November 14 , 2000
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC. 20549
Re: Boston Financial Qualified Housing Tax Credits L. P. II
Report on Form 10-QSB for the Quarter Ended September 30, 2000
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, 2000
-------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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(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
Balance Sheet - September 30, 2000 (Unaudited) 1
Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 2000 and 1999 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 2000 3
Statements of Cash Flows (Unaudited) -
For the Six Months Ended September 30, 2000 and 1999 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Items 1-6 9
SIGNATURE 10
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
BALANCE SHEET
September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 269,647
Marketable securities, at fair value 1,893,004
Investments in Local Limited Partnerships, net (Note 1) 1,340,552
Other assets 26,679
---------------
Total Assets $ 3,529,882
===============
Liabilities and Partners' Equity
--------------------------------
Accounts payable to affiliates $ 205,138
Accounts payable and accrued expenses 18,505
---------------
Total Liabilities 223,643
---------------
Commitments (Note 2)
General, Initial and Investor Limited Partners' Equity 3,316,465
Net unrealized losses on marketable securities (10,226)
---------------
Total Partners' Equity 3,306,239
---------------
Total Liabilities and Partners' Equity $ 3,529,882
===============
</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)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
September 30, 1999 September 30, 1999
2000 (Restated) 2000 (Restated)
-------------- ------------- ------------- ------------
Revenue:
<S> <C> <C> <C> <C>
Investment $ 30,620 $ 30,972 $ 60,332 $ 60,801
Other 3,257 3,394 60,559 6,069
-------------- ------------- ------------- -------------
Total Revenue 33,877 34,366 120,891 66,870
-------------- ------------- ------------- -------------
Expenses:
Asset management fees,
related party 70,608 69,102 141,216 134,666
General and administrative
(includes reimbursements
to an affiliate of $71,457
and $48,112 in 2000
and 1999, respectively) 65,980 41,030 125,547 91,445
Provision for valuation of
investments in Local Limited
Partnerships 300 1,213,122 300 1,193,468
Amortization 5,419 13,946 11,711 33,826
-------------- ------------- ------------- -------------
Total Expenses 142,307 1,337,200 278,774 1,453,405
-------------- ------------- ------------- -------------
Loss before equity in income (losses)
of Local Limited Partnerships (108,430) (1,302,834) (157,883) (1,386,535)
Equity in income (losses) of Local
Limited Partnerships (Note 1) 224,577 (92,192) 96,291 (509,283)
-------------- ------------- ------------- -------------
Net Income (Loss) $ 116,147 $ (1,395,026) $ (61,592) $ (1,895,818)
============== ============= ============= =============
Net Income (Loss) allocated:
To General Partners $ 1,161 $ (13,950) $ (616) $ (18,958)
To Limited Partners 114,986 (1,381,076) (60,976) (1,876,860)
-------------- ------------- ------------- -------------
$ 116,147 $ (1,395,026) $ (61,592) $ (1,895,818)
============== ============= ============= =============
Net Income (Loss) per Limited
Partnership Unit
(60,000 Units) $ 1.91 $ (23.02) $ (1.02) $ (31.28)
============== ============= ============= ==============
</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)
For the Six Months Ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Initial Investor Net
General Limited Limited Unrealized
Partners Partners Partners Losses Total
----------- ------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 2000 $ (493,537) $ 5,000 $ 3,866,594 $ (21,360) $ 3,356,697
----------- ------------- -------------- ------------- --------------
Comprehensive Income (Loss):
Change in net unrealized
losses on marketable
securities available for sale - - - 11,134 11,134
Net Loss (616) - (60,976) - (61,592)
----------- ------------- ----------- ---------- -----------
Comprehensive Income (Loss) (616) - (60,976) 11,134 (50,458)
------------ ------------- ----------- ---------- -----------
Balance at September 30, 2000 $ (494,153) $ 5,000 $ 3,805,618 $ (10,226) $ 3,306,239
=========== ============= ============== ============= ==============
</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)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999
2000 (Restated)
------------- ------------
<S> <C> <C>
Net cash used for operating activities $ (150,045) $ (256,367)
Net cash provided by investing activities 175,872 89,380
------------- -------------
Net increase (decrease) in cash and cash equivalents 25,827 (166,987)
Cash and cash equivalents, beginning 243,820 273,496
------------- -------------
Cash and cash equivalents, ending $ 269,647 $ 106,509
============= =============
</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 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-KSB
for the year ended March 31, 2000. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Partnership's financial
position and results of operations. The results of operations for the periods
may not be indicative of the results to be expected for the year.
