August , 1999
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Qualified Housing Tax Credits L.P. II
Report on Form 10-QSB Edgar for Quarter Ended June 30, 1999
File Number. 0-17777
Dear Sir/Madam:
Pursuant to the requirements of section 15(d) of the Securities Exchange Act of
1934, there is filed herewith a copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH2-10Q1.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended June 30, 1999 Commission file number 0-17777
------------------ ----------
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>
<CAPTION>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
<S> <C>
Combined Balance Sheet - June 30, 1999 (Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 1999 and 1998 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30,
1999 3
Combined Statements of Cash Flows (Unaudited) -
For the Three Months Ended June 30, 1999 and 1998 4
Notes to Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Items 1-6 14
SIGNATURE 15
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
COMBINED BALANCE SHEET
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 243,821
Marketable securities, at fair value 2,070,217
Accounts receivable 38,942
Tenant security deposits 73,356
Investments in Local Limited Partnerships (Note 1) 1,000,819
Rental property at cost, net of
accumulated depreciation 12,218,505
Mortgage escrow deposits 136,447
Operating reserves 38,229
Replacement reserves 187,027
Deferred fee (net of accumulated amortization
of $162,578) 44,433
Other assets 29,926
Total Assets $ 16,081,722
==============
Liabilities and Partners' Equity
Mortgage notes payable $ 11,451,642
Accounts payable to affiliates 39,974
Accounts payable and accrued expenses 346,069
Accrued interest payable 77,600
Security deposits payable 63,316
--------------
Total Liabilities 11,978,601
Minority interests in Local Limited Partnerships (170,719)
--------------
Commitments
General, Initial and Investor Limited Partners' Equity 4,279,476
Net unrealized losses on marketable securities (5,636)
Total Partners' Equity 4,273,840
--------------
Total Liabilities and Partners' Equity $ 16,081,722
==============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
Revenue:
<S> <C> <C>
Rental $ 551,070 $ 522,409
Investment 30,342 31,990
Other 16,936 17,606
Total Revenue 598,348 572,005
------------- -------------
Expenses:
Asset management fees, related party 65,564 68,040
General and administrative (includes reimbursements
to an affiliate of $26,320 and $23,459, respectively) 50,415 51,829
Bad debt expense (recovery) (19,654) 3,788
Rental operations, exclusive of depreciation 170,271 295,478
Property management fees, related party 24,209 22,227
Interest 214,589 221,597
Depreciation 139,465 137,846
Amortization 270,150 34,300
------------- -------------
Total Expenses 915,009 835,105
------------- -------------
Loss before minority interests in losses of Local Limited
Partnerships and equity in losses of
Local Limited Partnerships (316,661) (263,100)
Minority interests in losses of
Local Limited Partnerships 2,346 2,068
Equity in losses of Local Limited
Partnerships (Note 1) (412,611) (618,682)
------------- -------------
Net Loss $ (726,926) $ (879,714)
============= =============
Net Loss allocated:
To General Partners $ (7,269) $ (8,797)
To Limited Partners (719,657) (870,917)
------------- -------------
$ (726,926) $ (879,714)
============= =============
Net Loss per Limited
Partnership Unit (60,000 Units) $ (11.99) $ (14.52)
============== =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Three Months Ended June 30, 1999
<TABLE>
<CAPTION>
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999 $ (477,253) $ 5,000 $ 5,478,655 $ 10,438 $ 5,016,840
------------ ------------- ------------- ------------- ------------
Comprehensive Loss:
Net change in net unrealized
gains on marketable
securities available for
sale - - - (16,074) (16,074)
Net Loss (7,269) - (719,657) - (726,926)
------------ ------------- ------------- ------------- ------------
Comprehensive Loss (7,269) - (719,657) (16,074) (743,000)
------------ ------------- ------------- ------------- ------------
Balance at June 30, 1999 $ (484,522) $ 5,000 $ 4,758,998 $ (5,636) $ 4,273,840
============ ============= ============= ============= ============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -----=====---
<S> <C> <C>
Net cash provided by (used for) operating activities $ (72,923) $ 15,735
Net cash provided by (used for) investing activities (199,734) 277,360
Net cash provided by financing activities 196,938 96,000
------------- -------------
Net increase (decrease) in cash and cash equivalents (75,719) 389,095
Cash and cash equivalents, beginning of period 319,540 722,737
------------- -------------
Cash and cash equivalents, end of period $ 243,821 $ 1,111,832
============= =============
Supplemental disclosure:
Cash paid for interest $ 399,712 $ 173,156
============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<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-QSB and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included with the Partnership's Form 10-K for the
year ended March 31, 1999. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Partnership's financial position
and results of operations. The results of operations for the periods may not be
indicative of the results to be expected for the year.
