June 29, 2000
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC. 20549
Boston Financial Qualified Housing Limited Partnership
Form 10-KSB Annual Report for the Year Ended March 31, 2000
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 one copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH110K-K.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16796
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 Identification No.)
incorporation or organization)
101 Arch Street, Boston, Massachusetts 02110-1106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-3911
----------------------------
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)
50,000
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Subsection 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
State the aggregate sales price of partnership units held by nonaffiliates of
the registrant.
$50,000,000 as of March 31, 2000
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-KSB INTO WHICH THE
DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS: (2) ANY
PROXY OR INFORMATION STATEMENT AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE
424(b) OR (c) UNDER THE SECURITIES ACT OF 1933.
Part of Report on
Form 10-KSB into
Which the Document
Documents incorporated by reference is Incorporated
Post-Effective Amendments Nos. 1 through 3
to the Form S-11 Registration Statement,
File # 33-11910 Part I, Item 1
Report on Form 8-K filed on July 7, 1988 Part I, Item 1
Report on Form 8-K filed on January 20, 1989 Part I, Item 1
Acquisition Reports Part I, Item 1
Prospectus - Sections Entitled:
"Estimated Use of Proceeds" Part III, Item 13
"Management Compensation and Fees" Part III, Item 13
"Profits and Losses for Tax Purposes, Tax
Credits and Cash Distributions" Part III, Item 13
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART 1 Page No.
Item 1 Business K-3
Item 2 Properties K-5
Item 3 Legal Proceedings K-13
Item 4 Submission of Matters to a
Vote of Security Holders K-13
PART II
Item 5 Market for the Registrant's Units
and Related Security Holder Matters K-13
Item 6 Management's Discussion and Analysis of Financial
Condition and Results of Operations K-14
Item 7 Financial Statements and Supplementary Data K-18
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure K-18
PART III
Item 9 Directors and Executive Officers
of the Registrant K-18
Item 10 Management Remuneration K-19
Item 11 Security Ownership of Certain Beneficial
Owners and Management K-19
Item 12 Certain Relationships and Related
Transactions K-20
PART IV
Item 13 Exhibits and Reports on Form 8-K K-22
SIGNATURES K-23
<PAGE>
PART I
Item 1. Business
Boston Financial Qualified Housing Limited Partnership (the "Partnership") is a
limited partnership formed on January 22, 1987 under the Uniform Limited
Partnership Act of the State of Delaware. The Partnership's partnership
agreement ("Partnership Agreement") authorized the sale of up to 50,000 units of
Limited Partnership Interest ("Units") at $1,000 per Unit, adjusted for certain
discounts. The Partnership raised $49,963,740 ("Gross Proceeds"), net of
discounts of $36,260, through the sale of 50,000 Units. Such amounts exclude
five unregistered Units previously acquired for $5,000 by the Initial Limited
Partner, which is also one of the General Partners. The offering of Units
terminated on April 29, 1988.
The Partnership is engaged solely in the business of real estate investment.
Accordingly, a presentation of information about industry segments is not
applicable and would not be material to an understanding of the Partnership's
business taken as a whole.
The Partnership has invested as a limited partner in other limited partnerships
("Local Limited Partnerships") which own and operate residential apartment
complexes ("Properties"), all of which benefit from some form of federal, state
or local assistance programs and which qualify for the low-income housing tax
credits ("Tax Credits") that were added to the Internal Revenue Code (the "Code)
by the Tax Reform Act of 1986. The investment objectives of the Partnership
include the following: (i) to provide current tax benefits in the form of Tax
Credits which qualified limited partners may use to offset their federal income
tax liability; (ii) to preserve and protect the Partnership's capital; (iii) to
provide limited cash distributions from property operations which are not
expected to constitute taxable income during the expected duration of the
Partnership's operations; and (iv) to provide cash distributions from sale or
refinancing transactions. There cannot be any assurance that the Partnership
will attain any or all of these investment objectives. A more detailed
discussion of these investment objectives, along with the risks in achieving
them, is contained in the section of the prospectus entitled "Investment
Objectives and Policies - Principal Investment Policies" which is herein
incorporated by this reference.
Table A on the following page lists the properties originally acquired by the
Local Limited Partnerships in which the Partnership has invested. Item 6 of this
Report contains other significant information with respect to such Local Limited
Partnerships. As required by applicable rules, the terms of the acquisition of
Local Limited Partnership interests have been described in supplements to the
Prospectus and collected in three post-effective amendments to the Registration
Statement and in two Form 8-K filings listed in Part IV of this Report on Form
10-KSB (collectively, the "Acquisition Reports"); such descriptions are
incorporated herein by this reference.
<PAGE>
<TABLE>
<CAPTION>
TABLE A
SELECTED LOCAL LIMITED
PARTNERSHIP DATA
(Unaudited)
Properties owned by Date
Local Limited Interest
Partnerships Location Acquired
<S> <C> <C>
Barrington Manor * Fargo, ND 12/31/87
Bingham Bingham, ME 12/30/87
Birmingham Village Randolph, ME 12/30/87
Bittersweet Randolph, MA 10/27/87
Boulevard Commons Chicago, IL 07/14/88
Brentwood Manor II Nashua, NH 01/20/89
Cass House/Roxbury Hills Boston, MA 06/08/88
Chestnut Lane Newnan, GA 08/01/88
Coronado Courts Douglas, AZ 12/18/87
Country Estates Glennville, GA 03/01/88
600 Dakota ** Wahpeton, ND 10/01/88
Delmar * Gillette, WY 10/01/88
Duluth * Sioux Falls, SD 10/01/88
Elmore Hotel Great Falls, MT 12/22/87
Garver Inn ** Fargo, ND 12/31/87
Hazel-Winthrop Chicago, IL 12/30/87
Hughes Mandan, ND 12/31/87
Lakeview Heights Clearfield, UT 12/30/87
Logan Plaza * New York, NY 05/10/88
New Medford Hotel Medford, OR 12/22/87
Heritage View New Sweden, ME 12/30/87
Park Terrace Dundalk, MD 01/20/89
Pebble Creek Arlington, TX 06/20/88
Hillcrest III Perryville, MO 03/31/89
Pine Village Pine Mountain, GA 03/01/88
Rolling Green Edmond, OK 09/30/87
Sierra Pointe Las Vegas, NV 09/01/87
Sierra Vista Aurora, CO 09/30/87
Talbot Village Talbotton, GA 03/01/88
Terrace Oklahoma City, OK 11/20/87
Trenton Salt Lake City, UT 12/30/87
Verdean Gardens New Bedford, MA 05/31/88
Willowpeg Village Rincon, GA 03/01/88
Windsor Court Aurora, CO 12/30/87
</TABLE>
* The Partnership's interest in profits and losses of each Local Limited
Partnership arising from normal operations is 99%, except for Logan Plaza
where the Partnership's ownership interest is 98% and Barrington Manor,
Delmar and Duluth where the Partnership's ownership interest is 49.5%.
Profits and losses arising from sale or refinancing transactions are
allocated in accordance with the respective Local Limited Partnership
Agreements.
** The Managing General Partner tranferred its interests in 600 Dakota and
Graver Inn to the Local General Partner. The transfers were effective
April 9, 1999.
<PAGE>
Although the Partnership's investments in Local Limited Partnerships are not
subject to seasonal fluctuations, the Partnership's equity in losses of Local
Limited Partnerships, to the extent it reflects the operations of individual
properties, may vary from quarter to quarter based upon changes in occupancy and
operating expenses as a result of seasonal factors.
