, and the
return on investment to Limited Partners will consist primarily of net losses
for federal income tax purposes used to offset Limited Partner passive income
from the Partnership and other sources.
Item 6. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources
At December 31, 1998, the Partnership had cash and cash equivalents of $159,298
compared with $142,840 at December 31, 1997. The increase in cash and cash
equivalents is a result of cash distributions received from Local Limited
Partnerships and the proceeds from the sale and maturities of marketable
securities. These increases are offset by net cash used by operations and the
purchase of marketable securities.
At December 31, 1998, approximately $1,053,000 has been designated as Reserves
and is partially invested in various securities. 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. Reserves may be used to fund Partnership operating
deficits if the Managing General Partner deems funding appropriate in order to
protect its investment.
As of December 31, 1998, investment in Local Limited Partnerships remained at
zero from December 31, 1997.
Since April 1, 1985, the Partnership had been obligated to pay interest from its
own funds on the Oakdale note. The Partnership negotiated with the seller of
Oakdale to defer these payments, and as such, since October 1, 1986 interest had
been accrued but not paid. The note was due on April 1, 1995. During 1996, the
local general partner of Oakdale Manor filed chapter 11 bankruptcy. On June 3,
1997, the new mortgagee for Oakdale manor foreclosed on the property, and the
Partnership relinquished its interest in the Local Limited Partnership. The only
effect on the Partnership's financial statements was cancellation of
indebtedness income, since the Partnership was a limited partner and the note
and interest were collateralized only by the Partnership's interest in Oakdale
Manor, which, at June 3, 1997, had a carrying value of zero. For tax purposes,
the consequence of the foreclosure was that investors may have had a capital
and/or ordinary gain and resulting taxable income as a result of the disposal of
this Local Limited Partnership.
Since the Partnership has invested as a limited partner, it has no contractual
duty to provide additional funds to Local Limited Partnerships beyond its
specified investment. The Partnership's contractual obligations have been fully
met. Thus, at December 31, 1998 and 1997, it did not have any contractual or
other obligation to any Local Limited Partnership which had not been paid or
provided for.
Future cash distributions will be derived almost exclusively from distributions
of net cash provided by operations of the Local Limited Partnerships. Such cash
is not expected to be significant in 1999, and therefore, there is no assurance
that adequate cash will be available to warrant cash distributions in future
years.
Results of Operations
Fiscal year ended December 31, 1998 versus 1997
The Partnership's results of operations for the year ended December 31, 1998
resulted in net income of $128,162 as compared to net income of $1,350,580 in
1997. The net income position in 1997 is primarily due to cancellation of
indebtedness income of $1,247,144 resulting from the foreclosure of Oakdale
Manor on June 3, 1997. Please refer to Item 2 - Properties for more detail.
Inflation and Other Economic Factors
Inflation had no material impact on the operations or financial condition of the
Partnerships for the two years ended December 31, 1998.
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 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 the service contracts with vendors. Most major systems
have already been updated and assurances have been obtained that any remaining
testing and updating will be complete by mid 1999. 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 in
early 1999, the Managing General Partner has determined that a formal
contingency plan that responds to material system failures is not necessary.
Item 7. Financial Statements and Supplementary Data
Information required under this Item is submitted as a separate section of
this Report on Form 10-K. See Index to Financial Statements and Schedules on
page F-1 hereof.
Item 8. Disagreements on Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant
The managing general partner of the Partnership is BFTG Residential Properties,
Inc., a Massachusetts corporation (the "Managing General Partner" or "BFTG"),
and is an affiliate of The Boston Financial Group Limited Partnership ("Boston
Financial"), a Massachusetts limited partnership. The names, positions and ages
of the executive officers and directors of BFTG are set forth below:
Name Position Age
James D. Hart Chief Financial Officer 41
Vincent J. Costantini President and Chief Operating
Officer 42
Michael H. Gladstone Director and Clerk 42
The other general partner of the Partnership is Milk Street Housing Associates,
L.P., a Massachusetts limited partnership ("Milk Street"). Milk Street was
originally formed as Franklin Housing Associates, but its name was changed on
December 8, 1981 to enable it to qualify to do business in Delaware. Messrs.