The Managing General Partner has elected to report results of
the Local Limited Partnerships on a 90 day lag basis, because the Local Limited
Partnerships report their results on a calendar year basis. Accordingly, the
financial information about the Local Limited Partnerships that is included in
the accompanying financial statements is as of June 30, 2000 and 1999.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its
limited partnership interests in thirty-four Local Limited Partnerships 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, which contain certain
operating and distribution restrictions, has acquired a 99% interest in the
profits, losses, tax credits and cash flows from operations of each of the Local
Limited Partnerships. 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, 2000:
<TABLE>
<CAPTION>
Capital contributions and advances paid to Local Limited
Partnerships and purchase price paid to withdrawing
<S> <C>
partners of Local Limited Partnerships $ 35,410,260
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $7,526,121) (33,124,418)
Cumulative cash distributions received
from Local Limited Partnerships (2,792,687)
-------------
Investments in Local Limited Partnerships
before adjustment (506,845)
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 4,334,939
Accumulated amortization of acquisition
fees and expenses (1,266,671)
-------------
Investments in Local Limited Partnerships before reserve for valuation 2,561,423
Reserve for valuation of investments in Local Limited Partnerships (1,220,871)
-------------
Investments in Local Limited Partnerships $ 1,340,552
=============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS, L.P. II
(A Limited Partnership)
Notes to the Financial Statements (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
----------------------------------------------------
The Partnership's share of the net losses of the Local
Limited Partnerships for the six months ended September 30, 2000 is $1,200,171.
For the six months ended September 30, 2000 the Partnership has not recognized
$1,296,462 of equity in losses relating to twenty-nine Local Limited
Partnerships where cumulative equity in losses and cumulative distributions
exceeded its total investment in these Local Limited Partnerships.
2. Commitments
At September 30, 2000, the Partnership 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 property's 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)
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 is including this
statement for purposes of complying with these safe harbor provisions. Although
the Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions and interest rates.
Liquidity and Capital Resources
At September 30, 2000, the Partnership had cash and cash
equivalents of $269,647 as compared to $243,820 at March 31, 2000. The increase
is primarily attributable to proceeds from sales and maturities of marketable
securities and cash distributions received from Local Limited Partnerships.
These increases are partially offset by purchases of marketable securities and
cash used for operations.
The Managing General Partner initially designated 3% of the
Gross Proceeds to Reserves as defined in the Partnership Agreement. The Reserves
were established to be used for working capital of the Partnership and
contingencies related to the ownership of Local Limited Partnership interests.
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 $84,000 have been paid from
Reserves. The Partnership also advanced approximately $1,221,000 to two 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
September 30, 2000, approximately $946,000 of cash, cash equivalents and
marketable securities has been designated as Reserves.
At September 30, 2000, the Partnership 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 property's achievement of certain criteria as set forth in the
Local Limited Partnership Agreements and total approximately $338,000.
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, 2000,
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, 2000.
<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 and
six months ended September 30, 2000 resulted in a net income of $116,147 and a
net loss of $61,592, respectively, as compared to a net loss of $1,395,026 and
$1,895,818 for the same periods in 1999. The decrease in net loss is primarily
attributable to decreases in equity in losses of Local Limited Partnerships and
provision for valuation of investment in 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
As previously reported, Chapparal, Nottingham Square, Patrick
Henry and Shadow Wood, which are all located in Oklahoma and have the same Local
General Partner, encountered operating difficulties. Due to concerns regarding
the long-term viability of these properties, the Managing General Partner
negotiated a plan with the Local General Partner that ultimately transferred
ownership of each property to the Local General Partner. The plan included
provisions to minimize the risk of recapture. Subsequent to HUD approval of the
plan, the Managing General Partner consummated the transfer, effective July 1,
1998, of 49.5% of the Partnership's capital and profits in the properties
to the Local General Partner. On February 28, 2000, the Managing General Partner
exercised its right to transfer the Partnership's remaining interest in
such properties to the Local General Partner. These transfers will not trigger a
recapture event for the Partnership nor have any impact on the
Partnership's financial statement. However, for tax purposes, this event
will result in both Section 1231 gain and cancellation of indebtedness income
for the 2000 tax year.
The Local General Partner of Ashton Place (Waynesboro, Georgia),
Bamberg Garden (Bamberg, South Carolina), Highland Village (Monroe, Georgia),
McKinley Lane, (Fitzgerald, Georgia), Meadowbrook (Americus, Georgia) and
Willowpeg Lane (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
reached agreement with the Local General Partner on 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. The Managing General
Partner has not yet transferred any of the Partnership's interest in these
properties.
The Partnership has implemented policies and practices for
assessing potential impairment of its investments in Local Limited Partnerships.
The investments are analyzed by real estate experts to determine if impairment
indicators exist. If so, the carrying value is compared to the undiscounted
future cash flows expected to be derived from the asset. If there is a
significant impairment in carrying value, a provision to write down the asset to
fair value will be recorded in the Partnership’s financial statements.
<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, 2000.
<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 14 , 2000 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