With the exception of Hughes, 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. As of March 31, 2000, the
following Local Limited Partnerships have a common Local General Partner or
affiliated group of Local General Partners accounting for the specified
percentage of capital contributions to Local Limited Partnerships: (i) Rolling
Green, Sierra Vista, Terrace, Windsor and Sierra Point Limited Partnerships,
representing 30.56%, have Phillip Abrams Ventures, Inc. and PDW, Inc. as Local
General Partners; (ii) Barrington Manor and Duluth Limited Partnerships,
representing 0.79%, have Jerry L. Meide and RRABB, Inc. as Local General
Partners (see discussion below); (iii) New Medford and Oregon Landmark Limited
Partnerships, representing 6.69%, have WHP Holdings, Inc. as the Local General
Partners; (iv) Trenton, Delmar and Lakeview Heights Limited Partnerships,
representing 2.66%, have PSC Real Estate, Inc. and J. Michael Queenan &
Associates, Inc. (which is a corporation controlled by J. Michael Queenan) as
Local General Partners; (v) Bingham, Birmingham and New Sweden Limited
Partnerships, representing 2.00%, have Charles B. Mattson and Todd Mattson as
Local General Partners; (vi) Cass House and Verdean Gardens Limited
Partnerships, representing 12.74%, have Cruz Development Corporation as the
Local General Partner; and (vii) Willowpeg Village, Pine Village, Glennville,
Talbot Village and Chestnut Lane Limited Partnerships, representing 2.81%, have
Norsouth Corporation as the General Partner. The Local General Partners of the
remaining Local Limited Partnerships are identified in the Acquisition Reports,
which are incorporated herein by reference.
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 continued success of the
Partnership will depend on many outside 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, or 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
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. Since all of the properties benefit from some form of
government assistance, the Partnership is subject to the risks inherent in that
area including decreased subsidies, difficulties in finding suitable tenants and
obtaining permission for rent increases. In addition, any Tax Credits allocated
to investors with respect to a property are subject to recapture to the extent
that the property or any portion thereof ceases to qualify for the Tax Credits.
Other future changes in federal and state income tax laws affecting real estate
ownership or limited partnerships could have a material and adverse affect on
the business of the Partnership.
The Partnership is managed by 29 Franklin Street, Inc., the Managing General
Partner of the Partnership. The other General Partner of the Partnership is
Franklin 29 Limited Partnership. The Partnership, which does not have any
employees, reimburses Lend Lease Real Estate Investments, Inc. ("Lend Lease"),
an affiliate of the General Partner, for certain expenses and overhead costs. A
complete discussion of the management of the Partnership is set forth in Item 9
of this Report.
Item 2. Properties
The Partnership owns limited partnership interests in thirty-two Local Limited
Partnerships which own and operate Properties, all of which benefit from some
form of federal, state or local assistance program and which qualify for the Tax
Credits added to the Code by the Tax Reform Act of 1986. The Partnership's
ownership interest in each Local Limited Partnership is 99%, except for Logan
Plaza where the Partnership's ownership interest is 98% and Barrington Manor,
Delmar, and Duluth where the Partnership's ownership interest is 49.5%.
Each of the Local Limited Partnerships has received an allocation of Tax Credits
from its relevant state tax credit agency. In general, the Tax Credit runs for
ten years from the date the Property is placed in service. The required holding
period (the "Compliance Period") of the Properties is fifteen years. During
these fifteen years, the Properties must satisfy rent restrictions, tenant
income limitations and other requirements, as promulgated by the Internal
Revenue Service, in order to maintain eligibility for the Tax Credit at all
times during the Compliance Period. Once a Local Limited Partnership has become
eligible for the Tax Credits, it may lose such eligibility and suffer an event
of recapture if its Property fails to remain in compliance with the
requirements. To date, none of the Local Limited Partnerships have suffered an
event of recapture of Tax Credits.
In addition, some of the Local Limited Partnerships have obtained one or a
combination of different types of loans such as: i) below market rate interest
loans; ii) loans provided by a redevelopment agency of the town or city in which
the property is located at favorable terms; or iii) loans that have repayment
terms that are based on a percentage of cash flow.
The schedules on the following pages provide certain key information on the
Local Limited Partnership interests acquired by the Partnership.
<PAGE>
<TABLE>
<CAPTION>
K-12
Capital Contributions
Local Limited Partnership Total Paid Mtge. Loans Occupancy at
Property Name Number of Committed at Through Payable at Type of March 31,
Property Location Apts. Units March 31, 2000 March 31, 2000 December 31, 1999 Subsidy * 2000
-----------------------------------------------------------------------------------------------------------------------------------
Barrington Manor
Limited Partnership
Barrington Manor
<S> <C> <C> <C> <C> <C> <C>
Fargo, ND 18 $ 175,200 $ 175,200 $ 575,000 Section 8 89%
Bingham Family Housing
Associates (A Limited
Partnership)
Bingham
Bingham, ME 24 240,900 240,900 1,157,452 FmHA 96%
Birmingham Housing Associates
(A Limited Partnership)
Birmingham Village
Randolph, ME 24 236,520 236,520 1,152,036 FmHA 100%
MB Bittersweet Associates Limited
Partnership (a Massachusetts
Limited Partnership)
Bittersweet
Randolph, MA 35 620,500 620,500 2,335,068 None 97%
Boulevard Commons
Limited Partnership
Boulevard Commons
Chicago, IL 212 4,527,850 4,527,850 10,447,050 Section 8 84%
Michael J. Dobens
Limited Partnership I
Brentwood Manor II
Nashua, NH 22 300,000 300,000 690,000 Section 8 95%
<PAGE>
Capital Contributions
Local Limited Partnership Total Paid Mtge. Loans Occupancy at
Property Name Number of Committed at Through Payable at Type of March 31,
Property Location Apts. Units March 31, 2000 March 31, 2000 December 31, 1999 Subsidy * 2000
------------------------------------------------------------------------------------------------------------------------------------
Cass House Associates Limited
Partnership (a Massachusetts
Limited Partnership)
Cass House/Roxbury Hills
Boston, MA 111 2,141,090 2,141,090 12,721,418 None 93%
Chestnut Lane Limited
Partnership (A Limited
Partnership)
Chestnut Lane
Newnan, GA 50 282,510 282,510 1,464,451 None 92%
Coronado Courts Limited
Partnership
Coronado Courts
Douglas, AZ 145 1,800,000 1,800,000 3,654,293 Section 8 97%
Glennville Properties
(A Limited Partnership)
Country Estates
Glennville, GA 24 121,910 121,910 592,177 FmHA 100%
600 Dakota Properties (A)
Limited Partnership
600 Dakota
Wahpeton, ND
Delmar Housing Associates
Limited Partnership
Delmar
Gillette, WY 16 128,000 128,000 424,725 Section 8 99%
Capital Contributions
Local Limited Partnership Total Paid Mtge. Loans Occupancy at
Property Name Number of Committed at Through Payable at Type of March 31,
Property Location Apts. Units March 31, 2000 March 31, 2000 December 31, 1999 Subsidy * 2000
-----------------------------------------------------------------------------------------------------------------------------------
Duluth Limited Partnership
Duluth
Sioux Falls, SD 11 107,000 107,000 252,659 Section 8 90%
Oregon Landmark-Three
Limited Partnership
Elmore Hotel
Great Falls, MT 60 1,022,000 1,022,000 3,111,223 Section 8 100%
Graves Inn (A)
Limited Partnership
Graver Inn
Fargo, ND
Hazel-Winthrop Apartments (An
Illinois Limited Partnership)
Hazel-Winthrop
Chicago, IL 30 350,400 350,400 2,102,096 Section 8 100%
Heritage Court
Limited Partnership
Park Terrace
Dundalk, MD 101 2,048,750 2,048,750 1,673,835 None 98%
Hughes Apartments
Limited Partnership
Hughes
Mandan, ND 47 379,453 379,453 1,210,000 Section 8 100%
<PAGE>
Capital Contributions
Local Limited Partnership Total Paid Mtge. Loans Occupancy at
Property Name Number of Committed at Through Payable at Type of March 31,
Property Location Apts. Units March 31, 2000 March 31, 2000 December 31, 1999 Subsidy * 2000
-----------------------------------------------------------------------------------------------------------------------------------
Lakeview Heights Apartments,
Ltd. (A Limited Partnership)
Lakeview Heights
Clearfield, UT 83 584,000 584,000 2,732,324 Section 8 96%
Logan Plaza Associates
Logan Plaza
New York NY 130 2,240,000 2,240,000 10,563,698 None 95%
New Medford Hotel Associates
Limited Partnership
New Medford Hotel
Medford, OR 76 1,365,100 1,365,100 3,106,176 Section 8 100%
New Sweden Housing Associates
(A Limited Partnership)
Heritage View
New Sweden, ME 24 237,250 237,250 1,154,992 FmHA 75%
2225 New York Avenue, Ltd.
(A Limited Partnership)
Pebble Creek
Arlington, TX 352 2,512,941 2,512,941 7,955,434 Section 8 95%
Perryville Associates I, L.P.
