February 12, 1997
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Qualified Housing Tax Credits L.P. II
Report on Form 10-Q Edgar for Quarter Ended December 31, 1996
File No. 0-17777
Dear Sir/Madam:
Pursuant to the requirements of Rule 901(d) of Regulation S-T, enclosed is one
copy of subject report.
Very truly yours,
/s/ Veronica J. Curioso
Veronica J. Curioso
Assistant Controller
QH2-10Q3.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under 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 December 31, 1996
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 December 31, 1996 Commission file number 0-17777
Boston Financial Qualified Housing Tax Credits L.P. II
(Exact name of registrant as specified in its charter)
Delaware 04-3002607
(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 TAX CREDITS L.P. II
(A Limited Partnership)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- - ------------------------------ --------
Item 1. Financial Statements
Combined Balance Sheets - December 31, 1996 (Unaudited)
and March 31, 1996 1
Combined Statements of Operations (Unaudited) - For the Three and
Nine Months Ended December 31, 1996 and 1995 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31,
1996 3
Combined Statements of Cash Flows (Unaudited) -
For the Nine Months Ended December 31, 1996 and 1995 4
Notes to Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Items 1-6 15
SIGNATURE 16
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 269,071 $ 164,590
Tenant security deposits 30,479 32,644
Insurance proceeds receivable - 375,000
Other current assets 195,860 81,015
------------- -------------
Total current assets 495,410 653,249
Notes and interest receivable 52,930 81,908
Mortgagee escrow deposits 73,455 50,121
Replacement reserves 79,919 69,262
Investments in Local Limited Partnerships (Note 2) 11,057,851 14,387,959
Marketable securities, at fair value (Note 1) 1,337,549 1,739,223
Rental property at cost, net of accumulated depreciation 5,439,653 5,645,672
Deferred fees, net of accumulated amortization
of $54,998 and $39,786, respectively 249,260 264,472
------------- -------------
Total Assets $ 18,786,027 $ 22,891,866
============= =============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 205,275 $ 86,178
Accounts payable and accrued expenses 130,289 774,568
Current portion of mortgage note payable 23,464 21,759
Accrued interest payable 38,170 38,291
Security deposits payable 29,469 29,754
------------- -------------
Total current liabilities 426,667 950,550
Mortgage note payable 5,094,350 5,112,191
------------- -------------
Total Liabilities 5,521,017 6,062,741
------------- -------------
Minority interest in Local Limited Partnership 94,259 97,466
------------- -------------
Commitments (Note 3)
General, Initial and Investor Limited Partners' Equity 13,163,507 16,725,984
Net unrealized gains on marketable securities 7,244 5,675
------------- -------------
Total Partners' Equity 13,170,751 16,731,659
------------- -------------
Total Liabilities and Partners' Equity $ 18,786,027 $ 22,891,866
============= =============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 187,113 $ 185,423 $ 556,082 $ 552,491
Investment 23,909 52,817 78,351 129,623
Other 5,263 4,850 23,150 16,112
------------ ------------ ------------ -------------
Total Revenue 216,285 243,090 657,583 698,226
------------ ------------ ------------ -------------
Expenses:
Asset management fees,
related party 67,668 66,018 203,004 198,054
General and administrative
(includes reimbursements
to an affiliate of $73,307
and $74,532) 35,156 55,935 149,382 159,826
Rental operations,
exclusive of depreciation 94,434 84,706 284,605 299,703
Property management fees,
related party 8,557 8,550 28,285 27,233
Interest 114,565 115,050 344,020 345,433
Depreciation 72,649 69,628 217,952 209,082
Amortization 46,238 36,994 119,699 111,432
------------ ------------ ------------ -------------
Total Expenses 439,267 436,881 1,346,947 1,350,763
------------ ------------ ------------ -------------
Loss before equity in losses of
Local Limited Partnerships (222,982) (193,791) (689,364) (652,537)
Minority interest in loss of
Local Limited Partnership 1,116 936 3,207 3,271
Equity in losses of Local
Limited Partnerships (1,316,986) (857,601) (2,876,320) (2,555,528)
------------ ------------ ------------ -------------
Net Loss $ (1,538,852) $ (1,050,456) $ (3,562,477) $ (3,204,794)
============ ============ ============ =============
Net Loss allocated:
To General Partners $ (15,389) $ (10,505) $ (35,625) $ (32,048)
