November 9, 1998
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. IV
Report on Form 10-Q for Quarter Ended September 30, 1998
File No. 0-19765
Gentlemen:
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
QH4-Q2.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1998
-----------------------------------
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 0-19765
----------------------
Boston Financial Qualified Housing Tax Credits L.P. IV
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3044617
-------------------------------- --------------------
(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. IV
(A Limited Partnership)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Combined Financial Statements
Combined Balance Sheets - September 30, 1998 (Unaudited)
and March 31, 1998 1
Combined Statements of Operations (Unaudited) -
For the Three and Six Months Ended
September 30, 1998 and 1997 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1998 4
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 30, 1998 and 1997 5
Notes to Combined Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Items 1-6 16
SIGNATURE 17
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEETS - September 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
(Unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 261,468 $ 386,059
Marketable securities, at fair value 1,288,202 985,849
Accounts receivable, net of allowance for bad debt of
$305,048 and $314,316, respectively 43,542 12,759
Tenant security deposits 82,580 85,340
Investments in Local Limited Partnerships,
net of reserve for valuation of $2,724,482 (Note 1) 15,099,243 15,286,237
Rental property at cost, net of accumulated depreciation 13,140,037 14,519,371
Mortgagee escrow deposits 176,963 114,300
Deferred charges, net of accumulated amortization of
$186,821 and $176,768, respectively 179,023 189,076
Other assets 55,569 29,133
------------- -------------
Total Assets $ 30,326,627 $ 31,608,124
============= =============
Liabilities and Partners' Equity
Mortgage notes payable $ 8,589,308 $ 9,720,859
Accounts payable to affiliates 672,058 602,600
Accounts payable and accrued expenses 296,990 340,574
Interest payable 599,700 627,412
Tenant security deposits payable 82,488 84,131
Payable to affiliated Developer 2,482,000 2,482,000
------------- -------------
Total Liabilities 12,722,544 13,857,576
------------- -------------
Minority interest in Local Limited Partnerships 333,576 432,469
------------- -------------
General, Initial and Investor Limited Partners' Equity 17,253,857 17,316,902
Net unrealized gains on marketable securities 16,650 1,177
------------- -------------
Total Partners' Equity 17,270,507 17,318,079
------------- -------------
Total Liabilities and Partners' Equity $ 30,326,627 $ 31,608,124
============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Six Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental $ 431,967 $ 454,767 $ 867,730 $ 907,649
Investment 26,636 21,300 52,004 46,009
Other 17,299 14,803 99,185 89,291
------------- --------------- ------------- --------------
Total Revenue 475,902 490,870 1,018,919 1,042,949
------------- --------------- ------------- --------------
Expenses:
Asset management fee,
related party 49,626 57,480 99,252 114,960
General and administrative
(includes reimbursements to an
affiliate in the amounts of
$50,508 and $79,932 in 1998
and 1997, respectively) 43,145 80,097 107,889 170,672
Bad debt expense 244,895 132,983 245,594 150,539
Rental operations, exclusive of
depreciation 201,950 256,447 421,282 513,403
Property management fee,
related party 24,770 32,475 53,116 65,027
Interest 226,398 256,635 471,541 514,474
Depreciation 146,774 186,691 304,112 373,381
Amortization 21,626 27,877 43,246 55,746
------------- --------------- ------------- --------------
Total Expenses 959,184 1,030,685 1,746,032 1,958,202
------------- --------------- ------------- --------------
Loss before equity in losses of Local
Limited Partnerships, minority interest,
loss on liquidation of interests in
Local Limited Partnerships and
extraordinary item (483,282) (539,815) (727,113) (915,253)
Equity in losses of Local
Limited Partnerships (Note 1) (14,470) (159,532) (20,413) (528,884)
Minority interest in losses of
Local Limited Partnerships 83,081 18,738 98,893 38,578
Loss on liquidation of interests in
Local Limited Partnerships (Note 3) (3,750) (2,538) (3,750) (2,538)
------------- --------------- ------------- --------------
Net loss before extraordinary item (418,421) (683,147) (652,383) (1,408,097)
Extraordinary gain on cancellation
of indebtedness (Note 3) 589,338 453,877 589,338 453,877
------------- --------------- ------------- --------------
Net Income (Loss) $ 170,917 $ (229,270) $ (63,045) $ (954,220)
============= =============== ============= ==============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS (continued)
(Unaudited)
For the Three and Six Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- --------------
Net Income (Loss) allocated:
<S> <C> <C> <C> <C>
To General Partners $ 1,709 $ (2,293) $ (631) $ (9,542)
To Limited Partners 169,208 (226,977) (62,414) (944,678)