(A Limited Partnership)
Hillcrest III
Perryville, MO 24 128,115 128,115 588,931 FmHA 96%
Pine Village Limited Partnership
(A Limited Partnership)
Pine Village
Pine Mountain, GA 36 188,340 188,340 933,926 FmHA 97%
Capital Contributions
Local Limited Partnership Total Paid Mtge. Loans Occupancy at
Property Name Number of Committed at Through Payable at Type of March 31,
Property Location Apts. Units March 31, 2000 March 31, 2000 December 31, 1999 Subsidy * 2000
-----------------------------------------------------------------------------------------------------------------------------------
Rolling Green Housing Associates,
Ltd. (a Limited Partnership)
Rolling Green
Edmond, OK 166 1,855,650 1,855,650 4,718,190 Section 8 100%
Sierra Vista Housing Associates,
Ltd. (a Limited Partnership)
Sierra Pointe
Las Vegas, NV 209 3,016,008 3,016,008 7,348,022 Section 8 80%
Sundance Housing Associates,
Ltd. (A Limited Partnership)
Sierra Vista
Aurora, CO 160 2,271,751 2,271,751 6,200,598 Section 8 100%
Talbot Village Limited Partnership
(A Limited Partnership)
Talbot Village
Talbotton, GA 24 121,180 121,180 598,214 FmHA 100%
Terrace Housing Associates,
Ltd. (a Limited Partnership)
Terrace
Oklahoma City, OK 206 1,950,550 1,950,550 5,189,999 Section 8 84%
Trenton Apartments, Ltd.
(A Limited Partnership)
Trenton
Salt Lake City, UT 37 237,250 237,250 810,756 Section 8 100%
<PAGE>
Capital Contributions
Local Limited Partnership Total Paid Mtge. Loans Occupancy at
Property Name Number of Committed at Through Payable at Type of March 31,
Property Location Apts. Units March 31, 2000 March 31, 2000 December 31, 1999 Subsidy * 2000
-----------------------------------------------------------------------------------------------------------------------------------
Verdean Gardens Associates Limited
Partnership (a Massachusetts
limited partnership)
Verdean Gardens
New Bedford, MA 110 2,409,000 2,409,000 7,385,999 None 92%
Willowpeg Village Limited Partnership
(A Limited Partnership)
Willowpeg Village
Rincon, GA 57 288,400 288,400 1,468,907 FmHA 100%
Windsor Court Housing Associates,
Ltd. (a Limited Partnership)
Windsor Court
Aurora, CO 143 1,815,500 1,815,500 4,447,203 Section 8 99%
------- ------------ ------------ -------------
2,767 $ 35,703,118 $ 35,703,118 $ 108,766,852
======= ============ ============ =============
</TABLE>
*FmHA This subsidy, which is authorized under Section 515 of the
Housing Act of 1949, can be one or a combination of different
types of financing. For instance, FmHA may provide: 1) direct
below-market-rate mortgage loans for rural rental housing;
2) mortgage interest subsidies which effectively lower the
interest rate of the loan to 1%;3) a rental assistance subsidy
to tenants which allows them to pay no more than 30% of their
monthly income as rent with the balance paid by the federal
government; or 4) a combination of any of the above.
Section 8 This subsidy, which is authorized under Section 8 of Title
II of the Housing and Community Development Act of 1974,
allows qualified low-income tenants to pay 30% of their
monthly income as rent with the balance paid by the federal
government.
(A) Effective April 9, 1999, the Managing General Partner
transferred its interests in 600 Dakota and Graver Inn to the
Local Limited Partner. These Local Limited Partnerships had
capital contributions and mortgage payable amounts of $932,500
and $2,611,386, respectively, as of the transfer date.
<PAGE>
K-19
One Local Limited Partnership invested in by the Partnership, Boulevard Commons,
represents more than 10% of the total capital contributions made to Local
Limited Partnerships by the Partnership. Boulevard Commons is a 212-unit
rehabilitation apartment complex with six buildings located in Chicago,
Illinois.
Boulevard Commons was initially financed by a first mortgage at 10% interest,
insured by the U.S. Department of Housing and Urban Development ("HUD") and was
refinanced at 8.875% on April 6, 1995. Principal and interest payments of
$74,916 commenced June 1, 1995 and continue to May 1, 2035. In addition, there
is a junior mortgage payable to the City of Chicago which bears interest at 3%
per annum and matures at the later of July 1, 2030 or the retirement of the FHA
insured mortgage. Principal and interest are due in a lump sum upon maturity.
Duration of leases for occupancy in the Properties described above is six to
twelve months. The Managing General Partner believes the described herein are
adequately covered by insurance.
Additional information required under this Item, as it pertains to the
Partnership, is contained in Items 1, 6 and 7 of this Report.
Item 3. Legal Proceedings
As previously reported, Cass House and Verdean Gardens, which are 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 possible that Bittersweet may 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.
Except as noted above, 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.
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 a public
market will develop. If a Limited Partner desires to sell Units, the buyer of
those Units will be required to comply with the minimum purchase and retention
requirements and investor suitability standards imposed by applicable federal or
state securities laws and the minimum purchase and retention requirements
imposed by the Partnership. The price to be paid for the Units, as well as the
commissions to be received by any participating broker-dealers, will be subject
to negotiation by the Limited Partner seeking to sell his Units. Units will not
be redeemed or repurchased by the Partnership.
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.
As of June 15, 2000, there were 3,291 record holders of Units of the
Partnership.
Cash distributions, when made, are paid annually. No cash distributions were
paid during the years ended March 31, 2000 and 1999.
Item 6. 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 and interest rates.
Liquidity and Capital Resources
At March 31, 2000, the Partnership has cash and cash equivalents of $331,824 as
compared with $221,758 at March 31, 1999. The increase is primarily attributable
to proceeds from sales and maturities of marketable securities in excess of
purchases of marketable securities. These increases to cash and cash equivalents
are partially offset by cash used for operations and advances to Local Limited
Partnerships in excess of cash distributions received from Local Limited
Partnerships.
At March 31, 2000, approximately $356,000 of cash, cash equivalents and
marketable securities has been designated as Reserves as defined in the
Partnership Agreement. The Reserves were established to be used for working
capital of the Partnership and contingencies related to the ownership of Local
Limited Partnership interests. 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 March 31, 2000, 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 interest to provide such funds, voluntarily, in order to protect its
investment. During the year ended March 31, 2000, the Partnership advanced
$947,955 to four Local Limited Partnerships for various property issues.
Cash Distributions
No cash distributions to Limited Partners were made during the two years ended
March 31, 2000. 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.