A. Harold Howell and Fred N. Pratt, Jr. are general partners of Milk Street.
The Partnership is a party to an agreement with Boston Financial, pursuant to
which Boston Financial will provide day-to-day management services for the
Partnership's investments in Local Limited Partnerships. Boston Financial
receives certain compensation for these services as discussed in Item 12 of this
Report.
There is no family relationship between any of the persons listed in this
section.
The business experience of each of the persons listed above is described below:
James D. Hart, age 41, graduated from Trinity College (B.A.) and Amos Tuck
School at Dartmouth College (M.B.A.). Mr. Hart joined Boston Financial in 1997
and serves as Chief Financial Officer and is a member of the Senior Leadership
Team. Prior to joining Boston Financial, Mr. Hart was engaged in venture capital
management on behalf of institutional investors, including the negotiation and
structuring of private equity and mezzanine transactions as a Vice President of
Interfid Ltd., and later in the operational management of a venture-backed
software company, as Managing Director and Chief Financial Officer of Bitstream
Inc. Mr. Hart has also served on the Board of Directors of several investee
companies, including those that went on to complete initial public offerings.
Vincent J. Costantini, age 42, is a graduate of St. Joseph's University (B.S.
1978). Mr. Costantini serves as Chief Operating Officer and is a member of
Boston Financial's Senior Leadership Team, as well as the Board of Directors.
Formerly, he served as Senior Vice President at General Investment and
Development Co. and President of its affiliate, Windsor Realty Advisors, Inc. In
this capacity, he was responsible for implementing strategy, sourcing pension
fund capital for the firm, and overseeing acquisition and asset management
activities. Prior to joining General Investment and Development Co., Mr.
Costantini was responsible for negotiating trade finance and foreign exchange
positions, managing the international banking relationships, tax accounting and
the financial operations departments of Monaco-based Tampimex International
Ltd., a subsidiary of the Ingram Group. Mr. Costantini began his career at Price
Waterhouse and Co., where he was a Senior Auditor and Consultant. Mr. Costantini
is a Director of the National Multi Housing Council (NMHC), a board member of
the Greater Boston Real Estate Finance Association and a member of both the
Urban Land Institute (ULI) and the Pension Real Estate Association (PREA).
Michael H. Gladstone, age 42, graduated from Emory University (B.A. 1978) and
Cornell University (J.D., MBA 1982). Mr. Gladstone joined Boston Financial in
1985 and is Vice President and General Counsel. He is also a member of Boston
Financial's Senior Leadership Team. Prior to joining Boston Financial, Mr.
Gladstone was associated with the Boston law firm of Herrick & Smith. Mr.
Gladstone is on the Advisory Board of the Housing and Development Reporter. He
is also a member of the Investment Program Association, the National Realty
Committee, Cornell Real Estate Council, National Housing Conference and the
Massachusetts Bar.
Item 10. Management Remuneration
Neither the directors and officers of BFTG nor any other individual with
significant involvement in the business of the Partnership receives any current
or proposed remuneration from the Partnership.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The equity securities registered by the Partnership under Section 12(g) of the
Act consist of 22,000 Units, of which 21,910 were sold to the public. Holders of
Units are permitted to vote on matters affecting the Partnership only in certain
unusual circumstances and do not generally have the right to vote on the
operation or management of the Partnership. No limited partner is known to the
Partnership to be the beneficial owner of more than 5% of the outstanding Units.
BFTG Property Ventures, Inc., an affiliate of the General Partners, owns five
(unregistered) Units.
Except as described in the preceding paragraph, neither BFTG, Milk Street,
Boston Financial nor any of their executive officers, directors, partners or
affiliates is the beneficial owner of any Units. None of the foregoing persons
possesses a right to acquire beneficial ownership of Units.