To Limited Partners (1,523,463) (1,039,951) (3,526,852) (3,172,746)
------------ ------------ ------------ -------------
$(1,538,852) $ (1,050,456) $ (3,562,477) $ (3,204,794)
=========== ============ ============ =============
Net Loss per Limited
Partnership Unit
(60,000 Units) $ (25.39) $ (17.33) $ (58.78) $ (52.88)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Nine Months Ended December 31, 1996
<TABLE>
<CAPTION>
Initial Investor Net
General Limited Limited Unrealized
Partners Partners Partners Gains Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $ (360,058) $ 5,000 $ 17,081,042 $ 5,675 $ 16,731,659
Net change in net unrealized
gains on marketable securities
available for sale - - - 1,569 1,569
Net Loss (35,625) - (3,526,852) - (3,562,477)
---------- -------- ------------ ---------- -------------
Balance at December 31, 1996 $ (395,683) $ 5,000 $ 13,554,190 $ 7,244 $ 13,170,751
========== ======== ============ ========== =============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ---------
<S> <C> <C>
Net cash used for operating activities $ (694,875) $ (381,928)
---------- ----------
Cash flows from investing activities:
Repayment of notes receivable 34,373 -
Purchases of marketable securities (908,552) (2,275,163)
Proceeds from sales and maturities
of marketable securities 1,385,566 3,076,894
Cash distributions received from Local
Limited Partnerships 350,029 2,935
Capital contributions to Local Limited Partnerships - (850,000)
Purchases of rental property and equipment (11,933) (67,307)
Replacement reserves, net (10,657) 41,177
---------- ----------
Net cash provided by (used for) investing activities 838,826 (71,464)
---------- ----------
Cash flows from financing activities:
Repayment of mortgage note payable (16,136) (14,747)
Mortgagee escrow deposits (23,334) (28,654)
Proceeds from developer - 6,110
---------- ----------
Net cash used for financing activities (39,470) (37,291)
---------- ----------
Net increase (decrease) in cash and cash equivalents 104,481 (490,683)
Cash and cash equivalents, beginning of period 164,590 614,257
---------- ----------
Cash and cash equivalents, end of period $ 269,071 $ 123,574
========== ==========
Supplemental disclosure to cash flow activity:
Cash paid for interest $ 344,141 $ 345,530
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(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-Q 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 10-K for the year
ended March 31, 1996. 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. Certain reclassifications have been
made to prior period financial statements to conform to current period
classifications.
1. Marketable Securities
A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Debt securities issued by
the US Treasury and
other US government
corporations and agencies $ 714,336 $8,600 $ (1,260) $ 721,676
Mortgage backed securities 556,973 335 (412) 556,896
Other debt securities 58,996 3 (22) 58,977
----------- ------ -------- -----------
Marketable securities
at December 31, 1996 $ 1,330,305 $8,938 $ (1,694) $ 1,337,549
=========== ====== ======== ===========
Debt securities issued by
the US Treasury and
other US government
corporations and agencies $ 1,025,378 $10,410 $ (7,636) $ 1,028,152
Mortgage backed securities 348,843 1,366 (977) 349,232
Other debt securities 359,327 3,183 (671) 361,839
----------- ------- -------- -----------
Marketable securities
at March 31, 1996 $ 1,733,548 $14,959 $ (9,284) $ 1,739,223
=========== ======= ======== ===========
</TABLE>
The contractual maturities at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Cost Fair Value
<S> <C> <C>
Due in one year or less $ 171,216 $ 174,229
Due in one year to five years 602,116 606,424
Mortgage backed securities 556,973 556,896
----------- -----------
$ 1,330,305 $ 1,337,549
=========== ===========
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
1. Marketable Securities (continued)
Actual maturities may differ from contractual maturities because some borrowers
have the right to call or prepay obligations. Proceeds from the sales of fixed
maturity securities were approximately $1,386,000 and $3,077,000 during the nine
months ended December 31, 1996 and 1995, respectively. Included in investment
income are gross gains of $85,086 and gross losses of $11,315 which were
realized on these sales during the nine months ended December 31, 1996 and gross
gains of $18,670 and gross losses of $17,525 which were realized on sales during
the nine months ended December 31, 1995.