Results of Operations
2000 versus 1999
The Partnership's results of operations for the year ended March 31, 2000
resulted in a net loss of $1,439,749 as compared to a net loss of $514,410 for
the same period in 1999. The increase in net loss is primarily attributable to
provision for valuation of investment in Local Limited Partnership of $984,445
caused by the write-off of uncollectable advances made to four Local Limited
Partnerships. This is offset by 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 distributions exceeded its total
investment in these Partnerships.
Low-Income Housing Tax Credits
The 2000 and 1999 Low-Income Housing Tax Credits per Unit for individuals were
$40.76 and $85.69, respectively. The 2000 and 1999 Low-Income Housing Tax
Credits per Unit for corporations were $46.25 and $92.64, respectively. The Tax
Credits per Limited Partnership Unit stabilized in 1991 at approximately $148.00
per Unit for individuals and $158.00 per Unit for corporations. The credits have
begun to decrease as certain properties are reaching the end of the ten-year
credit period. However, because the Tax Credit compliance periods generally
extend five years beyond the Tax Credits, the Partnership intends to hold its
Local Limited Partnership investments for the foreseeable future.
Property Discussions
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 its
partnership interest in Barrington Manor and Duluth to a non-profit general
partner effective June 17, 1999. Additionally, the Managing General Partner was
granted the right to transfer the Partnership's remaining interest to the new
Local General Partner any time after one year from June 17, 1999. Further, the
new Local General Partner was granted the right to call the remaining interest
after the tax credit period has expired.
In addition, 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 statements. However, for tax purposes, this event resulted 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.
The Local General Partner of Chestnut Lane, located in Newman, Georgia,
Glenville Properties, located in Glenville, Georgia, Pine Village, located in
Pine Mountain, Georgia, Talbot Village, located in Talbottom, Georgia and
Willopeg Village, located in Rincon, Georgia, expressed to the Managing General
Partner some concerns over the long-term financial health of the properties. In
response to these concerns and to reduce possible future risk, the Managing
General Partner is in negotiations with the Local General Partner to develop a
plan that will ultimately transfer ownership of the properties to the Local
General Partner. The plan includes provisions to minimize the risk of recapture.
As previously reported, Boulevard Commons, located in Chicago, Illinois, has
been experiencing operating deficits due to increased expenses 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 with 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 a plan with
the Local General Partner 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. As
previously reported, the Managing General Partner at Pebble Creek, located in
Arlington, Texas, was in negotiations with HUD to extend and/or modify the
existing workout agreement which expired May 31, 1998. In December 1998, the
Local General Partner signed a Provisional Workout Agreement (PWA) with HUD. As
part of the PWA, the Partnership assumed the out-of-pocket costs of the workout
totaling approximately $700,000. This amount is included in investments in Local
Limited Partnerships. Going forward, the Managing General Partner will continue
to pursue HUD " Mark to Market" restructuring. In the meantime, the Managing
General Partner will continue to work closely with the Local General Partners to
monitor the property's operations. As of March 31, 2000, occupancy was 95%.
As previously reported, Cass House and Verdean Gardens, which are 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 possible that Bittersweet may 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, continue to
experience operating deficits due to occupancy issues. The March 31, 2000,
occupancy for Sierra Pointe was 80% and for Terrace was 84%. As previously
reported, the Managing General Partner has been negotiating a plan with the
Local General Partner to ultimately transfer ownership of the properties to the
Local General Partner. With respect to Sierra Pointe, effective May 2000, 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. This plan
includes provisions to minimize the risk of recapture. 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. With
respect to Terrace, the Managing General Partner and Local General Partner have
also been successful in negotiating a transfer of the ownership of the property
to the Local Limited Partner, however, they are awaiting HUD approval of the
plan.
The Partnership has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. The investments are
analyzed by real estate experts to determine if impairment indicators exist. If
so, the carrying value is compared to the undiscounted future cash flows
expected to be derived from the asset. If there is a significant impairment in
carrying value, a provision to write down the asset to fair value will be
recorded in the Partnership's financial statements.
Inflation and Other Economic Factors
Inflation had no material impact on the operations or financial condition of the
Partnership for the years ended March 31, 2000 and 1999.
Since some of the Properties benefit from some sort of government assistance,
the Partnership is subject to the risks inherent in that area including
decreased subsidies, difficulties in finding suitable tenants and obtaining
permission for rent increases. In addition, any Tax Credits allocated to
investors with respect to a Property are subject to recapture to the extent that
the Property or any portion thereof ceases to qualify for the Tax Credits.
Certain of the Properties listed in this Report are located in areas suffering
from poor economic conditions. Such conditions could have an adverse effect on
the rent or occupancy levels at such Properties. Nevertheless, management
believes that the generally high demand for below-market rate housing will tend
to negate such factors. However, no assurance can be given in this regard.
Other Development
Lend Lease Real Estate Investments, Inc.("Lend Lease"), the U.S. subsidiary of
Lend Lease Corporation and the leading U.S. institutional real estate advisor,
as ranked by assets under management, acquired The Boston Financial Group
Limited Partnership ("Boston Financial") on November 3, 1999.
Headquartered in New York and Atlanta, Lend Lease Corporation has regional
offices in 12 cities nationwide. The company ranks as the leading U.S. manager
of tax-exempt assets invested in real estate. Lend Lease is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. Worldwide, Lend Lease Corporation
operates from more than 30 cities on five continents: North America, Europe,
Asia, Australia and South America. In addition to real estate investments, the
Lend Lease Group operates in the areas of property development, project
management and construction, and capital services (infrastructure).
Item 7. Financial Statements and Supplementary Data
Information required under this Item is submitted as a separate section of this
Report. See Index on page F-1 hereof.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors and Executive Officers of the Registrant
The Managing General Partner of the Partnership is 29 Franklin Street, Inc., a
Massachusetts corporation (the "Managing General Partner"), an affiliate of Lend
Lease Estate Investments, Inc. ("Lend Lease"). The Managing General Partner was
incorporated in January 1987. Randolph G. Hawthorne is the Chief Operating
Officer of the Managing General Partner and had the primary responsibility for
evaluating, selecting and negotiating investments for the Partnership. The
Investment Committee of the Managing General Partner approved all investments.
The names and positions of the principal officers and the directors of the
Managing General Partner are set forth below.
Name Position
Jenny Netzer President, Managing Director
Michael H. Gladstone Vice President, Managing Director
Randolph G. Hawthorne Vice President, Managing Director
Paul F. Coughlan Vice President
William E. Haynsworth Vice President
The other General Partner of the Partnership is Franklin 29 Limited Partnership,
a Massachusetts limited partnership ("Franklin L.P.") that was organized in
January 1987. The General Partner of Franklin L.P. is 29 Franklin Street, Inc.
The Managing General Partner provides day-to-day management of the Partnership.
Compensation is discussed in Item 10 of this report. Such day-to-day management
does not include the management of the Properties.
The business experience of each of the persons listed above is described below.
There is no family relationship between any of the persons listed in this
section.
Jenny Netzer, age 44, Principal, Head of Housing and Community Investing. -
Responsible for tax credit investment programs to institutional clients. Joined
Lend Lease through its 1999 acquisition of Boston Financial, started with Boston
Financial 1987. Previously, led Boston Financial's new business initiatives and
managed firm's Asset Management division, responsible for performance of 750
properties and providing service to 35,000 investors. Prior to joining Boston
Financial, served as Deputy Budget Director for Commonwealth of Massachusetts,
responsible for Commonwealth's health care and public pension program's budgets,
served as Assistant Controller at Yale University and former member of Watertown
Zoning Board of Appeals Officer of Affordable Housing Tax Credit Coalition and
frequent speaker on affordable housing and tax credit industry issues, BA
Harvard University; Master's in Public Policy Harvard's Kennedy School of
Government.