------------- --------------- ------------- --------------
$ 170,917 $ (229,270) $ (63,045) $ (954,220)
============= =============== ============= ==============
Net Loss before extraordinary
item per Limited
Partnership Unit (68,043 Units) $ (6.09) $ (9.94) $ (9.49) $ (20.48)
============= =============== ============ ==============
Extraordinary item
per Limited Partnership
Unit (68,043 Units) $ 8.57 $ 6.60 $ 8.57 $ 6.60
============= ============= ============= ==============
Net Income (Loss) per Limited
Partnership Unit
(68,043 Units) $ 2.48 $ (3.34) $ (0.92) $ (13.88)
============= ============= ============ =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
Initial Investor Net
General Limited Limited Unrealized
Partners Partners Partners Gains Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1998 $ (417,917) $ 5,000 $ 17,729,819 $ 1,177 $ 17,318,079
------------- ------------- ------------- ------------- -------------
Comprehensive Loss:
Net Loss (631) - (62,414) - (63,045)
Change in net unrealized
gains on marketable securities
available for sale - - - 15,473 15,473
------------- ------------- ------------- ------------- -------------
Comprehensive Loss (631) - (62,414) 15,473 (47,572)
------------- ------------- ------------- ------------- -------------
Balance at September 30, 1998 $ (418,548) $ 5,000 $ 17,667,405 $ 16,650 $ 17,270,507
============= ============= ============= ============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Net cash provided by (used for) operating activities $ 13,146 $ (111,535)
------------- -------------
Cash flows from investing activities:
Purchases of marketable securities (575,056) (198,988)
Proceeds from sales and maturities of
marketable securities 287,956 332,353
Cash distributions received from Local
Limited Partnerships 209,795 164,576
Advances to Local Limited Partnerships (509) (49,061)
Additions to rental property (17,730) (39,561)
------------- -------------
Net cash provided by (used for) investing activities (95,544) 209,319
------------- -------------
Cash flows from financing activities:
Advances from affiliates 4,484 17,121
Payment of mortgage principal (46,677) (68,780)
------------- --------------
Net cash used for financing activities (42,193) (51,659)
------------- -------------
Net increase (decrease) in cash and cash equivalents (124,591) 46,125
Cash and cash equivalents, beginning 386,059 288,153
------------- -------------
Cash and cash equivalents, ending $ 261,468 $ 334,278
============= =============
Supplemental disclosure:
Cash paid for interest $ 332,896 $ 357,828
============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included with the Partnership's 10-K for the year
ended March 31, 1998. In the opinion of management, these financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Partnership's financial position and results of
operations. The results of operations for the periods may not be indicative of
the results to be expected for the year. Certain amounts in prior year financial
statements have been reclassified herein to conform to current year
presentation.
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, 1998 and 1997.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-six Local Limited Partnerships (excluding 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, which contain certain
operating and distribution restrictions, has generally 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,
excluding the Combined Entities, at September 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
Capital contributions paid to Local Limited
Partnerships and purchase price paid to
withdrawing partners of Local Limited Partnerships $ 43,001,951
Cumulative equity in losses of Local Limited
Partnerships (excludes cumulative unrecognized
losses of $3,526,215) (25,530,045)
Cash distributions received from Local
Limited Partnerships (2,018,254)
Investments in Local Limited Partnerships
before adjustment 15,453,652
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 3,025,727
Accumulated amortization of acquisition
fees and expenses (655,654)
Investments in Local Limited Partnerships 17,823,725
Reserve for valuation of investments
in Local Limited Partnerships (2,724,482)
---------------
$ 15,099,243
---------------
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
The Partnership's share of the net losses of the Local Limited Partnerships,
excluding the Combined Entities, for the six months ended September 30, 1998 is
$1,037,305. For the six months ended September 30, 1998, the Partnership has not
recognized $1,080,821 of equity in losses relating to thirteen Local Limited
Partnerships where cumulative equity in losses and cumulative distributions
exceeded its total investments in these Local Limited Partnerships.
2. Effect of Recently Issued Accounting Standard
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
Statement, which is effective for fiscal years beginning after December 15,
1997, requires that the Partnership display an amount representing total
comprehensive income for the period in its financial statements. The Partnership
adopted the new standard effective April 1, 1998.
3. Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of eleven of the
Texas Partnerships, subject to their liabilities, to unaffiliated entities.
Grandview Terrace Apartments, Pecan Hills Apartments, Seagraves Garden
Apartments, Hilltop Apartments, Bent Tree Housing, Justin Place Apartments,
Valley View Apartments, Nacona Terrace Apartments, Royal Creste Apartments and
Pine Manor Apartments were transferred prior to March 31, 1998 and Pinewood
Terrace Apartments was transferred on July 9, 1998. The transfer of the
remaining Texas Partnership, Gateway Village, is expected to take place in
January 1999.
For financial reporting purposes, loss on liquidation of interest in Local
Limited Partnerships of $3,750 and extraordinary gain on cancellation of
indebtedness of $589,338 were recognized in the six months ended September 30,
1998 as a result of the transfer of Pinewood Terrace Apartments.
For tax purposes, these events result in both Section 1231 Gain and cancellation
of indebtedness income. In addition, the transfer of ownership results in a
nominal amount of recapture of tax credits, since the Texas Partnerships
represent only 3% of the Partnership's tax credits.
4. Litigation
Bentley Court is involved in an audit by the IRS in which the IRS is questioning
the treatment of certain items and included findings for non-compliance in 1993.
On behalf of the Partnership, the Managing General Partner hired attorneys to
respond to the IRS. The Managing General Partner was recently advised that the
local general partner for this property has been indicted on various criminal
charges. In the opinion of management, there is a risk that Bentley Court will
suffer some tax credit recapture or credit disallowance. However, management
cannot quantify the risk at this time. The Managing General Partner is in the
process of having an affiliate admitted to Bentley Court as the managing general
partner thereof.
As previously reported, Audobon Apartments and Brown Kaplan, both of which are
located in Massachusetts are operating below break-even. Both properties receive
subsidies through the State Housing Assistance Rental Program (SHARP), which are
an important part of their annual income. As originally conceived, the SHARP
subsidy was scheduled to decline over time to match increases in net operating
income. However, increases in net operating income failed to keep pace with the
decline in the SHARP subsidy. Many of the SHARP properties (including Audobon
Apartments and Brown Kaplan) sought restructuring workouts with the lender,
Massachusetts
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Litigation (continued)
Housing Finance Agency (MHFA), that included additional subsidies in the form of
Operating Deficit Loans (ODL's). In July, 1997, MHFA refused to close the
restructuring for Brown Kaplan. Effective October 1, 1997, MHFA, which provided
the SHARP subsidies, withdrew funding of the ODL's from its portfolio of 77
subsidized properties. Properties unable to make full debt service payments were
declared in default by the Agency. The Managing General Partner has joined a
group of SHARP property owners called the responsible SHARP Owners, Inc. (RSO)
and is negotiating with MHFA and the Local General Partners of Audobon and Brown
Kaplan to find a solution to the problems that will result from the withdrawn
subsidies. Given the existing operating deficits and the dependence on these
subsidies, Audobon Apartments and Brown Kaplan may default on their mortgage
obligation in the near future. On September 16, 1998, the Partnership joined
with the RSO and about 20 other SHARP property owners and filed suit against the
MHFA (Mass. Sup. Court Civil Action #98-4720). Among other things, the suit
seeks to enforce the MHFA's previous financial commitments to the SHARP
properties. The lawsuit is complex and in its early stages, so no predications
can be made at this time as to the ultimate outcome. In the meantime, the
Managing General Partner intends to continue to participate in the RSO's efforts
to negotiate a resolution of this matter with MHFA.