2. Investments in Local Limited Partnerships
The Partnership has acquired limited partner interests in thirty-nine Local
Limited Partnerships, excluding Garden Cove, which own and operate multi-family
housing complexes, most of which are government-assisted. The Partnership, as
Investor Limited Partner pursuant to the various Local Limited Partnership
Agreements, has acquired a 99% interest in the profits, losses, tax credits and
cash flows from operations of each of the Local Limited Partnerships. Upon
dissolution, proceeds will be distributed according to each respective
partnership agreement.
A summary of investments in Local Limited Partnerships, excluding Garden Cove,
at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Capital contributions paid to Local Limited Partnerships and purchase price
paid to withdrawing partners of Local Limited Partnerships $ 40,811,675
Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
unrecognized losses of $1,710,169) (33,170,770)
Cumulative cash distributions received from Local Limited Partnerships (834,505)
--------------
Investments in Local Limited Partnerships before adjustment 6,806,400
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 5,561,180
Accumulated amortization of acquisition fees and expenses (1,309,729)
--------------
Investments in Local Limited Partnerships $ 11,057,851
=============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
2. Investments in Local Limited Partnerships (continued)
Summarized financial information from the combined financial statements of all
Local Limited Partnerships, excluding Garden Cove, in which the Partnership has
invested at December 31, 1996 is as follows:
Summarized Balance Sheet - as of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment property, net $ 103,578,963
Current assets 2,758,334
Other assets 5,619,801
--------------
Total Assets $ 111,957,098
==============
Liabilities and Partners' Equity:
Long-term debt $ 94,124,178
Current liabilities 4,890,782
Other liabilities 8,653,067
--------------
Total Liabilities 107,668,027
Partners' Equity 4,289,071
--------------
Total Liabilities and Partners' Equity $ 111,957,098
==============
Summarized Income Statement- For the
nine months ended September 30, 1996 (Unaudited)
Rental and other income $ 14,116,438
--------------
Expenses:
Operating 7,266,080
Interest 6,777,630
Depreciation and amortization 3,783,982
--------------
Total Expenses 17,827,692
Net Loss $ (3,711,254)
==============
Partnership's share of net loss $ (3,674,141)
==============
Other Partners' share of net loss $ (37,113)
==============
</TABLE>
For the nine months ended December 31, 1996 the Partnership has not recognized
$797,821 in equity in losses relating to seventeen Local Limited Partnerships
where cumulative equity in losses and cumulative cash distributions exceed their
total investment.
3. Commitments
At December 31, 1996, the Partnership has committed to make future capital
contributions and to pay future purchase price installments on its investments
in Local Limited Partnerships. These future payments are contingent upon the
achievement of certain criteria as set forth in the Local Limited Partnership
Agreements and total $337,500.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
4. Litigation
As previously reported, the Partnership and its affiliates recently settled a
lawsuit with the former managing general partners of Garden Cove Apartments,
Ltd. ("Garden Cove"). Management believes the settlement was favorable to the
Partnership. Among other things, the majority of the settlement payments were
reimbursed by the Partnership's insurer. However, the Partnership also incurred
significant litigation expenses in connection with this matter. As of December
31, 1996, these expenses totaled approximately $190,000.
