November 12, 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 for Quarter Ended September 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-Q2.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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 September 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 (IRS 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
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Combined Balance Sheet - September 30, 1999 (Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 1999 and 1998 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1999 3
Combined Statements of Cash Flows (Unaudited) -
For the Six Months Ended September 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 13
SIGNATURE 14
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
COMBINED BALANCE SHEET
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 256,437
Marketable securities, at fair value 1,841,844
Account receivable 48,610
Tenant security deposits 75,250
Investments in Local Limited Partnerships (Note 1) 945,156
Rental property at cost, net of
accumulated depreciation 12,099,792
Mortgage escrow deposits 114,338
Replacement reserves 193,660
Deferred fees, net of accumulated amortization
of $167,049 39,962
Other assets 57,211
Total Assets $ 15,672,260
===============
Liabilities and Partners' Equity
Mortgage notes payable $ 11,438,389
Accounts payable to affiliates 28,063
Accounts payable and accrued expenses 216,039
Accrued interest payable 118,932
Security deposits payable 64,467
---------------
Total Liabilities 11,865,890
Minority interests in Local Limited Partnerships (173,074)
---------------
Commitments (Note 3)
General, Initial and Investor Limited Partners' Equity 3,992,658
Net unrealized losses on marketable securities (13,214)
Total Partners' Equity 3,979,444
---------------
Total Liabilities and Partners' Equity $ 15,672,260
===============
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 and Six Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
-------------- ------------- ------------- ------------
Revenue:
<S> <C> <C> <C> <C>
Rental $ 545,773 $ 531,976 $ 1,096,843 $ 1,054,385
Investment 31,831 43,335 62,173 75,325
Other 17,984 343,789 34,920 361,395
-------------- ------------- ------------- -------------
Total Revenue 595,588 919,100 1,193,936 1,491,105
-------------- ------------- ------------- -------------
Expenses:
Asset management fees,
related party 69,102 68,040 134,666 136,080
General and administrative
(includes reimbursements
to an affiliate of $48,112
and $47,013, respectively) 14,614 45,808 65,029 97,637
Bad debt expense 19,654 - - -
Rental operations,
exclusive of depreciation 327,359 324,888 497,630 624,154
Property management fees,
related party 23,731 22,703 47,940 44,930
Interest 238,870 221,456 453,459 443,053
Depreciation 139,465 139,466 278,930 277,312
Amortization 21,303 27,051 291,453 61,351
-------------- ------------- ------------- -------------
Total Expenses 854,098 849,412 1,769,107 1,684,517
-------------- ------------- ------------- -------------
Income (Loss) before minority interests in
losses of Local Limited Partnerships
and equity in losses of Local Limited
Partnerships (258,510) 69,688 (575,171) (193,412)
Minority interests in losses of
Local Limited Partnerships (Note 1) 2,355 2,630 4,701 4,698
Equity in losses of Local
Limited Partnerships (30,663) (1,010,854) (443,274) (1,629,536)
-------------- ------------- ------------- -------------
Net Loss $ (286,818) $ (938,536) $ (1,013,744) $ (1,818,250)
============== ============= ============= =============
Net Loss allocated:
To General Partners $ (2,868) $ (9,385) $ (10,137) $ (18,182)
To Limited Partners (283,950) (929,151) (1,003,607) (1,800,068)
-------------- ------------- ------------- -------------
$ (286,818) $ (938,536) $ (1,013,744) $ (1,818,250)
============== ============= ============= =============
Net Loss per Limited
Partnership Unit
(60,000 Units) $ (4.74) $ (15.48) $ (16.73) $ (30.00)
============= ============= ============= ==============
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 Six Months Ended September 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 - - - (23,652) (23,652)
Net Loss (10,137) - (1,003,607) - (1,013,744)
----------- --------- ------------- ------------- ------------
Comprehensive Loss (10,137) - (1,003,607) (23,652) (1,037,396)
----------- --------- ------------- ------------- ------------
Balance at September 30, 1999 $ (487,390) $ 5,000 $ 4,475,048 $ (13,214) $ 3,979,444
=========== ========= ============= ============= ============
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 Six Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net cash used for operating activities $ (280,871) $ (574,035)
Net cash provided by (used for) investing activities 4,638 (20,319)
Net cash provided by financing activities 213,130 48,916
------------- -------------
Net decrease in cash and cash equivalents (63,103) (545,438)
Cash and cash equivalents, beginning 319,540 722,737
------------- -------------
Cash and cash equivalents, ending $ 256,437 $ 177,299
============= =============
Supplemental Disclosure:
Cash paid for interest $ 597,250 $ 348,541
============= =============
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 of the Local Limited Partnerships that is included in the
accompanying combined financial statements is as of June 30, 1999 and 1998.
1. Investments in Local Limited Partnerships
The Partnership has acquired limited partner 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.
