August 11, 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 Limited Partnership
Report on Form 10-QSB Edgar for Quarter Ended June 30, 1999
File Number 0-16796
Dear Sir/Madam:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act
of 1934, filed herewith is a copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH1-Q1.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 June 30, 1999 Commission file number 0-16796
------------------- --------------
Boston Financial Qualified Housing Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 04-2947737
(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 .
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Combined Balance Sheet - June 30, 1999
(Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 1999 and 1998 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 1999 3
Combined Statements of Cash Flows (Unaudited) - For the Three
Months Ended June 30, 1999 and 1998 4
Notes to the Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Items 1-6 13
SIGNATURE 14
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
COMBINED BALANCE SHEET
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 119,063
Tenant security deposits 4,040
Accounts receivable, net 162,557
Marketable securities, at fair value 1,912,433
Mortgage escrow deposits 2,749
Replacement reserve escrow 6,719
Bond trusts 122,093
Investments in Local Limited Partnerships,
net of reserve for valuation of
$685,201 (Note 1) 1,207,692
Deferred charges, net 41,115
Rental property, at cost, net of
accumulated depreciation 1,089,358
Other assets 28,805
Total Assets $ 4,696,624
==============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 15,277
Accounts payable and accrued expenses 42,280
Accrued interest 68,819
Tenant security deposits payable 5,522
Bonds payable 1,210,000
--------------
Total Liabilities 1,341,898
Minority interest in Local Limited Partnership 58,139
--------------
General, Initial and Investor Limited Partners' Equity 3,302,898
Net unrealized losses on marketable securities (6,311)
Total Partners' Equity 3,296,587
--------------
Total Liabilities and Partners' Equity $ 4,696,624
==============
The accompanying notes are integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
Revenue:
<S> <C> <C>
Rental $ 57,143 $ 56,625
Investment 34,373 31,591
Other 101,521 22,546
------------- -------------
Total Revenue 193,037 110,762
------------- -------------
Expenses:
General and administrative (includes reimbursements
to an affiliate of $34,370 and $30,863, respectively) 75,596 85,764
Rental operations, exclusive of depreciation 25,564 19,425
Interest 41,000 30,004
Depreciation 10,182 10,182
Amortization 6,692 8,539
------------- -------------
Total Expenses 159,034 153,914
------------- -------------
Income (loss) before minority interest in loss of Local
Limited Partnership and equity in losses of
Local Limited Partnerships 34,003 (43,152)
Minority interest in losses of Local Limited Partnership 182 25
Equity in losses of Local Limited Partnerships (220,419) (258,738)
(Note 1) ------------- -------------
Net Loss $ (186,234) $ (301,865)
============= =============
Net Loss allocated
To General Partners $ (1,862) $ (3,019)
To Limited Partners (184,372) (298,846)
------------- -------------
$ (186,234) $ (301,865)
============= =============
Net Loss per Limited Partnership Unit
(50,000 Units) $ (3.69) $ (5.98)
============= =============
The accompanying notes are integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Three Months Ended June 30, 1999
<TABLE>
<CAPTION>
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999 $ (399,606) $ 4,648 $ 3,884,090 $ 12,442 $ 3,501,574
----------- ----------- ----------- ------------- --------------
Comprehensive Loss:
Net change in net unrealized
gains on marketable
securities available
for sale - - - (18,753) (18,753)
Net Loss (1,862) - (184,372) - (186,234)
----------- ----------- ------------ ------------- --------------
Comprehensive Loss (1,862) - (184,372) (18,753) (204,987)
----------- ----------- ------------ ------------- --------------
Balance at June 30, 1999 $ (401,468) $ 4,648 $ 3,699,718 $ (6,311) $ 3,296,587
=========== ============ =========== ============= ==============
The accompanying notes are integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net cash used for operating activities $ (46,360) $ (65,283)
Net cash provided by (used for) investing activities (60,399) 68,542
------------- -------------
Net increase (decrease) in cash and cash equivalents (106,759) 3,259
Cash and cash equivalents, beginning 225,822 243,723
------------- -------------
Cash and cash equivalents, ending $ 119,063 $ 246,982
============= =============
The accompanying notes are integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE 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
about the Local Limited Partnerships that is included in the accompanying
financial statements is as of March 31, 1999 and 1998.