There exists no arrangement known to the Partnership, the operation of which may
at a subsequent date result in a change in control of the Partnership.
Item 12. Certain Relationships and Related Transactions
Information required under this Item is contained in Note 6 to the Financial
Statements included in this Report on Form 10-K. The affiliates of the Managing
General Partner which have received or may receive fee payments and expense
reimbursements from the Partnership are described below:
The Partnership is permitted to enter into transactions involving affiliates of
the Managing General Partner, subject to certain limitations established in the
Partnership Agreement.
Under an agreement between the Partnership and Boston Financial (as successor by
merger to Fund Service Corporation), Boston Financial provides day-to-day
management services in connection with the Partnership's investments in Local
Limited Partnerships and receives certain reimbursements for such services.
Currently, Boston Financial receives an annual fee (the "Management Fee") equal
to 10% of the Partnership's share of cash flow from Local Limited Partnerships.
However, the Management Fee is subject to certain limitations and to reduction
under certain circumstances and is non-cumulative and payable only out of
available Partnership funds. Since inception, Management Fees amounting to
$181,506 have been paid to Boston Financial.
Information concerning cash distributions and other fees paid or payable to the
Managing General Partner and its affiliates and expenses reimbursed or
reimbursable to Boston Financial and its affiliates during each of the two years
ended December 31, 1998 is presented below and in Note 6 to the Financial
Statements included in Item 7 of this Report on Form 10-K.
1998 1997
---------- --------
Salaries and benefits expense reimbursement $ 64,244 $ 71,931
Management Fees 19,860 20,175
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) and (a)(2) Documents filed as a part of this Report
In response to this portion of Item 13, the financial statements, financial
statement schedule and auditor's report relating thereto are submitted as a
separate section of this Report on Form 10-K. See Index to Financial Statements
and Schedules on page F-1 hereof.
The reports of other auditors relating to the audits of the financial statements
of Local Limited Partnerships, which were referred to and relied upon in the
report of independent certified public accountants and in the Partnership's
financial statements and financial statement schedule, appear in Exhibit (28)(a)
of this report.
All other financial statement schedules and exhibits for which provision is made
in the applicable accounting regulation of the Securities and Exchange
Commission are not required under related instructions or are inapplicable and
therefore have been omitted.
<PAGE>
(a)(3) and (c) Exhibits
Page Number or
Number and Description in Accordance with Incorporation
Item 601 of Regulation S-K by Reference to
4. Instruments defining the rights of security
holders, including indentures
4.1 Second Amended and Restated Agreement Exhibit C to Report
and Certificate of Limited Partner- on Form 10-K for 1981
ship dated as of February 1, 1982
10.1.1 Management Agreement between Boston Exhibit 10A to Regis-
Financial Apartments Associates, L.P., tration Statement on
and Fund Service Corporation dated as Form S-11 [File No.
of August 31, 1981 2-73448] dated
August 31, 1981
10.1.2 Amendment No. 1, dated January 1 Exhibit 10A to
1982, to Management Agreement with Amendment No. 1 to
Fund Service Corporation dated as Registration State-
of August 31, 1981 ment on Form S-11
[File No. 2-73448]
dated October 14,
1981
28. Additional Exhibits
(a) 28.1 Reports of Other Auditors
(b) Audited financial statements of Investee Local Limited
Partnerships
None
(c) Reports on Form 8-K
No Reports on Form 8-K were filed during the fourth quarter ended
December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
By: BFTG Residential Properties, Inc.,
its Managing General Partner
By: /s/Michael H. Gladstone Date: March 31, 1999
-------------------------------
Michael H. Gladstone
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
By: /s/Fred N. Pratt, Jr. Date: March 31, 1999
------------------------------------
Fred N. Pratt, Jr.