The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90 day lag basis, because the Local Limited Partnerships
report their results on a calendar year basis. Accordingly, the financial
information about the Local Limited Partnerships that is included in the
accompanying combined financial statements is as of March 31, 1999 and 1998.
1. Investments in Local Limited Partnerships
The Partnership has acquired limited partnership interests in thirty-six Local
Limited Partnerships (excluding Snapfinger Creste and Grayton Pointe, which have
been written off, and the Combined Entities) 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 the Combined
Entities is as follows:
<TABLE>
<CAPTION>
Capital contributions paid to Local Limited Partnerships and purchase price paid
to withdrawing partners of Local
<S> <C>
Limited Partnerships $ 30,801,675
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative unrecognized
losses of $4,098,772) (30,005,608)
Cumulative cash distributions received
from Local Limited Partnerships (2,570,256)
Investments in Local Limited Partnerships
before adjustment (1,774,189)
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 3,917,757
Accumulated amortization of acquisition
fees and expenses (1,142,749)
Investments in Local Limited Partnerships $ 1,000,819
=============
</TABLE>
The Partnership's share of the net losses of the Local Limited Partnerships,
excluding the Combined Entities, for the three months ended June 30, 1999 is
$746,120. For the three months ended June 30, 1999, the Partnership has not
recognized $333,509 of equity in losses relating to twenty-five Local Limited
Partnerships where cumulative equity in losses and cumulative distributions
exceeded its total investment in these Local Limited Partnerships.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. Litigation
As previously reported, the Partnership, Garden Cove Apartments LTD. ("Garden
Cove") and the Managing General Partner were involved in litigation with the
former managing general partner of Garden Cove. On March 11, 1997 a jury trial
began. Four days into the trial, an out of court settlement was reached, which
was believed by management to be favorable for the Partnership. Briefly, the
settlement involved a $262,500 payment by the Partnership to the former managing
general partners and a $285,000 payment to a bank, which had claims against both
Garden Cove and the former local managing general partners. $375,000 of these
payments were covered by the Partnership's insurance. However, the Partnership
also incurred significant litigation expenses in this matter. The settlement
agreement also included the mutual release of certain liabilities and made
permanent the previously described injunction.
Garden Cove was involved in litigation. In this matter, the project's general
contractor claims that there are amounts due it (approximately $225,000 plus
interest) under the construction contract. The Partnership was aware of this
potential claim when it settled the previous dispute with the former managing
general partners and did not release them from liability with respect to it. In
January 1999, the Managing General Partner was successful in negotiations with
the lender and recently closed on a mortgage restructuring to the Garden Cove
mortgage. This mortgage restructuring involves a reduction of the first mortgage
along with delinquent mortgage payments to be included in a soft second
mortgage.
As a result of the restructuring of the Garden Cove mortgage, the Managing
General Partner was able to settle the litigation instituted by the project's
general contractor. The settlement included a release of all claims in exchange
for a payment to the general contractor of an amount equal to less than half of
the original contract sum. The Partnership and one of the former General
Partners will be paying the settlement amount.