1. Investments in Local Limited Partnerships
The Partnership has acquired limited partnership interests in thirty-three Local
Limited Partnerships, excluding Hughes, which own and operate multi-family
housing complexes, all 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
acquired a 99% interest in the profits, losses, tax credits and cash flows from
operations of each of the Local Limited Partnerships, with the exception of
Barrington Manor, Graver Inn, 600 Dakota and Duluth, in each of which the
Partnership's interest is only 49.5%. Upon dissolution, proceeds will be
distributed according to each respective partnership agreement.
A summary of Investments in Local Limited Partnerships, excluding Hughes, at
June 30, 1999, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Capital contributions to Local Limited Partnerships and purchase
price paid to withdrawing partners of Local Limited Partnerships $ 36,256,165
Cumulative equity in losses of Local Limited Partnerships
(excluding cumulative unrecognized losses of $28,714,906) (36,108,013)
Cumulative cash distributions received from Local Limited Partnerships (1,824,559)
----------------
Investments in Local Limited Partnerships before adjustment (1,676,407)
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 4,725,764
Accumulated amortization of acquisition fees and expenses (1,156,464)
----------------
Investments in Local Limited Partnerships 1,892,893
Reserve for Valuation of Investments in
Local Limited Partnerships (685,201)
$ 1,207,692
</TABLE>
The Partnership's share of net losses of the Local Limited Partnerships for the
three months ended June 30, 1999, excluding Hughes, is $1,115,308. For the
three months ended June 30, 1999, the Partnership has not recognized
$984,521 of equity in losses relating to twenty-seven Local Limited
Partnerships where cumulative equity in losses and cumulative distributions from
Local Limited Partnerships exceeded its total investments in these Local Limited
Partnerships.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
2. Supplemental Combining Schedules
Balance Sheets
Boston Financial
Qualified Housing Hughes
Tax Credits Apartments
L.P. (A) Ltd.(B) Eliminations Combined (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 117,873 $ 1,190 $ - $ 119,063
Tenant security deposits - 4,040 - 4,040
Accounts receivable, net 216,047 - (53,490) 162,557
Marketable securities, at fair value 1,912,433 - - 1,912,433
Mortgage escrow deposits - 2,749 - 2,749
Replacement reserve escrow - 6,719 - 6,719
Bond trusts - 122,093 - 122,093
Investments in Local Limited
Partnerships, net 1,074,023 - 133,669 1,207,692
Deferred charges, net - 41,115 - 41,115
Rental property, at cost, net of
accumulated depreciation - 1,057,783 31,575 1,089,358
Other assets 23,941 4,864 - 28,805
---------------- -------------- ------------- -------------
Total Assets $ 3,344,317 $ 1,240,553 $ 111,754 $ 4,696,624
================ ============== ============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 15,277 $ 53,490 $ (53,490) $ 15,277
Accounts payable and accrued
expenses 32,453 9,827 - 42,280
Accrued interest - 68,819 - 68,819
Tenant security deposits payable - 5,522 - 5,522
Bonds payable - 1,210,000 - 1,210,000
---------------- -------------- ------------- -------------
Total Liabilities 47,730 1,347,658 (53,490) 1,341,898
---------------- -------------- ------------- -------------
Minority interest in Local Limited
Partnership - - 58,139 58,139
---------------- -------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity (Deficiency) 3,302,898 (107,105) 107,105 3,302,898
Net unrealized losses on marketable
securities (6,311) - - (6,311)
---------------- -------------- ------------- -------------
Total Partners' Equity (Deficiency) 3,296,587 (107,105) 107,105 3,296,587
---------------- -------------- ------------- -------------
Total Liabilities and
Partners' Equity (Deficiency) $ 3,344,317 $ 1,240,553 $ 111,754 $ 4,696,624
================ ============== ============= =============
</TABLE>
(A) As of June 30, 1999
(B) As of March 31, 1999
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
For the Three Months Ended June 30, 1999
Boston Financial
Qualified Housing Hughes
Tax Credits Apartments
L.P. (A) Ltd.(B) Eliminations Combined (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 57,143 $ - $ 57,143