Chief Executive Officer of Boston
Financial Group Limited Partnership
By: BFTG Residential Properties, Inc.,
its Managing General Partner
By: /s/Michael H. Gladstone Date: March 31, 1999
-------------------------------
Michael H. Gladstone
Director
<PAGE>
F-2
Item 14 (a). Financial Statements and Supplementary Data
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
1998 FORM 10-K ANNUAL REPORT
INDEX
Sequential
Page No. Page No.
Report of Independent Accountants F-2
Financial Statements:
Balance Sheet - December 31, 1998 F-3
Statements of Operations - For the Years Ended
December 31, 1998 and 1997 F-4
Statements of Partners' Equity - For the Years Ended
December 31, 1998 and 1997 F-5
Statements of Cash Flows - For the Years
Ended December 31, 1998 and 1997 F-6
Notes to the Financial Statements F-7
All other schedules are omitted as they are not applicable or not required, or
the information is provided in the financial statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Boston Financial Apartments Associates, L.P.
(A Limited Partnership)
In our opinion, based upon our audits and the reports of other auditors, the
accompanying balance sheet and the related statement of operations, partners'
equity, and cash flows present fairly, in all material respects, the financial
position of Boston Financial Apartments Associates, L.P. (a limited partnership)
("the Partnership") as of December 31, 1998, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. The Partnership accounts for its investments in Local Limited
Partnerships, as discussed in Note 2 of the notes to the financial statements,
using the equity method of accounting. As of December 31, 1998 and for the years
December 31, 1998 and 1997, 100 percent of the Partnership's Investment in Local
Limited Partnerships, and equity in income (losses) reflected in the financial
statements of the Partnership, relates to investments in Local Limited
Partnerships for which we did not audit the financial statements. The financial
statements of these Local Limited Partnerships were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to those investments in Local Limited Partnerships in 1998 and 1997, is based
solely upon the reports of other auditors. We conducted our audits of the
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the reports of
other auditors provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PRICEWATERHOUSECOOPERS LLP
March 31, 1999
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
BALANCE SHEET
December 31, 1998
Assets
Cash and cash equivalents $ 159,298
Interest receivable 11,359
Marketable securities, at fair value (Note 3) 935,517
Other assets 1,475
Investment in Local Limited Partnerships (Note 4) -
-----------
Total Assets $ 1,107,649
===========
Liabilities and Partners' Equity
Liabilities:
Accounts payable to affiliate (Note 6) $ 5,213
Accounts payable and accrued expenses 32,925
-----------
Total Liabilities 38,138
Partners' Equity 1,069,511
-----------
Total Liabilities and Partners' Equity $ 1,107,649
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997
1998 1997
----------- -----------
Revenue:
Distribution income (Note 2) $ 198,606 $ 201,749
Investment 53,747 57,347
Other 7,825 3,000
----------- -----------
Total Revenue 260,178 262,096
----------- -----------
Expenses:
General and administrative expense (includes
reimbursement to affiliates in the amounts of
$64,244 and $71,931) (Note 6) 112,156 115,091
Interest expense - 23,394
Management Fees, related party (Note 6) 19,860 20,175
----------- -----------
Total Expenses 132,016 158,660
----------- -----------
Income before equity in income
of Local Limited Partnerships and
cancellation of indebtedness 128,162 103,436
Equity in income of Local Limited
Partnerships (Note 4) - -
----------- -----------
Income before extraordinary item 128,162 103,436
Extraordinary gain on cancellation
of indebtedness (Note 7) - 1,247,144
----------- -----------
Net Income $ 128,162 $ 1,350,580
=========== ==========
Net Income allocated:
To the General Partners $ 6,408 $ 67,529
To the Limited Partners 121,754 1,283,051
----------- -----------
$ 128,162 $ 1,350,580
=========== ===========
Basic income before extraordinary
item allocated to the Limited Partners per
Limited Partnership Unit (21,915 Units) $ 5.56 $ 4.49
=========== ============
Basic extraordinary gain on cancellation
of indebtedness allocated to the Limited Partners
per Limited Partnership Unit (21,915 Units) $ - $ 54.06