In early September, Garden Cove and the former local managing general partners
of this partnership were served with a lawsuit by Saunders Construction Company,
Inc., the contractor for this apartment complex. Saunders claims that certain
amounts on its construction contract remain unpaid and it is seeking
approximately $196,000, plus interest, from Garden Cove. Additional amounts are
sought from the former managing general partners. Neither the Partnership nor
its General Partners are defendants in this matter. Because this lawsuit was
only recently filed, it is too early to determine whether Garden Cove may have
any exposure.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules
Balance Sheets
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Garden Cove
Tax Credits Apartments
L.P. II (A) Ltd.(B) Eliminations Combined
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 261,055 $ 8,016 $ - $ 269,071
Tenant security deposits - 30,479 - 30,479
Other current assets 950,433 32,353 (786,926) 195,860
------------- ----------- ------------ -------------
Total current assets 1,211,488 70,848 (786,926) 495,410
Notes and interest receivable 52,930 - - 52,930
Mortgagee escrow deposits - 73,455 - 73,455
Replacement reserves - 79,919 - 79,919
Investments in Local Limited
Partnerships 10,801,117 - 256,734 11,057,851
Marketable securities, at fair value 1,337,549 - - 1,337,549
Rental property at cost, net of
accumulated depreciation - 5,439,653 - 5,439,653
Deferred fees, net - 249,260 - 249,260
------------- ----------- ----------- -------------
Total Assets $ 13,403,084 $ 5,913,135 $ (530,192) $ 18,786,027
============= =========== =========== =============
Liabilities and Partners' Equity (Deficiency)
Current liabilities:
Accounts payable to affiliates $ 203,004 $ 2,271 $ - $ 205,275
Accounts payable and accrued
expenses 29,329 100,960 - 130,289
Advances from Limited Partner - 786,926 (786,926) -
Current portion of mortgage
note payable - 23,464 - 23,464
Accrued interest payable - 38,170 - 38,170
Security deposits payable - 29,469 - 29,469
------------- ----------- ----------- -------------
Total current liabilities 232,333 981,260 (786,926) 426,667
Mortgage note payable - 5,094,350 - 5,094,350
------------- ----------- ----------- -------------
Total Liabilities 232,333 6,075,610 (786,926) 5,521,017
------------- ----------- ----------- -------------
Minority interest in Local Limited
Partnership - - 94,259 94,259
------------- ----------- ----------- -------------
General, Initial and Investor
Limited Partners' Equity (Deficiency) 13,163,507 (162,475) 162,475 13,163,507
Net unrealized gains on marketable securities 7,244 - - 7,244
----------- --------- -------- ----------
Total Partners' Equity (Deficiency) 13,170,751 (162,475) 162,475 13,170,751
------------- ----------- ----------- -------------
Total Liabilities and Partners'
Equity (Deficiency) $ 13,403,084 $ 5,913,135 $ (530,192) $ 18,786,027
============= =========== =========== =============
</TABLE>
(A) December 31, 1996.
(B) September 30, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended December 31, 1996
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Garden Cove
Tax Credits Apartments
L.P. II (A) Ltd.(B) Eliminations Combined
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 187,113 $ - $ 187,113
Investment 22,864 1,045 - 23,909
Other 3,439 1,824 - 5,263
------------ ---------- --------- ------------
Total Revenue 26,303 189,982 - 216,285
------------ ---------- --------- ------------
Expenses:
Asset management fees, related party 67,668 - - 67,668
General and administrative 35,156 - - 35,156
Rental operations, exclusive
of depreciation - 94,434 - 94,434
Property management fees,
related party - 8,557 - 8,557
Interest - 114,565 - 114,565
Depreciation - 72,649 - 72,649
Amortization 34,829 11,409 - 46,238
------------ ---------- --------- ------------
Total Expenses 137,653 301,614 - 439,267
------------ ---------- --------- ------------
Loss before equity in losses of
Local Limited Partnerships (111,350) (111,632) - (222,982)
Minority interest in loss of
Local Limited Partnership - - 1,116 1,116
Equity in losses of Local
Limited Partnerships (1,427,502) - 110,516 (1,316,986)
------------ ---------- --------- ------------
Net Loss $ (1,538,852) $ (111,632) $ 111,632 $ (1,538,852)
============ ========== ========= ============
</TABLE>
(A) For the three months ended December 31,1996.
(B) For the three months ended September 30, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
Statements of Operations
For the Nine Months Ended December 31, 1996
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Garden Cove
Tax Credits Apartments
L.P. II (A) Ltd.(B) Eliminations Combined
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 556,082 $ - $ 556,082
Investment 75,404 2,947 - 78,351
Other 12,823 10,327 - 23,150
------------ ---------- --------- ------------
Total Revenue 88,227 569,356 - 657,583
------------ ---------- --------- ------------
Expenses:
Asset management fees, related party 203,004 - - 203,004
General and administrative 149,382 - - 149,382
Rental operations, exclusive
of depreciation - 284,605 - 284,605
Property management fees,
related party - 28,285 - 28,285
Interest - 344,020 - 344,020
Depreciation - 217,952 - 217,952
Amortization 104,487 15,212 - 119,699
------------ ---------- --------- ------------
Total Expenses 456,873 890,074 - 1,346,947
------------ ---------- --------- ------------
Loss before equity in losses of
Local Limited Partnerships (368,646) (320,718) - (689,364)
Minority interest in loss of
Local Limited Partnership - - 3,207 3,207
Equity in losses of Local
Limited Partnerships (3,193,831) - 317,511 (2,876,320)
------------ ---------- --------- ------------
Net Loss $ (3,562,477) $ (320,718) $ 320,718 $ (3,562,477)
============ ========== ========= ============
</TABLE>
(A) For the nine months ended December 31,1996.