The following is a summary of Investments in Local Limited Partnerships at
September 30, 1999, excluding the Combined Entities:
<TABLE>
<CAPTION>
Capital contributions paid to Local Limited Partnerships and purchase price
<S> <C>
paid to withdrawing partners of Local Limited Partnerships $ 30,801,675
Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
unrecognized losses of $4,435,265) (30,035,727)
Cumulative cash distributions received
from Local Limited Partnerships (2,585,069)
Investments in Local Limited Partnerships before adjustment (1,819,121)
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 3,917,758
Accumulated amortization of acquisition fees and expenses (1,153,481)
-------------
Investments in Local Limited Partnerships $ 945,156
=============
</TABLE>
The Partnership's share of losses of the Local Limited Partnerships, excluding
the Combined Entities, for the six months ended September 30, 1999 totaled
$1,112,732. For the six months ended September 30, 1999, the Partnership has not
recognized $670,002 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.
3. Commitments
At September 30, 1999, the Fund has committed to make future capital
contributions and 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 approximately $338,000.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Supplemental Combining Schedules
Balance Sheets
<TABLE>
<CAPTION>
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 $ 106,509 $ 149,928 $ - $ 256,437
Marketable securities, at fair value 1,841,844 - - 1,841,844
Accounts receivable - 48,610 - 48,610
Tenant security deposits - 75,250 - 75,250
Investments in Local Limited
Partnerships 810,680 - 134,476 945,156
Rental property at cost, net of
accumulated depreciation - 11,487,882 611,910 12,099,792
Mortgage escrow deposits - 114,338 - 114,338
Replacement reserves - 193,660 - 193,660
Deferred fees, net - 39,962 - 39,962
Other assets 24,186 33,025 - 57,211
------------- ------------- ------------- -------------
Total Assets $ 2,783,219 $ 12,142,655 $ 746,386 $ 15,672,260
============= ============= ============= =============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 11,438,389 $ - $ 11,438,389
Accounts payable to affiliates 16,420 11,643 - 28,063
Accounts payable and accrued
expenses 7,239 208,800 - 216,039
Advances from Limited Partner - 1,219,884 (1,219,884) -
Accrued interest payable - 118,932 - 118,932
Security deposits payable - 64,467 - 64,467
------------- ------------- ------------- -------------
Total Liabilities 23,659 13,062,115 (1,219,884) 11,865,890
------------- ------------- ------------- -------------
Minority interests in Local Limited
Partnerships - - (173,074) (173,074)
------------- ------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity 2,772,774 (919,460) 2,139,344 3,992,658
Net unrealized gains on
marketable securities (13,214) - - (13,214)
------------- ------------- ------------- -------------
Total Partners' Equity 2,759,560 (919,460) 2,139,344 3,979,444
------------- ------------- ------------- -------------
Total Liabilities and Partners' Equity $ 2,783,219 $ 12,142,655 $ 746,386 $ 15,672,260
============= ============= ============= =============
</TABLE>
(A) As of September 30, 1999.
(B) As of June 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Operations
For the Six Months Ended September 30, 1999
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. II (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 1,096,843 $ - $ 1,096,843
Investment 60,801 1,372 - 62,173
Other 6,069 28,851 - 34,920
------------- ------------- ------------- -------------
Total Revenue 66,870 1,127,066 - 1,193,936
------------- ------------- ------------- -------------
Expenses:
Asset management fees, related party 134,666 - - 134,666
General and administrative 91,445 - (26,416) 65,029
Bad debt expense 1,193,468 - (1,193,468) -
Rental operations, exclusive
of depreciation - 497,630 - 497,630
Property management fees,
related party - 47,940 - 47,940
Interest - 453,459 - 453,459
Depreciation - 278,930 - 278,930
Amortization 39,599 251,854 - 291,453
------------- -------------- ------------- -------------
Total Expenses 1,459,178 1,529,813 (1,219,884) 1,769,107
------------- ------------- ------------- -------------
Income (Loss) before minority interests in
losses of Local Limited Partnerships and
equity in losses of Local Limited
Partnerships (1,392,308) (402,747) 1,219,884 (575,171)
Minority interests in losses of
Local Limited Partnerships - - 4,701 4,701
Equity in losses of Local
Limited Partnerships (841,320) - 398,046 (443,274)
------------- ------------- -------------- -------------
Net Loss $ (2,233,628) $ (402,747) $ 1,622,631 $ (1,013,744)
============= ============= ============= =============
</TABLE>
(A) For the six months ended September 30, 1999.
(B) For the six months ended June 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Cash Flows
<TABLE>
<CAPTION>
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 $ (256,367) $ (24,504) $ - $ (280,871)
------------- ------------- ------------- -------------
Net cash provided by investing activities 89,380 (84,742) - 4,638
------------- ------------- ------------- -------------
Net cash provided by financing activities - 213,130 - 213,130
------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents (166,987) 103,884 - (63,103)
Cash and cash equivalents, beginning 273,496 46,044 - 319,540
------------- ------------- ------------- -------------
Cash and cash equivalents, ending $ 106,509 $ 149,928 $ - $ 256,437
============= ============= ============= =============
</TABLE>
(A) For the six months ended September 30, 1999.