The Partnership is not a party to any other pending legal or administrative
proceeding, and to the best of its knowledge, no legal or administrative
proceeding is threatened or contemplated against it.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Supplemental Combining Schedules
Balance Sheets
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. IV (A) (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 104,810 $ 156,658 $ - $ 261,468
Marketable securities, at fair value 1,288,202 - - 1,288,202
Accounts receivable, net 123,557 23,474 (103,489) 43,542
Tenant security deposits - 82,580 - 82,580
Investments in Local
Limited Partnerships, net 16,471,448 - (1,372,205) 15,099,243
Rental property at cost, net - 12,483,447 656,590 13,140,037
Mortgagee escrow deposits - 176,963 - 176,963
Deferred charges, net - 179,023 - 179,023
Other assets 20,757 34,812 - 55,569
------------- ------------- ------------- -------------
Total Assets $ 18,008,774 $ 13,136,957 $ (819,104) $ 30,326,627
============= ============= ============= =============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 8,589,308 $ - $ 8,589,308
Accounts payable to affiliates 644,818 130,729 (103,489) 672,058
Accounts payable and accrued expenses 93,449 203,541 - 296,990
Interest payable - 599,700 - 599,700
Tenant security deposits payable - 82,488 - 82,488
Payable to affiliated Developer - 2,482,000 - 2,482,000
------------- ------------- ------------- -------------
Total Liabilities 738,267 12,087,766 (103,489) 12,722,544
------------- ------------- ------------- -------------
Minority interest in Local Limited
Partnerships - - 333,576 333,576
------------- ------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity 17,253,857 1,049,191 (1,049,191) 17,253,857
Net unrealized gains on
marketable securities 16,650 - - 16,650
------------- ------------- ------------- -------------
Total Partners' Equity 17,270,507 1,049,191 (1,049,191) 17,270,507
------------- ------------- ------------- -------------
Total Liabilities and Partners' Equity $ 18,008,774 $ 13,136,957 $ (819,104) $ 30,326,627
============= ============= ============= =============
</TABLE>
(A) As of September 30, 1998.
(B) As of June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
For the Three Months Ended September 30, 1998
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. IV (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 431,967 $ - $ 431,967
Investment 19,242 7,394 - 26,636
Other 3,497 13,802 - 17,299
------------ ------------- ------------- -------------
Total Revenue 22,739 453,163 - 475,902
------------ ------------- ------------- -------------
Expenses:
Asset management fees, related party 49,626 - - 49,625
General and administrative 43,145 - - 43,145
Bad debt expense 244,895 - - 244,896
Rental operations, exclusive of depreciation - 201,950 - 201,950
Property management fee, related party - 24,770 - 24,770
Interest - 226,398 - 226,398
Depreciation - 146,774 - 146,774
Amortization 16,600 5,026 - 21,626
------------ ------------- ------------- -------------
Total Expenses 354,266 604,918 - 959,184
------------ ------------- ------------- -------------
Loss before equity in income (losses) of Local
Limited Partnerships, minority interest,
loss on liquidation of interest in Local
Limited Partnership and extraordinary item (331,527) (151,755) - (483,282)
Equity in income (losses) of Local
Limited Partnerships 506,194 - (520,664) (14,470)
Minority interest in income (losses) of
Local Limited Partnerships - - 83,081 83,081
Loss on liquidation of interest in Local
Limited Partnership (3,750) - - (3,750)
------------ ------------- ------------- -------------
Net income (loss) before extraordinary item 170,917 (151,755) (437,583) (418,421)
Extraordinary gain on cancellation of
indebtedness - 589,338 - 589,338
------------ ------------- ------------- -------------
Net Income $ 170,917 $ 437,583 $ (437,583) $ 170,917
============ ============= ============= =============
</TABLE>
(A) For the three months ended September 30, 1998.
(B) For the three months ended June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended September 30, 1998
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. IV (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 867,730 $ - $ 867,730
Investment 36,136 15,868 - 52,004
Other 74,399 24,786 - 99,185
------------ ------------- ------------- -------------
Total Revenue 110,535 908,384 - 1,018,919
------------ ------------- ------------- -------------
Expenses:
Asset management fees, related party 99,252 - - 99,252
General and administrative 107,889 - - 107,889
Bad debt expense 245,594 - - 245,594
Rental operations, exclusive of depreciation - 421,282 - 421,282
Property management fee, related party - 53,116 - 53,116
Interest - 471,541 - 471,541
Depreciation - 304,112 - 304,112
Amortization 33,193 10,053 - 43,246
------------ ------------- ------------- -------------
Total Expenses 485,928 1,260,104 - 1,746,032
------------ ------------- ------------- -------------
Loss before equity in income of Local Limited
Partnerships, minority interest,
loss of liquidation of interest in Local
Limited Partnership and extraordinary item (375,393) (351,720) - (727,113)
Equity in income of Local
Limited Partnerships 316,098 - (336,511) (20,413)
Minority interest in income of
Local Limited Partnerships - - 98,893 98,893
Loss on liquidation of interest in Local
Limited Partnership (3,750) - - (3,750)
------------ ------------- ------------- -------------
Net loss before extraordinary item (63,045) (351,720) (237,618) (652,383)
Extraordinary gain on cancellation of
indebtedness - 589,338 - 589,338
------------ ------------- ------------- -------------
Net Income (Loss) $ (63,045) $ 237,618 $ (237,618) $ (63,045)
============ ============= ============= =============
</TABLE>
(A) For the six months ended September 30, 1998.