The Partnership is not a party to any other pending legal or administrative
proceeding, and to the best of its knowledge, no other legal or administrative
proceeding is threatened or contemplated against it.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
3. Supplemental Combining Schedules
Balance Sheets
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. II (A) (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 116,252 $ 127,569 $ - $ 243,821
Marketable securities, at fair value 2,070,217 - - 2,070,217
Accounts receivable 1,212,548 38,942 (1,212,548) 38,942
Tenant security deposits - 73,356 - 73,356
Investments in Local Limited
Partnerships 1,028,494 - (27,675) 1,000,819
Rental property at cost, net of
accumulated depreciation - 11,614,763 603,742 12,218,505
Mortgage escrow deposits - 136,447 - 136,447
Operating reserves - 38,229 - 38,229
Replacement reserves - 187,027 - 187,027
Deferred fees, net - 44,433 - 44,433
Other assets 27,766 2,160 - 29,926
------------- ------------- ------------- -------------
Total Assets $ 4,455,277 $ 12,262,926 $ (636,481) $ 16,081,722
============= ============= ============= =============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 11,451,642 $ - $ 11,451,642
Accounts payable to affiliates 31,516 8,458 - 39,974
Accounts payable and accrued
expenses 149,921 196,148 - 346,069
Advances from Limited Partner - 1,212,548 (1,212,548) -
Accrued interest payable - 77,600 - 77,600
Security deposits payable - 63,316 - 63,316
------------- ------------- ------------- -------------
Total Liabilities 181,437 13,009,712 (1,212,548) 11,978,601
------------- ------------- ------------- -------------
Minority interests in Local Limited
Partnerships - - (170,719) (170,719)
------------- ------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity (Deficiency) 4,279,476 (746,786) 746,786 4,279,476
Net unrealized losses on
marketable securities (5,636) - - (5,636)
------------- ------------- ------------- --------------
Total Partners' Equity (Deficiency) 4,273,840 (746,786) 746,786 4,273,840
------------- ------------- ------------- -------------
Total Liabilities and Partners' Equity $ 4,455,277 $ 12,262,926 $ (636,481) $ 16,081,722
============= ============= ============= =============
(A) As of June 30, 1999.
(B) As of March 31, 1999.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
3. Supplemental Combining Schedules (continued)
Statements of Operations
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. II (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 551,070 $ - $ 551,070
Investment 29,829 513 - 30,342
Other 2,675 14,261 - 16,936
------------- ------------- ------------- -------------
Total Revenue 32,504 565,844 - 598,348
------------- ------------- ------------- -------------
Expenses:
Asset management fees, related party 65,564 - - 65,564
General and administrative 50,415 - - 50,415
Bad debt expense (19,654) - - (19,654)
Rental operations, exclusive
of depreciation - 170,271 - 170,271
Property management fees,
related party - 24,209 - 24,209
Interest - 214,589 - 214,589
Depreciation - 139,465 - 139,465
Amortization 22,767 247,383 - 270,150
------------- ------------- ------------- -------------
Total Expenses 119,092 795,917 - 915,009
------------- ------------- ------------- -------------
Loss before minority interests in losses
of Local Limited Partnerships and
equity in losses of Local Limited
Partnerships (86,588) (230,073) - (316,661)
Minority interests in losses of
Local Limited Partnerships - - 2,346 2,346
Equity in losses of Local
Limited Partnerships (640,338) - 227,727 (412,611)
------------- ------------- ------------- -------------
Net Loss $ (726,926) $ (230,073) $ 230,073 $ (726,926)
============= ============= ============= =============
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
3. Supplemental Combining Schedules (continued)
Statements of Cash Flows
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. II (A) (B) Eliminations (A)
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (23,035) $ (49,888) $ - $ (72,923)
Net cash used for investing activities (134,209) (65,525) - (199,734)
Net cash provided by financing activities - 196,938 - 196,938
------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents (157,244) 81,525 - (75,719)
Cash and cash equivalents, beginning 273,496 46,044 - 319,540
------------- ------------- ------------- -------------
Cash and cash equivalents, ending $ 116,252 $ 127,569 $ - $ 243,821
============= ============= ============= =============
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
</TABLE>
<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
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and are including this
statement for purposes of complying with these safe harbor provisions. Although
the Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions, interest rates and unanticipated delays or expenses on the
part of the Partnership and their suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
At June 30, 1999, the Partnership, including the Combined Entities, had cash and
cash equivalents of $243,821 as compared to $319,540 at March 31, 1999. The
decrease is primarily attributable to purchases of marketable securities in
excess of proceeds from sales and maturities of marketable securities, cash used
for operating activities and disbursements from replacement reserves. These
decreases are partially offset by proceeds from a restructuring of the mortgage
for one of the Combined Entities.
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 the Reserve account. To
date, approximately $149,000 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 $71,000 have been
paid from Reserves. The Partnership also advanced approximately $1,219,000 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 June 30, 1999, approximately
$1,668,000 of cash, cash equivalents and marketable securities has been
designated as Reserves.
At June 30, 1999, 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 June 30, 1999, 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 three months ended June 30, 1999.