Michael H. Gladstone, age 43, Principal, Legal - Responsible for legal work in
the areas of affordable and conventional housing and investment products and
services. Joined Lend Lease through its 1999 acquisition of Boston Financial,
started with Boston Financial 1985 served as firm's General Counsel. Prior to
joining Boston Financial, associated with law firm of Herrick & Smith, served on
advisory board of Housing and Development Reporter. Lectured at Harvard
University on affordable housing matters, Member, The National Realty Committee,
Cornell Real Estate Council, National Association of Real Estate Investment
Managers and Massachusetts Bar, BA Emory University; JD & MBA Cornell
University.
Randolph G. Hawthorne, age 50, Principal, Housing and Community Investing -
Responsible for structuring and acquiring real estate investments. Joined Lend
Lease through its 1999 acquisition of Boston Financial, started with Boston
Financial 1973. Previously, served as Boston Financial's Treasurer, Past
Chairman of the Board of the National Multi Housing Council, having served on
the board since 1989, Past President of the National Housing and Rehabilitation
Association, Member, Multifamily Council of the Urban Land Institute, Frequent
speaker at industry conferences. Serves on the Editorial Advisory Boards of the
Tax Credit Advisor and Multi-Housing News, BS Massachusetts Institute of
Technology; MBA Harvard Graduate School of Business. Board of Directors National
Housing Conference. Graduated MIT 1971, HBS 1973.
Paul F. Coughlan, age 56, Principal, Housing and Community Investing -
Responsible for marketing and sales of institutional tax credit investments.
Joined Lend Lease through its 1999 acquisition of Boston Financial, started with
Boston Financial 1975. Previously, served as sales manager for Boston
Financial's retail tax credit fund, AB Brown University.
William E. Haynsworth, age 60, Principal, Housing and Community Investing -
Responsible for the structuring of real estate investments and the acquisition
of property interests. Joined Lend Lease through its 1999 acquisition of Boston
Financial, started with Boston Financial 1977. Prior to joining Boston
Financial, Acting Executive Director and General Counsel of the Massachusetts
Housing Finance Agency. Served as Director of Non-Residential Development of the
Boston Redevelopment Authority and Associate of Goodwin, Proctor & Hoar, Past
President and current Chairman of the Board of Directors of Affordable Housing
Tax Credit Coalition, BA Dartmouth College; LLB and LLM Harvard Law School.
Item 10. Management Remuneration
Neither the directors nor officers of Franklin, Inc., nor the partners of
Franklin L.P. 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
No person is known to the Partnership to be the beneficial owner of more than 5%
of the outstanding Units.
The equity securities registered by the Partnership under Section 12(g) of the
Act consist of 50,000 Units, all of which have been 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.
Franklin L.P. owns five (unregistered) Units not included in the 50,000 Units
sold to the public.
Except as described in the preceding paragraph, neither Franklin, Inc., Franklin
L.P., Lend Lease 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.
The Partnership does not know of any existing arrangement that might at a later
date result in a change in control of the Partnership.
Item 12. Certain Relationships and Related Transactions
The Partnership was required to pay certain fees to and reimburse certain
expenses of the Managing General Partner or its affiliates (including Lend
Lease) in connection with the organization of the Partnership and the offering
of Units. The Partnership is also required to pay certain fees to and reimburse
certain expenses of the Managing General Partner or its affiliates (including
Lend Lease) in connection with the administration of the Partnership and its
acquisition and disposition of investments in Local Limited Partnerships. In
addition, the General Partners are entitled to certain Partnership distributions
under the terms of the Partnership Agreement. Also, an affiliate of the General
Partners will receive up to $10,000 from the sale or refinancing proceeds of
each Local Limited Partnership, if the Partnership is still a limited partner at
the time of such transaction. All such fees, expenses and distributions paid in
the two years ended March 31, 2000 are described below and in the sections of
the Prospectus entitled "Estimated Use of Proceeds", "Management Compensation
and Fees" and "Profits and Losses for Tax Purposes, Tax Credits and Cash
Distributions". Such sections are incorporated herein by reference. In addition,
during 1999 an affiliate of the Managing General Partner served as property
management agent for three of the properties in which the Partnership invested,
Windsor Court, Terrace and Rolling Green. As of July, 1999, management services
of these affiliates were transferred to an unrelated third party.
The Partnership is permitted to enter into transactions involving affiliates of
the Managing General Partner, subject to certain limitations established in the
Partnership Agreement, as follows:
Organizational fees and expenses and selling expenses
In accordance with the Partnership Agreement, the Partnership was required to
pay certain fees to and reimburse expenses of the General Partners and others in
connection with the organization of the Partnership and the offering of its
Limited Partnership Units. Selling commissions, fees and accountable expenses
related to the sale of the Units totaling $6,164,983 have been charged directly
to Limited Partners' equity. In connection therewith, $3,963,740 of selling
expenses and $2,201,243 of offering expenses incurred on behalf of the
Partnership have been paid to an affiliate of the General Partner. The
Partnership has capitalized an additional $50,000 of organizational costs which
were reimbursed to an affiliate of the General Partner. These costs have been
fully amortized. Total organization and offering expenses, exclusive of selling
commissions and underwriting advisory fees, did not exceed 5.5% of the Gross
Proceeds, and organizational and offering expenses, inclusive of selling
commissions and underwriting advisory fees, did not exceed 15.0% of the Gross
Proceeds. No organizational fees and expenses and selling expenses were paid
during the two years ended March 31, 2000.
Acquisition fees and expenses
In accordance with the Partnership Agreement, the Partnership was required to
pay acquisition fees to and reimburse acquisition expenses of the Managing
General Partner or its affiliates for selecting, evaluating, structuring,
negotiating and closing the Partnership's investments in Local Limited
Partnerships. Acquisition fees totaled 8% of the Gross Proceeds. Acquisition
expenses include such expenses as legal fees and expenses, travel and
communications expenses, costs of appraisals and accounting fees and expenses.
Acquisition fees totaling $4,000,000 for the closing of the Partnership's Local
Limited Partnership Investments have been paid to an affiliate of the Managing
General Partner. Acquisition expenses totaling $770,577 were incurred and have
been reimbursed to an affiliate of the Managing General Partner. No acquisition
fees or expenses were paid during the two years ended March 31, 2000.
Salaries and benefits expense reimbursements
An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries, benefits and administrative expenses. The reimbursements
are based upon the size and complexity of the Partnership's operations.
Reimbursements paid or payable in each of the two years ended March 31, 2000 are
as follows:
2000 1999
---------------------------------------------------------------- -------
Salaries and benefits expense
reimbursements $ 168,588 $ 133,092
Property Management Fees
During 1999 affiliates of the Managing General Partner managed three properties
in which the Partnership has invested. As of July 1999, management services of
these affiliates were transferred to an unrelated third party. Fees earned by
these affiliates in each of the two years ended December 31, 1999 are as
follows:
1999 1998
---------------------------------------------------------------- -------
Property Management Fees $ 69,812 $ 128,246
Cash distributions paid to the General Partners
In accordance with the Partnership Agreement, the General Partners of the
Partnership, Franklin, Inc. and Franklin Limited Partnership, receive 1% of cash
distributions paid to partners. No cash distributions were paid to the General
Partners in each of the two years ended March 31, 2000.
Additional information concerning cash distributions and other fees paid or
payable to the Managing General Partner and its affiliates and the reimbursement
of expenses paid or payable to Lend Lease and its affiliates during each of the
two years ended March 31, 2000 is presented in Note 5 to the Financial
Statements.
<PAGE>
PART IV
Item 13. Exhibits 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 and the
auditors' reports relating thereto are submitted as a separate section of this
Report. See Index to the Financial Statements on page F-1 hereof.
The reports of auditors of the Local Limited Partnerships relating to the audits
of the financial statements of such Local Limited Partnerships appear in
Exhibits 28.1 of this report.