Investment 34,227 146 - 34,373
Other 99,481 2,040 - 101,521
---------------- ------------- ------------ ---------------
Total Revenue 133,708 59,329 - 193,037
---------------- ------------- ------------ ---------------
Expenses:
General and administrative 75,596 - - 75,596
Rental operations, exclusive
of depreciation - 25,564 - 25,564
Interest - 41,000 - 41,000
Depreciation - 10,182 - 10,182
Amortization 5,886 806 - 6,692
---------------- ------------- ------------ ---------------
Total Expenses 81,482 77,552 - 159,034
---------------- ------------- ------------ ---------------
Income (Loss) before minority interest in
losses of Local Limited Partnership,
equity in losses of Local Limited
Partnerships and minority interest 52,226 (18,223) - 34,003
Minority interest in losses of
Local Limited Partnership - - 182 182
Equity in losses of Local
Limited Partnerships (238,460) - 18,041 (220,419)
---------------- ------------- ------------ ---------------
Net Income (Loss) $ (186,234) $ (18,223) $ 18,223 $ (186,234)
================ ============= ============ ===============
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Supplemental Combining Schedules (continued)
Statements of Cash Flows
For the Three Months Ended June 30,1999
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Hughes
Tax Credits Apartments
L.P. (A) Ltd.(B) Eliminations Combined (A)
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (43,486) $ (2,874) $ - $ (46,360)
Net cash used for investing activities (60,399) - - (60,399)
------------ ------------ ---------- --------------
Net decrease in cash and cash equivalents (103,885) (2,874) - (106,759)
Cash and cash equivalents, beginning 221,758 4,064 - 225,822
------------ ------------ ---------- --------------
Cash and cash equivalents, ending $ 117,873 $ 1,190 $ - $ 119,063
============ ============ ========== ==============
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(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 are 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 their suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
At June 30, 1999, the Partnership, including the combined entity (Hughes
Apartments, Ltd.), has cash and cash equivalents of $119,063 as compared with
$225,822 at March 31, 1999. The decrease is primarily attributable to cash used
for operations and advances to Local Limited Partnerships. These decreases to
cash and cash equivalents are partially offset by cash distributions received
from Local Limited Partnerships and proceeds from sales and maturities of
marketable securities in excess of purchases of marketable securities.
At June 30, 1999, approximately $1,346,000 of cash, cash equivalents and
marketable securities has been designated as Reserves. The Reserves were
established to be used for working capital of the Partnership and contingencies
related to the ownership of Local Limited Partnership interests. Reserves may be
used to fund Partnership operating deficits if the Managing General Partner
deems funding appropriate.
Since the Partnership invests as a limited partner, the Partnership has no
contractual duty to provide additional funds to Local Limited Partnerships
beyond its specified investment. Thus, at June 30, 1999, the Partnership had no
contractual or other obligation to any Local Limited Partnership, which had not
been paid or provided for.
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 provide such funds, voluntarily, in order to protect its
investment. During the period ended June 30, 1999, the Partnership advanced
$159,558 to the Local Limited Partnerships for various property issues.
Cash Distributions
No cash distributions to Limited Partners were made during the three months
ended June 30, 1999. In the event that distributions are received from Local
Limited Partnerships, the Managing General Partner has decided that such amounts
will be used to increase Reserves. No assurance can be given as to the amounts
of future distributions from the Local Limited Partnerships since many of the
Properties benefit from some type of federal or state subsidy and, as a
consequence, are subject to restrictions on cash distributions. Therefore, it is
expected that only a limited amount of cash will be distributed to investors
from this source in the future.