(B) For the six months ended June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Cash Flows
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. IV (A) (B) Eliminations (A)
Net cash provided by (used for)
<S> <C> <C> <C> <C>
operating activities $ (80,217) $ 93,363 $ - $ 13,146
------------- -------------- ------------- -------------
Cash flows from investing activities:
Purchases of marketable securities (575,056) - - (575,056)
Proceeds from sales and maturities
of marketable securities 287,956 - - 287,956
Cash distributions received from
Local Limited Partnerships 209,795 - - 209,795
Advances to Local Limited Partnerships (10,476) - 9,967 (509)
Additions to rental property - (17,730) - (17,730)
------------- ------------- ------------- -------------
Net cash used for
investing activities (87,781) (17,730) 9,967 (95,544)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Advances from affiliate - 14,451 (9,967) 4,484
Payment of mortgage principal - (46,677) - (46,677)
------------- ------------- ------------- -------------
Net cash used for financing activities - (32,226) (9,967) (42,193)
------------- ------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents (167,998) 43,407 - (124,591)
Cash and cash equivalents, beginning 272,808 113,251 - 386,059
------------- ------------- ------------- -------------
Cash and cash equivalents, ending $ 104,810 $ 156,658 $ - $ 261,468
============= ============= ============= =============
</TABLE>
(A) For the six months ended September 30, 1998.
(B) For the six months ended June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership (including the Combined Entities) had a decrease in cash and
cash equivalents of $124,591 from $386,059 at March 31, 1998 to $261,468 at
September 30, 1998. The decrease is mainly attributable to purchases of
marketable securities in excess of proceeds from sales and maturities of
marketable securities, repayment of mortgage principal and additions to rental
property by the Combined Entities. The decrease is offset by cash provided by
operations and cash distributions received from Local Limited Partnerships.
The Managing General Partner initially designated 4% of the Gross Proceeds as
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. Funds totaling approximately $1,163,000 have been
withdrawn from the Reserve account to pay legal fees relating to various
property issues. This amount includes approximately $1,097,000 for the Texas
Partnerships. To date, Reserve funds in the amount of $304,000 have been used to
make additional capital contributions to a Local Limited Partnership. To date,
the Partnership has used approximately $1,233,000 of operating funds to
replenish Reserves. At September 30, 1998, approximately $1,367,000 of cash,
cash equivalents and marketable securities has been designated as Reserves.
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. If Reserves are not adequate to cover
the Partnership's operations, the Partnership will seek other financing sources
including, but not limited to, the deferral of Asset Management Fees to an
affiliate of the Managing General Partner or working with Local Limited
Partnerships to increase cash distributions. In the event a Local Limited
Partnership encounters operating difficulties requiring additional funds, the
Partnership's management might deem it in its best interests to voluntarily
provide such funds in order to protect its investment. To date, in addition to
the $1,163,000 noted above, the Partnership has also advanced approximately
$732,000 to the Texas Partnerships to fund operating deficits. Approximately
$389,000 has also been advanced to four other Local Limited Partnerships.
Since the Partnership invests as a limited partner, the Partnership has no
contractual obligation to provide additional funds to Local Limited Partnerships
beyond its specified investment. Thus, at September 30, 1998, the Partnership
had no contractual or other obligation to any Local Limited Partnership which
had not been paid or provided for.
Cash Distributions
No cash distributions were made during the six months ended September 30, 1998.