All other financial statement schedules and exhibits for which provision is made
in the applicable accounting regulations of the Securities and Exchange
Commission are not required under related instructions or are inapplicable and
therefore have been omitted.
(a)(3) Exhibit Index contained herein.
(a)(3)(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the year ended March 31,
2000.
(a)(3)(c) Exhibits
Number and Description in Accordance with
Item 601 of Regulation S-K
18. Letter on Change in Accounting Principle
27. Financial Data Schedule
28. Additional Exhibits
(a) 28.1 Reports of Other Independent Auditors
(a)(3)(d) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
By: 29 Franklin Street, Inc.
its Managing General Partner
By: /s/Randolph G. Hawthorne Date: June 29, 2000
------------------------------- ---------------
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Managing General
Partner of the Partnership and in the capacities and on the dates indicated:
By: /s/ Randolph G. Hawthorne Date: June 29, 2000
------------------------------- ------------------
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
By: /s/Michael H. Gladstone Date: June 29, 2000
------------------------------- ----------------
Michael H. Gladstone
Managing Director, Vice President
<PAGE>
Item 8. Financial Statements and Supplementary Data
BOSTON FINANCIAL QUALIFIED HOUSING LIMITED PARTNERSHIP
(A Limited Partnership)
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED MARCH 31, 2000
INDEX
Page No.
Report of Independent Accountants
For the Years Ended March 31, 2000 and 1999 F-2
Financial Statements
Balance Sheet - March 31, 2000 F-3
Statements of Operations - Years Ended
March 31, 2000 and 1999 F-4
Statements of Changes in Partners' Equity (Deficiency) -
Years Ended March 31, 2000 and 1999 F-5
Statements of Cash Flows - Years Ended
March 31, 2000 and 1999 F-6
Notes to the Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Boston Financial Qualified Housing Limited Partnership:
In our opinion, based on our audits and the reports of other auditors, the
financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of Boston Financial Qualified Housing
Limited Partnership (the "Partnership") at March 31, 2000, and the results of
its operations and its cash flows for each of the two years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States. 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. We did not audit the financial
statements of certain local limited partnerships for which $35,958,947 of
cumulative equity in losses are included in the balance sheet as of March 31,
2000 and for which net losses of $260,235 and $311,996 are included in the
accompanying financial statements for the years ended March 31, 2000 and 1999,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for the Local Limited Partnerships, is based
solely on the reports of the other auditors. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, 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
opinions expressed above.
As discussed in Note 2 to the financial statements, in 2000 the Partnership
changed the basis of presentation of its financial statements from a combined
basis to a stand-alone basis. The 1999 financial statements have been restated
to show the effects of this change in reporting entity.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
June 22, 2000
Boston,Massachusetts
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
BALANCE SHEET
March 31, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 331,824
Marketable securities, at fair value (Note 3) 787,391
Investments in Local Limited Partnerships, net (Note 4) 1,105,130
Accounts receivable 20,000
Other assets 10,520
-------------
Total Assets $ 2,254,865
=============
Liabilities and Partners' Equity
Accounts payable to affiliates (Note 5) $ 71,000
Accounts payable and accrued expenses 30,692
-------------
Total Liabilities 101,692
General, Initial and Investor Limited Partners' Equity 2,164,689
Net unrealized losses on marketable securities (11,516)
Total Partners' Equity 2,153,173
-------------
Total Liabilities and Partners' Equity $ 2,254,865
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
1999
2000 (Restated)
Revenue:
<S> <C> <C>
Investment $ 98,526 $ 121,754
Other 140,930 104,880
------------- -------------
Total Revenue 239,456 226,634
------------- -------------
Expenses:
General and administrative (includes
reimbursements to affiliate of $168,588 and
$133,092, respectively) (Note 5) 411,403 400,926
Provision for valuation of investments in
Local Limited Partnerships 984,445 -
Amortization 23,122 28,122
------------- -------------
Total Expenses 1,418,970 429,048
------------- -------------
Loss before equity in losses of
Local Limited Partnerships (1,179,514) (202,414)
Equity in losses of Local Limited Partnerships (Note 4) (260,235) (311,996)
-------------- ---------------
Net Loss $ (1,439,749) $ (514,410)
============= =============
Net Loss allocated:
General Partners $ (14,397) $ (5,144)
Limited Partners (1,425,352) (509,266)
------------- -------------
$ (1,439,749) $ (514,410)
============= =============
Net Loss per Limited Partnership Unit
(50,000 Units) $ (28.51) $ (10.19)
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Years Ended March 31, 2000 and 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, 1998 (restated) $ (393,308) $ 4,648 $ 4,507,508 $ 5,058 $ 4,123,906
----------- --------- ------------- ----------- --------------
Comprehensive Income (Loss):
Change in net unrealized
gains on marketable
securities available for sale - - - 7,384 7,384
Net Loss (5,144) - (509,266) - (514,410)
----------- --------- ------------- ----------- --------------
Comprehensive Income (Loss) (5,144) - (509,266) 7,384 (507,026)
----------- --------- ------------- ----------- --------------
Balance at March 31, 1999 (restated) (398,452) 4,648 3,998,242 12,442 3,616,880
----------- --------- ------------- ----------- --------------
Comprehensive Loss:
Change in net unrealized
gains on marketable
securities available for sale - - - (23,958) (23,958)
Net Loss (14,397) - (1,425,352) - (1,439,749)
----------- --------- ------------- ----------- --------------
Comprehensive Loss (14,397) - (1,425,352) (23,958) (1,463,707)
----------- --------- ------------- ----------- --------------
Balance at March 31, 2000 $ (412,849) $ 4,648 $ 2,572,890 $ (11,516) $ 2,153,173
=========== ========= ============= =========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2000 and 1999
<TABLE>
1999
2000 (Restated)
Cash flows from operating activities:
<S> <C> <C>
Net Loss $ (1,439,749) $ (514,410)
Adjustments to reconcile net loss to net
cash used for operating activities:
Equity in losses of Local Limited Partnerships 260,235 311,996
Provision for valuation of investments in Local Limited Partnerships 984,445 -
Gain on sales and maturities of
marketable securities (1,205) (4,990)
Cash distribution income included in cash
distributions received from Local Limited Partnerships (126,857) (97,075)
Amortization 23,122 28,122
Other non-cash items 90 -
Increase in cash arising from changes
in operating assets and liabilities:
Other assets 11,400 3,859
Accounts payable to affiliates 45,201 3,026
Accounts payable and accrued expenses 537 18,975
------------- -------------
Net cash used for operating activities (242,781) (250,497)
------------- -------------
Cash flows from investing activities:
Purchases of marketable securities (499,748) (1,594,531)
Proceeds from sales and maturities
of marketable securities 1,625,595 1,696,150
Advances to Local Limited
Partnerships (947,955) -
Cash distributions received from Local
Limited Partnerships 174,955 129,377
------------- -------------
Net cash provided by investing activities 352,847 230,996
------------- -------------
Net increase (decrease) in cash and cash
equivalents 110,066 (19,501)
Cash and cash equivalents, beginning 221,758 241,259
------------- -------------
Cash and cash equivalents, ending $ 331,824 $ 221,758
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
1. Organization
Boston Financial Qualified Housing Tax Credits Limited Partnership (the
"Partnership") was formed on January 22, 1987 under the laws of the State of
Delaware for the primary purpose of investing, as a limited partner, in other
limited partnerships ("Local Limited Partnerships"), each of which owns and
operates apartment complexes benefiting from some form of federal, state or
local assistance program and each of which qualifies for low-income housing tax
credits. The Partnership's objectives are to: (i) provide current tax benefits
in the form of tax credits which qualified investors may use to offset their
federal income tax liability; (ii) preserve and protect the Partnership's
capital; (iii) provide limited cash distributions from property operations which
are not expected to constitute taxable income during Partnership operations; and
iv) provide cash distributions from sale or refinancing transactions. The
General Partners of the Partnership are 29 Franklin Street Inc., which serves as
the Managing General Partner, and Franklin 29 Limited Partnership, which serves
as the Initial Limited Partner. Both of the General Partners are affiliates of
Lend Lease Real Estate Investments, Inc. ("Lend Lease"). The fiscal year of the
Partnership ends on March 31.