Results of Operations
The Partnership's results of operations for the three months ended June 30, 1999
resulted in a net loss of $186,234 as compared to a net loss of $301,865 for the
same period in 1998. The decrease in net loss is primarily attributable to an
increase in distribution income and a decrease in equity in losses of Local
Limited Partnerships 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 these partnerships.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions
Currently the Partnership consists of 34 properties. Most of the 32 Local
Limited Partnerships have stabilized operations. The majority of these
stabilized properties are operating a breakeven or are generating positive
operating cash flow. A number of 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, the Local General Partner of 600 Dakota, Graver Inn and
Barrington Manor, located in North Dakota, and Duluth, located in South Dakota,
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 consummated the transfer of
50% of the Partnership's capital and profits in the properties to an affiliate
of the Local General Partner in November 1997. Subsequently, the Local General
Partner transferred both its general partner interest and 48.5% of the
partnership interest in Barrington Manor and Duluth to a non profit general
partner effective June 17, 1999. As a result of this change, the date when the
Managing General Partner has the right to transfer the remaining interest to the
new Local General Partner was amended to reflect the June 17, 1999 effective
date. Accordingly, the Managing General Partner has the right to transfer the
Partnership's remaining interest to the new Local General Partner any time after
one year from June 17, 1999. In addition, the new Local General Partner has the
right to call the remaining interest after the tax credit period has expired.
On April 9, 1999, due to concerns over the financial viability of 600 Dakota and
Graver Inn and to avoid the potential risk of recapture of tax credits
associated with the properties, the Managing General Partner exercised its right
to transfer the Partnership's remaining interest in 600 Dakota and Graver Inn to
the Local General Partner. This transfer will not trigger a recapture event for
the Partnership nor have any impact on the Partnership's financial statement.
However, for tax purposes, this event will result in both Section 1231 gain and
cancellation of indebtedness income for the 1999 tax year. The Managing General
Partner continues to monitor closely the operations of Barrington Manor and
Duluth.
As previously reported, Boulevard Commons, located in Chicago, Illinois, is
experiencing operating deficits due to expenses increasing because of high
turnover at the property, security issues and increasing maintenance and capital
needs. As a result of these issues, Boulevard Common's mortgage went into
default. In October 1998, affiliates of the Managing General Partner replaced
the Local General Partners and a new unaffiliated non-profit general partner.
The interest of the original Local General Partners was converted to a special
limited partner interest with no right to participate in the management of the
Local Limited Partnership. Further, the Managing General Partner consummated the
transfer of 48% of the Partnership's capital and profits in the property to the
new Local General Partner. The Managing General Partner has the right to
transfer the Partnership's remaining interest to the new Local General Partner
any time after one year has elapsed.
Delmar, located in Gillette, Wyoming, has been experiencing operating deficits.
In addition, a significant amount of capital improvements on the property needs
to be completed in the very near future. In the past, deficits were funded by a
combination of the accrual of property management fees and the Local General
Partner. Due to the Managing General Partner's concerns regarding the long-term
viability of this property, the Managing General Partner negotiated with the
Local General Partner a plan that will ultimately transfer ownership of the
property to the Local General Partner. Effective January 1, 1998, the Managing
General Partner consummated the transfer of 49.5% of the Partnership's capital
and profits in the property to the Local General Partner. The Managing General
Partner has the right to transfer the Partnership's remaining interest in the
property to the Local General Partner any time after one year has elapsed.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
As previously reported, the Managing General Partner at Pebble Creek, located in
Arlington, Texas, the Managing General Partner is still negotiating with HUD to
extend and/or modify the existing workout agreement which expired May 31, 1998.
However, it is possible that the Partnership will not be able to retain its
interest in Pebble Creek. 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, Cass House and Verdean Gardens, both located in
Massachusetts and share a common Local General Partner, continue to operate
below break-even. Both properties, as well as Bittersweet Apartments, receive a
subsidy through the State Housing Assistance Rental Program (SHARP), which is an
important part of their annual income. As originally conceived, the SHARP
subsidy was scheduled to decline over time to match expected 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
Cass, Verdean and Bittersweet) structured workouts that included additional
subsidy in the form of Operating Deficit Loans (ODL's). Effective October 1,
1997, the Massachusetts Housing Finance Agency (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 General Partners of Cass, Verdean and Bittersweet
to find a solution to the problems that will result from the withdrawn
subsidies. Due to the existing operating deficits and the dependence on these
subsidies, Cass and Verdean have defaulted on their mortgage obligations, and it
is likely that Bittersweet will default on its mortgage obligation in the near
future. On December 16, 1998, the Partnership joined with the RSO and about 20
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.