<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 (continued)
Results of Operations
The Partnership's results of operations for the three months ended June 30, 1999
resulted is a net loss of $726,926 as compared to a net loss of $879,714 for the
same period in 1998. The decrease in net loss is primarily due to fewer losses
being recognized in 1999 because more Local Limited Partnerships have cumulative
equity in losses in excess of their total investments as compared to the
previous year. In addition, the decrease in net loss is also due to a decrease
in operating expenses due to certain miscellaneous one-time adjustments 1999.
This decrease to net loss in partially offset by an increase to amortization
expense for one of the combined entities. This increase in amortization is
related to the amortization of the original financing costs associated with one
of the Combined Entity's refinanced mortgage.
Property Discussions
Most of the 38 properties have stable operations and are operating at breakeven
or are generating operating cash flow. Some of the properties are experiencing
operating difficulties and cash flow deficits due to a variety of reasons. The
Local General Partners of those properties have funded operating deficits
through project expense loans, subordinated loans or payments form operating
escrows. In instances where the Local General Partners have stopped funding
deficits because their obligation to do so has expired or otherwise, the
Managing General Partner is working with the Local General Partners to increase
operating income, reduce expenses or refinance the debt at lower interest rates
in order to improve cash flow.
As previously reported, Chapparal, Nottingham Square, Patrick Henry and Shadow
Wood, all located in Oklahoma and have the same Local General Partner, are
experiencing operating difficulties. In particular, Shadow Wood is experiencing
severe operating deficits due to high security costs, low Section 8 contract
rates and high debt service payments. Due to concerns regarding the long-term
viability of these properties, the Managing General Partner negotiated a plan
with the Local General Partner that will ultimately transfer ownership of each
property to the Local General Partner. The plan includes provisions to minimize
the risk of recapture. HUD approved the plan and effective July 1, 1998, the
Managing General Partner consummated the transfer of 49.5% of the Partnership's
capital and profits in the properties to the Local General Partner. The Managing
General Partner has the right to transfer the Partnership's remaining interest
in the properties to the Local General Partner any time after one year has
elapsed. The Partnership will retain its full share of tax credits until such
time as the remaining interest is put to the Local General Partner. In addition,
the Local General Partner has the right to call the remaining interest after the
tax credit period has expired.
As previously reported, Garden Cove, located in Huntsville, Alabama, was
involved in litigation. In this litigation, the project's general contractor
claimed there were amounts due it (approximately $225,000 plus interest) under
the construction contract. The Partnership was aware of this potential claim
when it settled the previous dispute in 1996 with the former managing general
partners and did not release them from liability with respect to it. As
previously reported, it appeared that a favorable settlement of the Saunders
matter was achievable but only made sense in the broader context of a mortgage
restructuring for this property (which has been experiencing substantial
deficits). In January 1999, the Managing General Partner was successful in
negotiations with the lender and recently closed on a mortgage restructuring to
the Garden Cove mortgage. This mortgage restructuring involves a reduction of
the first mortgage along with delinquent mortgage payments to be included in a
soft second mortgage.
As a result of the restructuring of the Garden Cove mortgage, the Managing
General Partner was able to settle the litigation instituted by the project's
general contractor. The settlement included a release of all claims in exchange
for a payment to the general contractor of an amount equal to less than half of
the original contract sum. The Partnership and one of the former General
Partners will be paying the settlement amount.
Shannon Creste located in Union City, Georgia, has experienced operating
difficulties due to occupancy, security and capital improvement needs. The
Managing General Partner is working with the management agent to develop a plan
to address these issues. Occupancy as of March 31, 1999 was 95%.
<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 (continued)
Property Discussions (continued)
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the Fund
has implemented policies and practices for assessing impairment of its real
estate assets and investments in Local Limited Partnerships. Each asset is
analyzed by real estate experts to determine if an impairment indicator exists.
If so, the carrying value is compared to the future cash flows expected to be
derived from the asset. If the total undiscounted cash flows are less than the
carrying value, a provision to write down the asset to fair value will be
charged against income.