The Partnership's partnership agreement ("Partnership Agreement") authorized the
sale of up to 50,000 units of Limited Partnership Interest ("Units") at $1,000
per Unit, adjusted for certain discounts. The Partnership raised $49,963,740
("Gross Proceeds"), net of discounts of $36,260, through the sale of 50,000
Units. Such amounts exclude five unregistered Units previously acquired for
$5,000 by the Initial Limited Partner, which is also one of the General
Partners. The offering of Units terminated on April 29, 1988.
Generally, profits, losses, tax credits and cash flows from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners after certain priority payments.
Under the terms of the Partnership Agreement, the Partnership originally
designated 5% of Gross Proceeds from the sale of Units as a reserve for working
capital of the Partnership and contingencies related to ownership of Local
Limited Partnership interests. The Managing General Partner may increase or
decrease such amounts from time to time as it deems appropriate. As of March 31,
2000, the Managing General Partner has designated approximately $356,000 of
cash, cash equivalents and marketable securities as such Reserve.
2. Significant Accounting Policies
Basis of Presentation
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting because the Partnership does not have control
over the major operating and financial policies of the Local Limited
Partnerships in which it invests. Under the equity method, the investment is
carried at cost, adjusted for the Partnership's share of income or loss of the
Local Limited Partnerships, additional investments in and cash distributions
from the Local Limited Partnerships. Equity in income or loss of the Local
Limited Partnerships is included in the Partnership's operations. The
Partnership has no obligation to fund liabilities of the Local Limited
Partnerships beyond its investment and therefore a Limited Partnership's
investment will not be carried below zero. To the extent that equity losses are
incurred or distributions received when the Partnership's respective carrying
value of a Local Limited Partnership has been reduced to a zero balance, the
losses will be suspended to be used against future income, and distributions
received will be recorded as income.
Excess investment costs over the underlying net assets acquired have arisen from
acquisition fees paid and expenses reimbursed to an affiliate of the
Partnership. These fees and expenses are included in the Partnership's
Investments in Local Limited Partnerships and are being amortized on a
straight-line basis over 35 years.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Basis of Presentation (continued)
The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90 day lag basis because the Local Limited Partnerships report
their results on a calendar year basis. Accordingly, the financial information
of the Local Limited Partnerships that is included in the accompanying financial
statements is as of December 31, 1999 and 1998.
The general partner of Hughes Apartments, Ltd. ("Hughes") Local Limited
Partnership and the General Partner of the Partnership are affiliated entities.
In prior periods, the Partnership combined its financial statements with those
of Hughes. During 2000, the General Partner concluded that the presentation of
the financial position and results of operations of the Partnership, with Hughes
accounted for using the equity method, resulted in a more meaningful
presentation. All prior period financial data has been restated to show the
effects of this change in reporting entity.
The Partnership recognizes a decline in the carrying value of its investments in
Local Limited Partnerships when there is evidence of a non-temporary decline in
the recoverable amount of the investment. There is a possibility that the
estimates relating to reserves for non-temporary declines in the carrying value
of investments in Local Limited Partnerships may be subject to material near
term adjustments.
The Partnership, as a limited partner in the Local Limited Partnerships, is
subject to risks inherent in the ownership of property which are beyond its
control, such as fluctuations in occupancy rates and operating expenses,
variations in rental schedules, proper maintenance and continued eligibility for
tax credits. If the cost of operating a property exceeds the rental income
earned thereon, the Partnership may deem it in its best interest to voluntarily
provide funds in order to protect its investment.
Cash and Cash Equivalents
Cash and cash equivalents consist of short-term money market instruments with
original maturities of ninety days or less at acquisition and approximate fair
value.
Marketable Securities
Marketable securities consist primarily of U.S. treasury instruments and various
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 and losses from the sales of
securities are based on the specific identification method. Unrealized gains and
losses are excluded from earnings and reported as a separate component of
partners' equity.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statements of Financial Accounting Standards No. 107 ("SFAS No. 107"),
Disclosures About Fair Value of Financial Instruments, requires disclosure for
the fair value of most on- and off-balance sheet financial instruments for which
it is practicable to estimate that value. The scope of SFAS No. 107 excludes
certain financial instruments, such as trade receivables and payables when the
carrying value approximates the fair value, investments accounted for under the
equity method and all nonfinancial assets such as real property. The fair values
of the Partnership's assets and liabilities which qualify as financial
instruments under SFAS No. 107 approximate their carrying amounts in the
accompanying balance sheets.
Income Taxes
No provision for income taxes has been made as the liability for such taxes is
the obligation of the partners of the Partnership.
3. Marketable Securities
A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities issued by the
US Treasury and
other US government
<S> <C> <C> <C> <C>
corporations and agencies $ 699,644 $ - $ (12,019) $ 687,625
Mortgage backed securities 99,263 579 (76) 99,766
------------- ------------- ------------- -------------
Marketable securities
at March 31, 2000 $ 798,907 $ 579 $ (12,095) $ 787,391
============= ============= ============= =============
</TABLE>
The contractual maturities at March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in less than one year $ 300,010 $ 296,781
Due in one year to five years 399,634 390,844
Mortgage backed securities 99,263 99,766
----------- -----------
$ 798,907 $ 787,391
=========== ===========
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. Marketable Securities (continued)
Actual maturities may differ from contractual maturities because some borrowers
have the right to call or prepay obligations. Proceeds from sales of securities
were approximately $1,131,000 and $302,000 during the fiscal years ended March
31, 2000 and 1999 respectively. Proceeds from the maturities of marketable
securities were approximately $495,000 and $1,394,000 during the fiscal years
ended March 31, 2000 and 1999, respectively. Included in investment income are
gross gains of $3,488 and $7,440 and gross losses of $2,283 and $2,450 that were
realized on these sales during the years ended March 31, 2000 and 1999,
respectively.
4. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in thirty-two Local Limited Partnerships 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 and Duluth, where 49.5% interests are held.
Upon dissolution, proceeds will be distributed according to each respective
partnership agreement.