=========== ===========
Basic Net Income per Limited Partnership
Unit (21,915 Units) $ 5.56 $ 58.55
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Other
General Limited Comprehensive
Partners Partners Income Total
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ (907,980) $ 508,940 $ 3 $ (399,037)
-------------- ------------- ---------------- --------------
Cash distributions (17,301) - - (17,301)
Comprehensive Income:
Net Income 67,529 1,283,051 - 1,350,580
Net change in net unrealized
gains on marketable securities
available for sale - - 322 322
------------- ------------- ---------------- -------------
Comprehensive Income 67,529 1,283,051 322 1,350,902
------------- ------------- ---------------- -------------
Balance at December 31, 1997 (857,752) 1,791,991 325 934,564
Comprehensive Income:
Net Income 6,408 121,754 - 128,162
Net change in net unrealized
gains on marketable securities
available for sale - - 6,785 6,785
------------- ------------- ---------------- -------------
Comprehensive Income 6,408 121,754 6,785 134,947
------------- ------------- ---------------- -------------
Balance at December 31, 1998 $ (851,344) $ 1,913,745 $ 7,110 $ 1,069,511
============= ============= ================ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
1998 1997
--------- ----------
Cash flows from operating activities:
Net income $ 128,162 $1,350,580
Adjustments to reconcile net income
to net cash used for operating activities:
Distribution income included in cash
distributions received from Local Limited
Partnerships (198,606) (201,749)
Extraordinary item:
Cancellation of indebtedness - (1,247,144)
(Gain) loss on sale of marketable securities (821) 484
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Interest receivable 1,834 (2,018)
Other assets 51 2,034
Accounts payable to affiliates 103 (12,531)
Accounts payable and accrued expenses (1,950) 13,761
Notes payable and accrued interest - 23,394
--------- ----------
Net cash used for operating activities (71,227) (73,189)
--------- ----------
Cash flows from investing activities:
Purchases of marketable securities (1,124,016) (418,751)
Proceeds from sales and maturities of
marketable securities 1,013,095 325,454
Cash distributions received from Local
Limited Partnerships 198,606 201,749
--------- ----------
Net cash provided by investing activities 87,685 108,452
--------- ----------
Cash flows from financing activities:
Cash distributions - (17,301)
--------- ----------
Net cash used for financing activities - (17,301)
--------- ----------
Net increase in cash and cash equivalents 16,458 17,962
Cash and cash equivalents, beginning of the year 142,840 124,878
--------- ----------
Cash and cash equivalents, end of the year $ 159,298 $ 142,840
========= ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Organization
Boston Financial Apartment Associates, L.P. (the "Partnership") is a limited
partnership formed on July 21, 1981 under the Uniform Limited Partnership Act of
the State of Delaware. The Partnership was organized to invest, as a limited
partner, in other limited partnerships ("Local Limited Partnerships") which own
and operate multi-family residential properties.
BFTG Residential Properties, Inc. (the "Managing General Partner") is an
affiliate of The Boston Financial Group Limited Partnership ("Boston
Financial"). Milk Street Housing Associates, L.P. (originally organized under
the name Franklin Housing Associates), the other general partner, is a limited
partnership of which the partners are employees or former employees of Boston
Financial. The initial limited partner is BFTG Property Ventures, Inc., an
affiliate of Boston Financial.
During 1981 and 1982, the Partnership sold limited partnership units producing
gross offering proceeds of $21,910,000. Such amounts exclude five unregistered
units previously acquired for $1,000 each by the initial limited partner.
Profits and losses are allocated 95% to the Limited Partners and 5% to the
General Partners. In the case of certain events defined in the Partnership
Agreement, the allocation of the related profits and losses would be different
from that described above. Profits and losses arising from a sale or refinancing
are generally allocated 99% to the Limited Partners and 1% to the General
Partners.
Cash Available for Distribution, as defined in the Partnership Agreement, is
allocated 95% to the Limited Partners and 5% to the General Partners.