(B) For the six 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
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The Fund
intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements and is including this statement for
purposes of complying with these safe harbor provisions. Although the Fund
believes the forward-looking statements are based on reasonable assumptions, the
Fund 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 Fund and its suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
At September 30, 1999, the Partnership, including the Combined Entities, had
cash and cash equivalents of $256,437, as compared to $319,540 at March 31,
1999. The decrease is primarily attributable to additions to rental property and
cash used for operations. These decreases are partially offset by proceeds from
sales of marketable securities in excess of purchases.
The Managing General Partner initially designated 3% of Gross Proceeds as
Reserves. The Reserves, as defined in the Partnership Agreement, were
established to be used for working capital of the Partnership and contingencies
related to the ownership of Local Limited Partnership interests. 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 $72,000 have been paid from Reserves. The
Partnership also advanced approximately $1,220,000 to various 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 such funding appropriate. At September 30, 1999,
approximately $1,587,000 of cash, cash equivalents and marketable securities has
been designated as Reserves.
At September 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 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 September 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 six months ended September 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 six months ended September 30,
1999 resulted in a net loss of $1,013,744, as compared to a net loss of
$1,818,250 for the same period in 1998. The decrease in net loss is primarily
due to decreases in equity in losses of Local Limited Partnerships. The decrease
in equity in losses of Local Limited Partnerships is primarily due to the
Partnership not recognizing losses relating to Local Limited Partnerships where
cumulative equity in losses and cumulative distributions have exceeded its total
investment.
Property Discussions
The majority 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. 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 June 30, 1999 was 100%.
<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)
The Local General Partner of Ashton Place, located in Waynesboro, Georgia,
Bamberg Garden, located in Bamberg, South Carolina, Highland Village, located in
Monroe, Georgia, McKinley Lane, located in Fitzgerald, Georgia, Meadowbrook,
located in Americus, Georgia and Willowpeg Lane, 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 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.
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 service contracts with vendors. As of November 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes all major systems are compliant; any systems still being updated are
not considered significant to the Partnership's operations. However, despite the
likelihood that all significant year 2000 issues are expected to be resolved in
a timely manner, the Managing General Partner has no means of ensuring that all
systems of outside vendors or other entities that impact operations will be 2000
compliant. The Managing General Partner does not believe that the inability of
third parties to address their year 2000 issues in a timely manner will have a
material impact on the Partnership. However, the effect of non-compliance by
third parties is not readily determinable.
Management has also evaluated a worst case scenario projection with respect to
the year 2000 and expects any resulting disruption of either the Managing
General Partner's activities or any Local Limited Partnership's operations to be
short-term inconveniences. Such problems, however, are not likely to fully
impede the ability to carry out necessary duties of the Partnership. Moreover,
because expected problems under a worst case scenario are not extensively
detrimental, and because the likelihood that all systems affecting the
Partnership will be compliant before 2000, the Managing General Partner has
determined that a formal contingency plan that responds to material system
failures is not necessary.
Other Development
Lend Lease Real Estate Investments, Inc., ("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, announced on July 29, 1999 it had reached
a memorandum of understanding to acquire The Boston Financial Group Limited
Partnership ("Boston Financial"). Lend Lease closed the acquisition of 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). 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 September 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: November 12, 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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 256,437
<SECURITIES> 1,841,844
<RECEIVABLES> 48,610
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 12,099,792
<DEPRECIATION> 000
<TOTAL-ASSETS> 15,672,260<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 3,979,444
<TOTAL-LIABILITY-AND-EQUITY> 15,672,260<F2>
<SALES> 000
<TOTAL-REVENUES> 1,193,936<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,315,648<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 453,459
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (1,013,744)<F5>
<EPS-BASIC> (16.73)
<EPS-DILUTED> 000
<FN>
<F1>Included in Total Assets: Tenant security deposits of $75,250, Investments
in Local Limited Partnerships of $945,156, Mortgage escrow deposits of $114,338,
Replacement reserves of $193,660, Deferred fees, net of accumulated amortization
of $39,962 and Other assets of $57,211. <F2>Included in Total Liabilities and
Equity: Mortgage notes payable of $11,438,389, Accounts payable to affiliates of
$28,063, Accounts payable and accrued expenses of $216,039, Accrued interest
payable of $118,932, Security deposits payable of $64,467 and Minority interests
in Local Limited Partnerships of $(173,074). <F3>Total Revenue includes: Rental
of $1,096,843, Investment of $62,173 and Other of $34,920. <F4>Included in Other
Expenses: Asset management fees of $134,666, General and administrative of
$65,029, Rental operations, exclusive of depreciation of $497,630, Property
management fees of $47,940, Depreciation of $278,930 and Amortization of
$291,453. <F5>Net loss reflects: Equity in losses of Local Limited Partnerships
of $(443,274) and Minority interests in losses of Local Limited Partnerships of
$4,701.
</FN>
</TABLE>