The following is a summary of Investments in Local Limited Partnerships, at
March 31, 2000:
<TABLE>
<CAPTION>
Capital contributions and advances paid to Local Limited Partnerships and
purchase price paid to withdrawing partners of Local Limited
<S> <C>
Partnerships $ 37,080,846
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $32,978,578) (35,960,227)
Cumulative cash distributions received
from Local Limited Partnerships (1,910,203)
Investments in Local Limited Partnerships
before adjustment (789,584)
Excess investment costs over the underlying net assets acquired:
Acquisition fees and expenses 4,648,780
Accumulated amortization of acquisition
fees and expenses (1,150,512)
Investments in Local Limited Partnerships 2,708,684
Reserve for valuation of investments in
Local Limited Partnerships (1,603,554)
$ 1,105,130
</TABLE>
The Partnership has recorded a reserve for valuation for its investment in three
Local Limited Partnerships, Sierra Pointe, Barrington Manor, and Duluth, because
there is evidence of a non-temporary decline in the recoverable amount of these
investments.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
Summarized financial information as of December 31, 1999 and 1998 (due to the
Partnership's policy of reporting financial information of its Local Limited
Partnership interests on a 90 day lag basis) of all the Local Limited
Partnerships in which the Partnership has invested as of that date is as
follows:
Summarized Balance Sheets - as of December 31,
<TABLE>
<CAPTION>
1998
1999 (Restated)
Assets:
<S> <C> <C>
Investment property, net $ 86,133,689 $ 93,431,633
Current assets 2,678,612 2,227,314
Other assets 7,899,559 7,480,627
---------------- ---------------
Total Assets $ 96,711,860 $ 103,139,574
================ ===============
Liabilities and Partners' Deficit:
Current liabilities (includes current portion
of long-term debt) $ 9,898,861 $ 18,152,341
Other debt 15,377,549 13,104,222
Long-term debt 110,012,955 104,511,903
---------------- ---------------
Total Liabilities 135,289,365 135,768,466
---------------- ---------------
Partners' Deficit:
Partnership's Deficit (37,281,312) (32,310,020)
Other Partners' Deficit (1,296,193) (318,872)
---------------- ---------------
Total Partners' Deficit (38,577,505) (32,628,892)
---------------- ---------------
Total Liabilities and Partners' Deficit $ 96,711,860 $ 103,139,574
================ ===============
Summarized Income Statements - for
the years ended December 31,
1998
1999 (Restated)
Rental and other revenue $ 20,140,097 $ 20,684,133
---------------- ---------------
Expenses:
Interest 9,579,035 9,804,372
Operating 11,708,895 11,968,902
Depreciation and amortization 4,355,198 4,422,623
---------------- ---------------
Total Expenses 25,643,128 26,195,897
---------------- ---------------
Net Loss $ (5,503,031) $ (5,511,764)
================ ===============
Partnership's share of Net Loss $ (5,390,620) $ (5,456,155)
================ ===============
Other partners' share of Net Loss $ (112,411) $ (55,609)
================ ===============
</TABLE>
For the years ended March 31, 2000 and 1999, the Partnership has not recognized
$5,130,385 and $5,144,159, respectively, in equity in losses relating to Local
Limited Partnerships where cumulative equity in losses and cumulative
distributions exceeded its total investments.
The Partnership's deficit as reflected by the Local Limited Partnerships of
$37,281,312 differs from the Partnership's Investments in Local Limited
Partnerships before adjustment of $789,584 principally because: a) the
Partnership has not recognized $32,979,858 of equity in losses relating to Local
Limited Partnerships whose cumulative equity in losses and cumulative cash
distributions exceeded their total investments b) the purchase price paid to the
original Limited Partners by the Partnership has not been reflected in the
balance sheets of certain Local Limited Partnerships and c) the Partnership has
included advances of approximately $1,376,000 in investments in Local Limited
Partnerships which are included in liabilities in the balance sheet of the Local
Limited Partnerships.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
5. Transactions with Affiliates
An affiliate of the Managing General Partner is reimbursed for the actual cost
of the Partnership's operating expenses. Included in general and administrative
expenses for the years ended March 31, 2000 and 1999 is $168,588 and $133,092,
respectively, that has been paid or is payable by the Partnership as
reimbursement for salaries and benefits. At March 31, 2000, $71,000, is payable
to an affiliate of the Managing General Partner.
An affiliate of the Managing General Partner managed three properties in which
the Partnership has invested. Included in operating expenses in the summarized
income statements in Note 4 to the Financial Statements is $69,812 and $128,246
of fees earned by this affiliate for the years ended December 31, 1999 and 1998,
respectively. As of July 1999, management services of these affiliates were
transferred to an unrelated third party.
6. Transfer of Interests in Local Limited Partnerships
On November 10, 1997, the Managing General Partner transferred 50% of its
interest in capital and profits of Barrington Manor, Graver Inn, 600 Dakota and
Duluth to the local general partner. Included in this transfer was a put option.
The put option grants the Managing General Partner the right to put the
Partnership's remaining interest to the local general partner anytime after one
year had elapsed. For financial reporting purposes, the Partnership wrote down
the carrying value of these investments in Local Limited Partnerships to zero
because it was uncertain as to whether the Partnership would be able to recover
its remaining invested balances. The Partnership would retain its full share of
tax credits until such time as the remaining interest is put to the local
general partner.
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 did not trigger a recapture event for
the Partnership nor have any impact on the Partnership's financial statements.
However, for tax purposes, this event resulted in both Section 1231 gain and
cancellation of indebtedness income for the 1999 tax year.
As previously reported, Boulevard Commons, located in Chicago, Illinois, had
been 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 properties 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. These events had no financial statement
impact.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LIMITED PARTNERSHIP
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
7. Federal Income Taxes
The following schedule reconciles the reported financial statement loss for the
fiscal years ended March 31, 2000 and 1999 to the loss reported on the Form
1065, U.S. Partnership Return of Income for the years ended December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999
2000 (Restated)
<S> <C> <C>
Net Loss per financial statements $ (1,439,749) $ (514,410)
Adjustment to reflect March 31 fiscal
year end to December 31 taxable year end 48,339 (38,297)
Amortization of acquisition fees and
expenses for tax purposes in excess of
amortization for financial reporting purposes (150,354) (145,354)
Adjustment for equity in losses of Local
Limited Partnerships for tax purposes
in excess of equity in losses for financial
reporting purposes (958,556) (1,252,301)
Equity in losses of Local Limited
Partnerships not recognized
for financial reporting purposes (5,257,241) (5,241,234)
Bad debt expense not deductible for tax purposes - 72,812
Cash distribution included in loss for financial reporting purposes (131,624) (97,075)
------------ ------------
Net Loss per tax return $ (7,889,185) $ (7,215,859)
============ ============
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes and tax purposes as of March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Financial Tax
Reporting Reporting
Purposes Purposes Differences
<S> <C> <C> <C>
Investments in Local Limited Partnerships $ 1,105,130 $ (39,888,525) $ 40,993,655
============= ============== =============
Other assets $ 1,149,735 $ 7,745,612 $ (6,595,877)
============= ============== =============
Liabilities $ 101,692 $ 40,411 $ 61,281
============= ============== =============
</TABLE>
The differences in assets and liabilities of the Partnership for financial
reporting purposes are primarily attributable to the following: (i) the
cumulative equity in losses from Local Limited Partnerships, for tax reporting
purposes is approximately $41,429,000 greater than for financial reporting
purposes, including approximately $32,980,000 of losses the Partnership has not
recognized relating to twenty eight Local Limited Partnerships whose cumulative
equity in losses exceeded its total investment; (ii) the amortization of
acquisition fees for tax reporting purposes exceeds financial reporting purposes
by approximately $850,000; and (iii) organizational and offering costs of
approximately $6,165,000 that have been capitalized for tax reporting purposes
are charged to Limited Partners' equity for financial reporting purposes.
<PAGE>
June 29, 2000
Boston Financial Qualified Housing Limited Partnership
101 Arch Street
Boston, MA 02110-1106
To the Partners of
Boston Financial Qualified Housing Limited Partnership:
We are providing this letter to you for inclusion as an exhibit to your Form
10-K filing pursuant to Item 601 of Regulation S-K.
We have audited the financial statements included in Boston Financial Qualified
Housing Limited Partnership (the "Partnership") Annual Report on Form 10-K for
the year ended March 31, 2000 and issued our report thereon dated June 22, 2000.
Note 2 to the financial statements describes a change in reporting entity from a
combined basis presentation to a stand-alone basis presentation. It should be
understood that the preferability of one acceptable method of presenting
entities under common control over another has not been addressed in any
authoritative accounting literature, and in expressing our concurrence below we
have relied on management's determination that this change in reporting entity
is preferable. Based on our reading of management's stated reasons and
justification for this change in reporting entity in the Form 10-K, and our
discussions with management as to their judgment about the relevant business
planning and legal factors relating to the change, we concur with management
that such change represents, in the Partnership's circumstances, the adoption of
a preferable accounting principle in conformity with Accounting Principles Board
Opinion No. 20.
Very truly yours,
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