Sale or Refinancing Proceeds, as defined in the Partnership Agreement, will be
allocated first to the Limited Partners in the amount of their Adjusted Capital
Contribution, as defined, and then 85% to the Limited Partners and 15% to the
General Partners, after adjustment for certain priority distributions.
As defined in the Partnership Agreement, Reserves were established to be used
for working capital of the Partnership and contingencies related to the
ownership of Local Limited Partnership interests. At December 31, 1998, the
General Partner has designated approximately $1,053,000 as Reserves. Such
Reserves may be increased or decreased as deemed appropriate from time to time
by the Managing General Partner. Substantially all of these Reserves are
invested for the purpose of providing revenue to the Partnership for ongoing
operations and contingencies.
2. Significant Accounting Policies
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting. Under the equity method, the investment is
carried at cost, adjusted for the Partnership's share of net income or loss and
for cash distributions from the Local Limited Partnerships; equity in income or
loss of the Local Limited Partnerships is included currently in the
Partnership's operations. Under the equity method, a Local Limited Partnership
investment will not be carried below zero. To the extent that equity in losses
are incurred when the Partnership's carrying value of the respective Local
Limited Partnership has been reduced to a zero balance, the losses will be
suspended and offset against future income. Income from Partnership investments
where cumulative equity in loss plus cumulative distributions have exceeded the
total investment in Local Limited Partnerships will not be recorded until all of
the related unrecorded losses have been offset. To the extent that a Local
Limited Partnership with a carrying value of zero distributes cash to the
Partnership, that distribution is recorded as income on the books of the
Partnership and is presented as "Distribution Income" in the accompanying
financial statements.
To the extent that the Partnership's investment in a Local Limited Partnership
exceeded the Partnership's share of fair value of net assets at the time of such
investment, such amounts are being amortized over the life of the principal
assets of the Local Limited Partnership (39 years). Such amortization is
included in the equity in loss of the Local Limited Partnership.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Cash and cash equivalents consist of short-term money market instruments with
maturities of ninety days or less at acquisition.
Marketable securities consists primarily of U.S. Treasury Notes, mortgage-backed
and various other asset-backed investment vehicles. The Partnership's marketable
securities are classified as "Available for Sale" securities and reported at
fair value as reported by the brokerage firm at which the securities are held.
All marketable securities have fixed maturities. Realized gains or losses from
the sales of securities are based on the specific identification method.
Unrealized gains and losses are excluded from earnings and reported as separate
components of partners' equity.
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 January 1, 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
No provision for income taxes has been made as the liability for such taxes is
an obligation of the partners of the Partnership.
3. Marketable Securities
A summary of marketable securities at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Debt securities issued by the US
Treasury and other US government
agencies $ 844,573 $ 5,063 $ (118) $ 849,518
Mortgage backed securities 83,834 2,165 - 85,999
----------- --------- -------- -----------
Balance at December 31, 1998 $ 928,407 $ 7,228 $ (118) $ 935,517
=========== ========= ========= ===========
</TABLE>
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
3. Marketable Securities (continued)
The contractual maturities at December 31, 1998 are as follows:
Fair
Cost Value
Due in less than one year $ 569,792 $ 573,854
Due in one year to five years 274,781 275,664
Mortgage backed securities 83,834 85,999
----------- -----------
$ 928,407 $ 935,517
============ ===========
Actual maturities for asset backed securities may differ from contractual
maturities because some borrowers have the right to call or prepay obligations.
Proceeds from the sales of marketable securities were approximately $426,000 and
$173,000 during the years ended December 31, 1998 and 1997, respectively.
Proceeds from the maturities of marketable securities were approximately
$587,000 and $153,000 during the years ended December 31, 1998 and 1997,
respectively. Included in investment income are gross gains of $2,293 and gross
losses of $1,472 that were realized on the sales in 1998 and gross gains of
$1,116 and gross losses of $1,600 that were realized on the sales in 1997.