Results of Operations
The Partnership's results of operations for the six months ended September 30,
1998 resulted in a net loss of $63,045 as compared to a net loss of $954,220 for
the same period in 1997. The decrease in net loss is primarily attributable to a
decrease in equity in losses of Local Limited Partnerships and decreases in
rental operations, interest, depreciation and general and administrative
expenses. The decrease in equity in losses of Local Limited Partnerships is due
to an increase in losses not recognized by the Partnership for Local Limited
Partnerships whose cumulative equity in losses and cumulative distributions
exceeded its total investment in those partnerships. The decrease in equity in
losses of Local Limited Partnerships is expected to continue. The decrease in
rental operations, interest and depreciation expenses is attributable to the
transfer of one of the combined Entities in the fourth quarter of calendar 1997
and another of the Combined Entities in the third quarter of calendar 1998. The
decrease in general and administrative expenses in due to a decrease in salary
reimbursement expense due to the timing of payments.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions
Prior to the transfer of eleven of the Texas Partnerships, Limited Partnership
interests had been acquired in thirty-seven Local Limited Partnerships which are
located in thirteen states, Washington, D.C. and Puerto Rico. Fifteen of the
properties with 1,440 apartments, were newly constructed, and twenty-two of the
properties with 2,061 apartments were rehabilitated.
Most of the Local Limited Partnerships have stable operations, operating at
break-even or generating operating cash flow. A few 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 from 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, Audobon Apartments and Brown Kaplan, both of which are
located in Massachusetts, are operating below break-even. Both properties
receive subsidies through the State Housing Assistance Rental Program (SHARP),
which are an important part of their annual income. As originally conceived, the
SHARP subsidy was scheduled to decline over time to match increases in net
operating income. However, increases in net operating income failed to keep pace
with the decline in the SHARP subsidy. Many of the SHARP properties (including
Audobon Apartments and Brown Kaplan) sought restructuring workouts with the
lender, Massachusetts Housing Finance Agency, (MHFA) that included additional
subsidies in the form of Operating Deficit Loans (ODL's). In July, 1997, MHFA
refused to close the restructuring for Brown Kaplan. Effective October 1, 1997,
MHFA, which provided the SHARP subsidies, withdrew funding of the ODL's from its
portfolio of 77 subsidized properties. Properties unable to make full debt
service payments were declared in default by MHFA. The Managing General Partner
has joined a group of SHARP property owners called the responsible SHARP Owners,
Inc. (RSO) and is negotiating with MHFA and the Local General Partners of
Audobon and Brown Kaplan to find a solution to the problems that will result
from the withdrawn subsidies. Given the existing operating deficits and the
dependence on these subsidies, Audobon Apartments and Brown Kaplan may default
on their mortgage obligation in the near future. On September 16, 1998, the
Partnership joined with the RSO and about 20 other SHARP property owners and
filed suit against the MHFA (Mass. Sup. Court Civil Action #98-4720). Among
other things, the suit seeks to enforce the MHFA's previous financial
commitments to the SHARP properties. The lawsuit is complex and in its early
stages, so no predications can be made at this time as to the ultimate outcome.
In the meantime, the Managing General Partner intends to continue to participate
in the RSO's efforts to negotiate a resolution of this matter with MHFA.
Bentley Court, located in Columbia, South Carolina, continues to generate
significant deficits despite the July 1996 debt refinancing. As previously
reported, an agreement was set up with the lender which enabled an affiliate of
the Managing General Partner to become an additional general partner and
substitute management agent, subject to lender approval, with the right to take
control of the property if it becomes necessary. In addition, the agreement
stipulates that if the Local Limited Partnership defaults on the agreement, the
lender has the right to remove the management company. The Managing General
Partner is now in the process of having an affiliate admitted as the Managing
General Partner of Bentley Court. In addition, the IRS finalized its report from
an audit of the 1993 tax return for the project. The IRS report includes the
questioning of the treatment of certain items and findings for non-compliance in
1993. Management understands that the audit now also focuses on 1994 and 1995
tax credits. On behalf of the Partnership, the Managing General Partner hired
attorneys to appeal the findings in the IRS report in order to minimize the loss
of credits. Recently, the Managing General Partner was informed that the Local
General Partner for this property has been indicted on various criminal charges.
In the opinion of management, there is a risk that Bentley Court will suffer
some tax credit recapture or credit disallowance.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
However, management cannot quantify the risk at this time. The Managing General
Partner will continue to monitor property operations and the Local General
Partner closely. Operating deficits are currently being funded by the Local
General Partner. As a result of the continuing tax issues at this property,
management has decided to fully reserve the Partnership's investment in Bentley
Court.
