August 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 Quarter Ended June 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
QH2-10Q1.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 June 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
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
Balance Sheet - June 30, 2000 (Unaudited) 1
Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 2000 and 1999 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30,
2000 3
Statements of Cash Flows (Unaudited) -
For the Three Months Ended June 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
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 63,153
Marketable securities, at fair value 1,916,226
Investments in Local Limited Partnerships (Note 1) 1,299,412
Other assets 27,656
--------------
Total Assets $ 3,306,447
==============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 98,801
Accounts payable and accrued expenses 25,121
--------------
Total Liabilities 123,922
--------------
Commitments (Note 3)
General, Initial and Investor Limited Partners' Equity 3,200,318
Net unrealized losses on marketable securities (17,793)
Total Partners' Equity 3,182,525
--------------
Total Liabilities and Partners' Equity $ 3,306,447
==============
</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 Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999
2000 (Restated)
Revenue:
<S> <C> <C>
Investment $ 29,712 29,829
Other 57,302 22,329
------------- -------------
Total Revenue 87,014 52,158
------------- -------------
Expenses:
Asset management fees, related party 70,608 65,564
General and administrative (includes reimbursements
to an affiliate of $35,728 and $26,320, respectively) 59,567 50,415
Amortization 6,292 19,880
------------- -------------
Total Expenses 136,467 135,859
------------- -------------
Loss before equity in losses of
Local Limited Partnerships (49,453) (83,701)
Equity in losses of Local Limited
Partnerships (Note 1) (128,286) (417,091)
------------- -------------
Net Loss $ (177,739) $ (500,792)
============= =============
Net Loss allocated:
To General Partners $ (1,777) $ (5,008)
To Limited Partners (175,962) (495,784)
------------- -------------
$ (177,739) $ (500,792)
============= =============
Net Loss per Limited
Partnership Unit (60,000 Units) $ (2.93) $ (8.26)
============= =============
</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 Three Months Ended June 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 - - - 3,567 3,567
Net Loss (1,777) - (175,962) - (177,739)
----------- ------------- -------------- ------------- --------------
Comprehensive Income (Loss) (1,777) - (175,962) 3,567 (174,172)
----------- ------------- -------------- ------------- --------------
Balance at June 30, 2000 $ (495,314) $ 5,000 $ 3,690,632 $ (17,793) $ 3,182,525
=========== ============= ============== ============= ==============
</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 Three Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999
2000 (Restated)
<S> <C> <C>
Net cash used for operating activities $ (145,819) $ (23,035)
Net cash used for investing activities (34,848) (134,209)
------------- -------------
Net decrease in cash and cash equivalents (180,667) (157,244)
Cash and cash equivalents, beginning 243,820 273,496
------------- -------------
Cash and cash equivalents, ending $ 63,153 $ 116,252
============= =============
</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 March 31, 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 June
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 $ 34,189,389
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $6,935,907) (33,350,295)
Cumulative cash distributions received
from Local Limited Partnerships (2,613,369)
-------------
Investments in Local Limited Partnerships
before adjustment (1,774,275)
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 4,334,939
Accumulated amortization of acquisition
fees and expenses (1,261,252)
-------------
Investments in Local Limited Partnerships $ 1,299,412
=============
</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 three months ended June 30, 2000 is $835,834. For the three months ended
June 30, 2000 the Partnership has not recognized $707,548 of equity in losses
relating to twenty-seven Local Limited Partnerships where cumulative equity in
losses and cumulative distributions exceeded its total investment in these Local
Limited Partnerships.
2. Litigation
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 June 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
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 June 30, 2000, the Partnership had cash and cash equivalents of $63,153 as
compared to $243,820 at March 31, 2000. The decrease is primarily attributable
to cash used for operating activities and purchases of marketable securities in
excess of proceeds from sales of marketable securities. These are partially
offset by cash distributions received from Local Limited Partnerships.
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 $75,000 have been paid from Reserves. The Partnership also
advanced approximately $1,221,000 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, 2000, approximately
$1,518,000 of cash, cash equivalents and marketable securities has been
designated as Reserves.
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, 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 three months ended June 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 months ended June 30, 2000
resulted is a net loss of $177,739 as compared to a net loss of $500,792 for the
same period in 1999. The decrease in net loss is primarily do 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 distribution as 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,
are experiencing 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 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 was also granted the right to transfer the Partnership's
remaining interest in the properties to the Local General Partner any time after
one year had elapsed. The Partnership retained its full share of tax credits
until such time as the remaining interest was put to the Local General Partner.
In addition, the Local General Partner was granted the right to call the
remaining interest after the tax credit period had expired.
On February 28, 2000, due to concerns over the financial viability of Shadow
Wood, Chapparal, Nottingham Square and Patrick Henry, and to avoid the potential
risk of recapture of tax credits associated with these properties, the Managing
General Partner exercised its right to transfer the Partnership's remaining
interest in Shadow Wood, Chapparal, Nottingham Square and Patrick Henry 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 is negotiating
with the Local General Partner to develop a plan that will ultimately transfer
ownership of the properties to the Local General Partner. The plan includes
provisions to minimize the risk of recapture.
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 June 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: August 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
<PAGE>