4. Investment in Local Limited Partnerships
As of December 31, 1998 the Partnership's Investment in Local Limited
Partnerships, at cost, was as follows:
<TABLE>
<CAPTION>
Capital Contribu- Net Equity Cash
tions and Related in Income Distributions
Local Limited Acquisition Costs (Losses) Received Net
Partnerships (Cumulative) (Cumulative) (Cumulative) (1) Investment
- - ----------------------------- ----------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
Bear Creek $ 796,556 $ 47,013 $ (843,569) $ -
Buttonwood Tree 1,482,996 (1,415,154) (67,842) -
Captain's Landing 1,057,682 (1,057,682) - -
Chelsea Village 2,076,589 (2,076,589) - -
Mountain View 422,593 (422,593) - -
Oakdale Manor 1,522,621 (1,522,621) - -
Oakwood Terrace 614,643 (614,643) - -
Overland Station 1,232,286 816,511 (1,274,833) 773,964
Park Hill 825,501 (687,453) (138,048) -
Pheasant Ridge 1,050,237 (924,712) (125,525) -
The Woods of Castleton 2,025,681 (2,025,681) - -
Westpark Plaza 1,846,469 (1,094,803) (751,666) -
Woodbridge 1,077,161 (1,044,146) (33,015) -
Woodmeade South 1,619,452 (1,619,452) - -
Youngstoun 935,861 (935,861) - -
-------------- ------------- -------------- ------------
Subtotal 18,586,328 (14,577,866) (3,234,498) 773,964
Less dispositions:
Mountain View (422,593) 422,593 - -
Woodmeade South (1,619,452) 1,619,452 - -
Overland Station (1,232,286) (816,511) 1,274,833 (773,964)
Captain's Landing (1,057,682) 1,057,682 - -
Oakwood Terrace (614,643) 614,643 - -
Oakdale Manor (1,522,621) 1,522,621 - -
----------------- ----------------- ---------- -------
Balance at
December 31, 1998 $ 12,117,051 $(10,157,386) $ (1,959,665) $ -
============== ============ =============== ========
</TABLE>
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
4. Investment in Local Limited Partnerships (continued)
(1) Included in cash distributions received is cumulative distribution income
of $1,342,495 which was received from six Local Limited Partnerships with
carrying values of zero.
Summarized financial information from the combined financial statements of all
Local Limited Partnerships in which the Partnership has invested at December 31,
1998 and 1997 is as follows:
Summarized Balance Sheets - as of December 31
1998 1997
------------- --------------
Assets:
Investment property, net $ 22,650,326 $ 23,729,368
Current assets 2,475,074 2,216,507
Other assets 1,921,778 1,872,497
------------- --------------
Total Assets $ 27,047,178 $ 27,818,372
============= ==============
Liabilities and Partners' Deficiency:
Long-term debt $ 40,603,410 $ 41,133,036
Current liabilities 2,434,004 2,398,602
Other liabilities 4,835,197 4,716,175
------------- --------------
Total Liabilities 47,872,611 48,247,813
Partners' Deficiency (20,825,433) (20,429,441)
------------- --------------
Total Liabilities and Partners' Deficiency $ 27,047,178 $ 27,818,372
============= ==============
Summarized Income Statements
For the Twelve Months Ended December 31
1998 1997
------------- -------------
Rental and other income $ 10,726,359 $ 10,543,952
------------- --------------
Expenses:
Operating expenses 5,980,596 5,907,595
Interest expense 3,492,736 3,558,194
Depreciation and amortization 1,448,407 1,863,700
------------- -------------
Total Expenses 10,921,739 11,329,489
------------- -------------
Net Loss $ (195,380) $ (785,537)
============= ==============
Partnership's share of net loss $ (191,604) $ (771,008)
============= =============
Other partners' share of net loss $ (3,776) $ (14,529)
============= =============
<PAGE>
BOSTON FINANCIAL APARTMENTS ASSOCIATES, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
4. Investment in Local Limited Partnerships (continued)
As discussed in Note 7, the mortgagor for Oakdale Manor initiated foreclosure
proceedings. The foreclosure proceedings for Oakdale Manor were finalized on
June 3, 1997. As the Partnership's carrying value of the Local Limited
Partnership was zero and the Partnership received no proceeds from the disposal,
the only financial statement effect was cancellation of indebtedness income of
$1,247,144 on a purchase note payable and its accrued interest.