Impact of Year 2000
The Managing General Partner's plan to resolve year 2000 issues involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Managing General Partner has fully completed an assessment of all
information systems that may not be operative subsequent to 1999 and has begun
the remediation, testing and implementation phase on both hardware and software
systems. Because the hardware and software systems of both the Partnership and
Local Limited Partnerships are generally the responsibility of obligated third
parties, the plan primarily involves ongoing discussions with and obtaining
written assurances from these third parties that pertinent systems will be 2000
compliant. In addition, neither the Partnership nor the Local Limited
Partnerships are incurring significant additional costs since such expenses are
principally covered under the service contracts with vendors. As of August 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes that all major systems are compliant; any systems still being updated
are not considered significant to the Partnership's operations. However, despite
the likelihood that all significant year 2000 issues are expected to be resolved
in a timely manner, the Managing General Partner has no means of ensuring that
all systems of outside vendors or other entities that impact operations will be
2000 compliant. The Managing General Partner does not believe that the inability
of third parties to address their year 2000 issues in a timely manner will have
a material impact on the Partnership. However, the effect of non-compliance by
third parties is not readily determinable.
Management has also evaluated a worst case scenario projection with respect to
the year 2000 and expects any resulting disruption of either the Managing
General Partner's activities or any Local Limited Partnership's operations to be
short-term inconveniences. Such problems, however, are not likely to fully
impede the ability to carry out necessary duties of the Partnership. Moreover,
because expected problems under a worst case scenario are not extensively
detrimental, and because the likelihood that all systems affecting the
Partnership will be compliant in early 1999, the Managing General Partner has
determined that a formal contingency plan that responds to material system
failures is not necessary.
Other Development
Lend Lease Real Estate Investments, Inc., the U.S. subsidiary of Lend Lease
Corporation and the leading U.S. institutional real estate advisor as ranked by
assets under management, announced on July 29, 1999 it has reached a memorandum
of understanding to acquire The Boston Financial Group Limited Partnership. The
transaction remains subject to final due diligence, legal agreements, and
regulatory approvals with no guarantee that the acquisition will be completed.
The two companies are targeting to complete the transactions by the end of
September.
<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 (continued)
Other Development (continued)
Headquartered in New York and Atlanta, Lend Lease Real Estate Investments, ,Inc.
has regional offices in 12 cities nationwide. Worldwide, Lend Lease Real Estate
Investments operates from more than 30 cities on five continents: North America,
Europe, Asia, Australia and South America. The company ranks as the leading U.S.
manager of tax-exempt assets invested in real estate. It is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. In addition to real estate investments,
the Lend Lease Group operates in the areas of property development, project
management and construction, and capital services (infrastructure). Financial
services activities include funds management, life insurance, and wealth
protection.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING 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 June 30, 1999.
<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: August , 1999 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. II
By: Arch Street, Inc.,
its Managing General Partner
/s/Randolph G. Hawthorne
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 243,821
<SECURITIES> 2,070,217
<RECEIVABLES> 38,942
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 12,218,505
<DEPRECIATION> 000
<TOTAL-ASSETS> 16,081,722 <F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 4,273,840
<TOTAL-LIABILITY-AND-EQUITY> 16,081,722 <F2>
<SALES> 000
<TOTAL-REVENUES> 598,348<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 700,420<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 214,589
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (412,611)<F5>
<EPS-BASIC> (11.99)
<EPS-DILUTED> 000
<FN>
<F1>Included in Total Assets: Tenant security deposits of $73,356, Investments
in Local Limited Partnerships of $1,000,819, Mortgage escrow deposits of
$136,447, Operating reserves of $38,229, Replacement reserves of $187,027,
deferred fees, net of $44,433 and Other assets of $29,926. <F2>Included in Total
Liabilities and Equity: Mortgage notes payable of $11,451,642, Accounts payable
to affiliates of $39,974, Accounts payable and accrued expenses of $346,069,
Accrued interest payable of $77,600, Security deposits payable of $63,316 and
Minority interests in Local Limited Partnerships of $170,719. <F3>Total Revenue
includes: Rental of $551,070, Investment of $30,342 and other of $16,936.
<F4>Included in Other Expenses: Asset management fees of $65,564, General and
administrative of $50,415, Bad debt expense of $(19,654), Rental operations,
exclusive of depreciation of $170,271, Property management fees of $24,209,
Depreciation of $139,465 and Amortization of $270,150. <F5>Net loss reflects:
Equity in losses of Local Limited Partnerships of $412,611 and Minority
interests in losses of Local Limited Partnerships of $2,346.
</FN>
</TABLE>