(B) For the nine months ended September 30, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
Statements of Cash Flows
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Garden Cove
Tax Credits Apartments
L.P. II (A) Ltd.(B) Eliminations Combined
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (725,131) $ (50,022) $ 80,278 $ (694,875)
----------- --------- --------- ----------
Cash flows from investing activities:
Repayment of notes receivable 34,373 - - 34,373
Purchases of marketable securities (908,552) - - (908,552)
Proceeds from sales and maturities
of marketable securities 1,385,566 - - 1,385,566
Cash distributions received from
Local Limited Partnerships 350,029 - - 350,029
Purchases of rental property
and equipment - (11,933) - (11,933)
Replacement reserves, net - (10,657) - (10,657)
----------- --------- --------- ----------
Net cash provided by (used for)
investing activities 861,416 (22,590) - 838,826
----------- --------- --------- ----------
Cash flows from financing activities:
Repayment of mortgage note payable - (16,136) - (16,136)
Mortgagee escrow deposits - (23,334) - (23,334)
Advances from limited partner - 80,278 (80,278) -
----------- --------- --------- ----------
Net cash provided by (used for)
financing activities - 40,808 (80,278) (39,470)
----------- --------- --------- ----------
Net increase (decrease) in cash
and cash equivalents 136,285 (31,804) - 104,481
Cash and cash equivalents, beginning 124,770 39,820 - 164,590
----------- --------- --------- ----------
Cash and cash equivalents, ending $ 261,055 $ 8,016 $ - $ 269,071
=========== ========= ========= ==========
</TABLE>
(A) For the nine months ended December 31,1996.
(B) For the nine months ended September 30, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At December 31, 1996, the Partnership, including Garden Cove Apartments, had
cash and cash equivalents of $269,071 as compared to $164,590 at March 31, 1996.
The increase is primarily attributable to proceeds from the sales and maturities
of marketable securities and cash distributions received from Local Limited
Partnerships in excess of purchases of marketable securities and cash used for
operations.
The Managing General Partner initially designated 3% of the Gross Proceeds to
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. The Managing General Partner may increase or decrease
such Reserves from time to time, as it deems appropriate. During the year ended
March 31, 1993, the Managing General Partner decided to increase the Reserve
level to 4% and it transferred the additional funds to Reserves. Approximately
$183,000 has been withdrawn from the Reserve account to pay legal and other
costs related to the Mod Rehab issue. Additionally, legal fees relating to
various property issues totaling approximately $25,000 have been paid from
Reserves. The Partnership also advanced approximately $936,000 to four Local
Limited Partnerships.
Management believes that the investment income earned on the Reserves, along
with cash distributions received from Local Limited Partnerships, to the extent
available, will be sufficient to fund the Partnership's ongoing operations.
Reserves may be used to fund Partnership operating deficits, if the Managing
General Partner deems funding appropriate. At December 31, 1996, approximately
$1,079,000 of marketable securities has been designated as Reserves.
At December 31, 1996, the Partnership has committed to make future capital
contributions and to pay future purchase price installments on its investments
in Local Limited Partnerships. These future payments are contingent upon the
achievement of certain criteria as set forth in the Local Limited Partnership
Agreements and total $337,500.
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, as of December 31, 1996, the Partnership
had no contractual or other obligation to any Local Limited Partnership which
had not been paid or provided for, except as disclosed above.
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.
Cash Distributions
No cash distributions were made during the nine months ended December 31,1996.
Results of Operations
For the three and nine months ended December 31, 1996, the Partnership
operations resulted in net losses of $1,538,852 and $3,562,477, respectively, as
compared to net losses of $1,050,456 and $3,204,794, respectively, for the same
periods in 1995. The increase in net loss is primarily due to higher equity in
losses of Local Limited Partnerships. The increase in equity in losses of Local
Limited Partnerships is primarily attributable to higher losses associated with
four Local Limited Partnerships which are affected by weak rental markets, costs
associated with unit turnover, and deferred or increased maintenance issues. The
increase in equity in losses is offset by fewer losses being recognized in 1996
because more Local Limited Partnerships have cumulative equity in losses in
excess of their total investments as compared to the same periods in 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions
Despite high occupancy and a debt restructuring, Atlantic Terrace, located in
Washington, D.C., continues to experience unstable operations due primarily to
costs associated with unit turnover, and increased maintenance and utility
expenses. Deteriorating market conditions are also impacting the property. The
managing agent is addressing these issues through enhanced tenant screening,
social programs and more careful expense monitoring.