The Partnership has not recognized equity losses of $390,210 and $972,757 in the
years ended December 31, 1998 and 1997, respectively. These unrecognized losses
relate to Local Limited Partnerships whose cumulative equity in losses and
cumulative distributions have exceeded their total investment.
5. Federal Income Taxes
The following schedule reconciles the reported financial statement income to the
income reported on Form 1065, US. Partnership Return of Income:
1998 1997
----------- --------
Income (loss) per financial statements $ 128,162 $ 1,350,580
Distribution income recognized for
book purposes (198,606) (201,749)
Equity in losses not recognized
currently for book purposes (191,604) (771,008)
Gain on disposition of Oakdale for tax purposes
in excess of gain for book purposes - 2,008,162
Additional depreciation and
amortization for tax purposes 597,166 569,797
Other differences, net - (8,361)
------------ ------------
Income per tax return $ 335,118 $ 2,947,421
============ ============
The carrying value of the Partnership's Investment in Local Limited Partnerships
for financial reporting purposes was approximately $34,061,000 greater than the
carrying value of such assets for tax purposes in 1998. The difference was
partially a result of the fact that, for financial reporting purposes, the
Partnership does not recognize equity losses from a Local Limited Partnership
once a Local Limited Partnership's carrying value has been reduced to zero. Such
unrecognized losses totaled approximately $16,300,000 at December 31, 1998. The
remaining differences were mainly due to accelerated depreciation taken for tax
purposes. The carrying value of all other assets and liabilities was the same
for financial reporting and tax purposes.
6. Transactions with Affiliates
Included in general and administrative expenses are amounts that the Partnership
has paid or are payable to an affiliate of the Managing General Partner for
reimbursement of salaries and benefits.
In accordance with the Partnership Agreement, Boston Financial currently
receives a Management Fee equal to 10% of the Partnership's share of Cash Flow
from Local Limited Partnerships. However, the fee is subject to certain
limitation and to reduction under certain circumstances. The fee is
non-cumulative and is payable only from available Partnership funds. Management
Fees totaling $19,860 and $20,175 were incurred during 1998 and 1997,
respectively, which relate to cash distributions received in those years.
NOTES TO FINANCIAL STATEMENTS (continued)
7. Disposition of Investments in Local Limited Partnership
The new mortgagee for Oakdale Manor foreclosed on this property on June 3, 1997.
The only effect on the Partnership was cancellation of indebtedness income of
$1,247,144 related to a purchase note payable and its associated accrued
interest. No obligation was due on the purchase note payable as the note was
collateralized only by the Partnership's interest in Oakdale Manor, which, at
June 3, 1997, had a carrying value of zero. For tax purposes, the consequence of
the foreclosure was that investors may have had capital and/or ordinary gain and
resulting taxable income as a result of the disposal of this Local Limited
Partnership.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 159,298
<SECURITIES> 935,517
<RECEIVABLES> 11,359
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,107,649<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,069,511
<TOTAL-LIABILITY-AND-EQUITY> 1,107,649<F2>
<SALES> 0
<TOTAL-REVENUES> 260,178<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 132,016<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,162
<EPS-PRIMARY> 5.56
<EPS-DILUTED> 0
<FN>
<F1>Includes Other assets of $1,475
<F2>Includes Accounts payable to affiliate of $5,213 and Accounts payable and
accrued expenses of $32,925 <F3>Includes Distribution income of $198,606,
Investment income of $53,747 and Other income of $7,825 <F4>Includes General and
administrative expenses of $112,156 and Management fees of $19,860
</FN>
</TABLE>