As previously reported, the Local General Partner for Brentwood Manor II, in
Nashua, New Hampshire, filed for protection under the provisions of the Chapter
7 bankruptcy laws. Consequently, the Local General Partner was removed as
general partner of the Local Limited Partnership and replaced with an affiliate
of the Managing General Partner. In addition, the Managing General Partner
replaced the former Local General Partner as management agent of the property
with an unaffiliated third-party management agent. Although full mortgage
payments are being made at this time, partial mortgage payments were made
earlier in 1998 prior to the Local General Partner declaring bankruptcy. The
lender required that the small deficit generated by the deficient payments be
cured immediately. The Managing General Partner is negotiating with both the
lender and the former Local General Partner to develop a plan for the payment of
this amount. It is possible that Partnership Reserves will be used to pay this
deficit.
Sierra Pointe, located in Las Vegas, Nevada, and Terrace, located in Oklahoma
City, Oklahoma, which share a common Local General Partner, are experiencing
operating deficits due to occupancy issues. The March 31, 1999, occupancy for
Sierra Pointe was 85% and for Terrace was 91%. The Managing General Partner and
the Local General Partner are working with the local housing authorities in both
Nevada and Oklahoma to fill vacant units. The Managing General Partner continues
to work with the Local General Partner and management agent in an effort to
stabilize operations and improve occupancy. In addition, the Managing General
Partner is negotiating with the Local General Partner 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.
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for assessing impairment of
its real estate assets and
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
investments in local limited partnerships. Each asset is analyzed by real estate
experts to determine if an impairment indicator exists. If so, the carrying
value is compared to the future cash flows expected to be derived from the
asset. If the total undiscounted cash flows are less than the carrying value, a
provision to write down the asset to fair value will be charged against income.
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. As of August 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., 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 has reached a memorandum
of understanding to acquire The Boston Financial Group Limited Partnership. The
transaction remains subject to final due diligence, legal agreements, and
regulatory approvals with no guarantee that the acquisition will be completed.
The two companies are targeting to complete the transactions by the end of
September.
Headquartered in New York and Atlanta, Lend Lease Real Estate Investments, Inc.
has regional offices in 12 cities nationwide. Worldwide, Lend Lease Real Estate
Investments operates from more than 30 cities on five continents: North America,
Europe, Asia, Australia and South America. The company ranks as the leading U.S.
manager of tax-exempt assets invested in real estate. It is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. 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.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(a)Exhibits - None
(b)Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: August 11, 1999 BOSTON FINANCIAL QUALIFIED HOUSING
LIMITED PARTNERSHIP
By: 29 Franklin Street, Inc.,
its Managing General Partner
/s/Randolph G. Hawthorne
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 119,063
<SECURITIES> 1,912,433
<RECEIVABLES> 162,557
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 1,089,358
<DEPRECIATION> 000
<TOTAL-ASSETS> 4,696,624<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 1,210,000
000
000
<COMMON> 000
<OTHER-SE> 3,296,587
<TOTAL-LIABILITY-AND-EQUITY> 4,696,624<F2>
<SALES> 000
<TOTAL-REVENUES> 193,037<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 118,034<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 41,000
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (186,234)<F5>
<EPS-BASIC> (3.69)
<EPS-DILUTED> 000
<FN>
<F1>Included in total assets is $4,040 of tenant security deposits, Investments
in Local Limited Partnerships of $1,207,692, deferred charges, net $41,115, bond
trusts of $122,093, mortgage escrow deposits of $2,749, replacement reserve
escrow of$6,719 and other assets of $28,805.
<F2>Included in total liability and equity is accounts payable to affiliates
$15,277, accounts payable and accrued expenses of $42,280, accrued interest of
$68,819, tenant security deposits payable of $5,522, and $58,139 of minority
interest in Local Limited Partnership. <F3>Total revenue includes rental of
$57,143, investment of $34,373 and other of $101,521. <F4>Included in other
expenses is general and administrative of $75,596, rental operations, exclusive
of depreciation of $25,564, depreciation of $10,182 and amortization of $6,692.
<F5>Net loss reflects equity in losses of Local Limited Partnerships of $220,419
and minority interest in loss of Local Limited Partnership of $182.
</FN>
</TABLE>