Garden Cove, located in Huntsville, Alabama, continues to generate operating
deficits which are being funded from Partnership Reserves. Although operations
have improved since the recent debt refinancing and real estate tax abatement,
the property remains unable to fully cover debt service from operating income
due to depressed rents. The Managing General Partner is currently working with
the management agent to find further ways to curtail the operating shortfalls.
Shadow Wood Housing, located in Chickasha, Oklahoma, continues to generate
operating deficits resulting from high security costs, low Section 8 contract
rates and high debt service payments. The Local General Partners are working to
improve operating results through contract rent increases and debt service
relief. The management agent is currently funding operating deficits.
As previously reported, Snapfinger Creste, Shannon Creste, and Grayton Pointe,
located in Georgia and which share the same Local General Partner, continue to
be affected by a weak rental market and deferred maintenance issues. The Local
General Partner is obligated to fund deficits and has made advances and deferred
management fees. An affiliate of the Managing General Partner is in the process
of assuming the local general partner interest and management contract at
Shannon Creste. The Managing General Partner has also successfully negotiated an
agreement with the lender to provide significant debt service relief and capital
improvements funding for this property.
Negotiations with the lenders for both Snapfinger Creste and Grayton Pointe are
still underway. Pending an acceptable workout agreement with these lenders,
affiliates of the Managing General Partner are prepared to step in as General
Partner and/or managing agent for both properties. These agreements may require
advances from Partnership Reserves. If negotiations with the lenders and Local
General Partner prove to be unsatisfactory, it is unlikely that the Partnership
will be able to retain its interest in these properties for the long-term. This
would result in recapture for investors of one third of the tax credit benefits
and loss of future benefits associated with these properties.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(a)Exhibits - None
(b)Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended December 31, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. II
(A Limited Partnership)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: February 12, 1997 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. II
By: Arch Street, Inc.,
its Managing General Partner
/s/Georgia Murray
Georgia Murray
A Managing Director, Treasurer
and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 269,071
<SECURITIES> 1,337,549
<RECEIVABLES> 52,930
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 226,339<F1>
<PP&E> 5,439,653
<DEPRECIATION> 000
<TOTAL-ASSETS> 18,786,027<F2>
<CURRENT-LIABILITIES> 426,667<F3>
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 13,170,751
<TOTAL-LIABILITY-AND-EQUITY> 18,786,027<F4>
<SALES> 000
<TOTAL-REVENUES> 657,583<F5>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,002,927<F6>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 344,020
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (3,562,477)<F7>
<EPS-PRIMARY> (58.78)
<EPS-DILUTED> 000
<FN>
<F1>Included in Current Assets: Tenant security deposits $30,479 and Other
current assets $195,860
<F2>Included in Total Assets: Investments in Local Limited Partnerships
$11,057,851, Replacement reserves $79,919, Mortgagee escrow deposits $73,455
and Deferred fees, net $249,260.
<F3>Included in current liabilities: Accounts Payable to Affiliates
$205,275, Accounts Payable and accrued expenses $130,289, Current portion
of mortgage note payable $23,464, Accrued interest payable $38,170,
Security deposits payable $29,469.
<F4>Included in Total Liabilities and Equity: Long-term debt $5,094,350 and
Minority interest in Local Limited Partnerships $94,259.
<F5>Total Revenue includes: Rental $556,082, Investment $78,351 and Other
$23,150.
<F6>Included in Other Expenses: Asset Management fees $203,004, General
and Administrative $149,382, Property Management fees $28,285, Rental
operations, exclusive of depreciation $284,605, Depreciation $217,952 and
Amortization $119,699.
<F7>Net loss reflects: Equity in losses of Local Limited Partnerships of
$2,876,320 and minority interest in loss of Local Limited Partnership $3,207.
</FN>
</TABLE>