As previously reported, BK Apartments, located in Jamestown, North Dakota, has
been generating operating deficits despite improved occupancy. The lender issued
a default notice and threatened to foreclose. A workout agreement was negotiated
and completed on November 10, 1997. The Managing General Partner is closely
monitoring the workout plan with the Local General Partner. Furthermore, in
November 1997, the Managing General Partner consummated a transfer of 50% of its
interest in capital and profits of BK Apartments Limited Partnership to the
Local General Partner. The Managing General Partner has the right to put the
Partnership's remaining interest 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, at Findlay Market (Cincinnati, Ohio), in order to
reconstruct the units damaged by fire, the Partnership agreed to advance up to
$345,000 to help cover the funding shortfall between the insurance proceeds,
lender funding and a City grant. To date, the Partnership has advanced
approximately $299,000 of this amount. However, the property continued to
generate operating deficits which caused the default of the first mortgage. The
Managing and Local General Partners were in negotiation with the lender in hopes
of averting a foreclosure. However, the lender was not amenable to a cure of the
mortgage and exercised its right to foreclose on the mortgage effective in
August 1998. A foreclosure on this property will result in an estimated
recapture of tax credits of $8.00 per unit, plus interest, and the allocation of
taxable income to the Partnership.
As previously reported, negotiations among the Managing General Partner, Lender
and prospective buyer for the remaining two Texas Partnerships, Pinewood Terrace
and Gateway Village, have continued and have resulted in the transfer of
Pinewood Terrace Apartments on July 9, 1998. The transfer of Gateway Village
Apartments is expected to take place in the first quarter of 1999. For tax
purposes in 1998, the transfer event of Pinewood Terrace will result in both
Section 1231 Gain and cancellation of indebtedness income, in addition to
estimated tax credit recapture of $2.80 per Unit. For tax purposes in 1999, the
transfer event of Gateway Village will result in both Section 1231 Gain and
cancellation of indebtedness income and an estimated tax credit recapture of
$2.40 per Unit.
At 46 & Vincennes, located in Chicago, Illinois, operations are running below
break-even due to occupancy problems. On April 1, 1998 the management agent was
replaced with a new management agent. Occupancy as of June 30, 1998 was 82%. The
Managing General Partner is working closely with the Local General Partner to
develop a plan that will address these occupancy concerns. The Managing General
Partner will continue to monitor the new management agent, property operations
and marketing efforts.
Impact of Year 2000
The Managing General Partner has assessed the Partnership's exposure to date
sensitive computer software programs that may not be operative subsequent to
1999 and has executed a requisite course of action to minimize Year 2000 risk
and ensure that neither significant costs nor disruption of normal business
operations are encountered. However, due to the inherent uncertainty that all
systems of outside vendors or other companies on which the Partnership and/or
Local Limited Partnerships rely will be compliant, the Partnership remains
susceptible to consequences of the Year 2000 issue.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(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, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(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 9, 1998 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. IV
By: Arch Street IV, 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-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 261,468
<SECURITIES> 1,288,202
<RECEIVABLES> 43,542
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 13,140,037
<DEPRECIATION> 000
<TOTAL-ASSETS> 30,326,627<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 17,270,507
<TOTAL-LIABILITY-AND-EQUITY> 30,326,627<F2>
<SALES> 000
<TOTAL-REVENUES> 1,018,919<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,274,491<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 471,541
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (63,045)<F5>
<EPS-PRIMARY> (0.92)
<EPS-DILUTED> 000
<FN>
<F1>Included in total assets: Investments in Local Limited Partnerships of
$15,099,243, Deferred charges, net of $179,023, Tenant security deposits of
$82,580, Mortgagee escrow deposits of $176,963 and other assets of $55,569.
<F2>Included in Total Liabilities and Equity: Mortgage notes payable of
$8,589,308, Accounts payable to affiliates of $672,058, Accounts payable and
accrued expenses of $296,990, Interest payable of $599,700, Tenant security
deposits payable of $82,488, Payable to affiliated developer of $2,482,000 and
Minority interest in Local Limited Partnerships of $333,576. <F3>Total revenue
includes: Rental of $867,730, Investment of $52,004 and Other of $99,185.
<F4>Included in Other Expenses: Asset management fees of $99,252, General and
administrative of $107,889, Rental operations, exclusive of depreciation of
$421,282, Bad debt of $245,594, Property management fees of $53,116,
Depreciation of $304,112 and Amortization of $43,246. <F5>Net loss reflects:
Equity in losses of Local Limited Partnerships of $20,413, Minority interest in
losses of Local Limited Partnerships of $98,893, Loss on liquidation of interest
in Local Limited Partnership of $3,750 and Gain on transfer and liquidation of
real estate of $589,338.
</FN>
</TABLE>
