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. IV
Report on Form 10-QSB for Quarter Ended September 30, 1999
File Number 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-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 0-19765
------------------------
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
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Combined 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 4
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 30, 1999 and 1998 5
Notes to Combined Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Items 1-6 15
SIGNATURE 16
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEET
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 427,352
Marketable securities, at fair value 732,263
Accounts receivable, net of allowance for bad debts of $5,800 97,516
Tenant security deposits 81,963
Investments in Local Limited Partnerships,
net of reserve for valuation of $2,094,646 (Note 1) 14,972,568
Rental property at cost, net of accumulated depreciation 11,512,190
Mortgagee escrow deposits 226,945
Deferred charges, net of accumulated amortization of
$6,702 205,052
Other assets 31,779
Total Assets $ 28,287,628
=============
Liabilities and Partners' Equity
Mortgage notes payable $ 8,320,488
Accounts payable to affiliates 155,180
Accounts payable and accrued expenses 97,222
Interest payable 46,179
Tenant security deposits payable 70,255
Payable to affiliated Developer 2,482,000
-------------
Total Liabilities 11,171,324
Minority interest in Local Limited Partnership 272,684
-------------
General, Initial and Investor Limited Partners' Equity 16,846,035
Net unrealized losses on marketable securities (2,415)
-------------
Total Partners' Equity 16,843,620
Total Liabilities and Partners' Equity $ 28,287,628
=============
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, 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 $ 422,698 $ 431,967 $ 843,840 $ 867,730
Investment 18,856 26,636 36,797 52,004
Other 63,475 17,299 149,257 99,185
------------- --------------- ------------- --------------
Total Revenue 505,029 475,902 1,029,894 1,018,919
------------- --------------- ------------- --------------
Expenses:
Asset management fee,
related party 42,935 49,626 89,604 99,252
General and administrative
(includes reimbursements to an
affiliate in the amounts of
$51,774 and $50,508 in 1999
and 1998, respectively) 144,009 43,145 211,599 107,889
Bad debt expense (5,694) 244,895 215,345 245,594
Rental operations, exclusive of
depreciation 180,969 201,950 348,990 421,282
Property management fee,
related party 22,016 24,770 43,293 53,116
Interest 138,660 226,398 339,609 471,541
Depreciation 137,653 146,774 275,307 304,112
Amortization 21,480 21,626 208,577 43,246
------------- --------------- ------------- --------------
Total Expenses 682,028 959,184 1,732,324 1,746,032
------------- --------------- ------------- --------------
Loss before equity in (losses)
income of Local Limited Partnerships,
minority interest, loss on liquidation
of interests in Local Limited Partnerships
and gain on transfer of assets (176,999) (483,282) (702,430) (727,113)
Equity in (losses) income of Local
Limited Partnerships (Note 1) (125,146) (14,470) 73,420 (20,413)
Minority interest in losses of
Local Limited Partnerships 4,446 83,081 112,933 98,893
Loss on liquidation of interests in
Local Limited Partnerships (Note 2) - (3,750) (6,486) (3,750)
------------- --------------- ------------- --------------
Net loss before gain on transfer of
assets (297,699) (418,421) (522,563) (652,383)
Gain on transfer of assets (Note 2) - 589,338 218,408 589,338
------------- --------------- ------------- --------------
Net Income (Loss) $ (297,699) $ 170,917 $ (304,155) $ (63,045)
============= =============== ============= ==============
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, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- --------------
Net Income (Loss) allocated:
<S> <C> <C> <C> <C>
To General Partners $ (2,976) $ 1,709 $ (3,041) $ (631)
To Limited Partners (294,723) 169,208 (301,114) (62,414)
------------- --------------- ------------- --------------
$ (297,699) $ 170,917 $ (304,155) $ (63,045)
============= =============== ============= ==============
Net Loss before gain on transfer of
of assets item per Limited
Partnership Unit (68,043 Units) $ (4.33) $ (6.09) $ (7.60) $ (9.49)
============ ============ ============ =============
Gain on transfer of assets
per Limited Partnership
Unit (68,043 Units) $ - $ 8.57 $ 3.18 $ 8.57
============= ============= ============= ==============
Net Income (Loss) per Limited
Partnership Unit
(68,043 Units) $ (4.33) $ 2.48 $ (4.42) $ (0.92)
============ ============= ============ =============
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, 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 $ (419,584) $ 5,000 $ 17,564,774 $ 3,473 $ 17,153,663
------------- ------------- ------------- ------------- -------------
Comprehensive Loss:
Net change in net unrealized
gains on marketable securities
available for sale - - - (5,888) (5,888)
Net Loss (3,041) - (301,114) - (304,155)
------------- ------------- ------------- ------------- -------------
Comprehensive Loss (3,041) - (301,114) (5,888) (310,043)
------------- ------------- ------------- ------------- -------------
Balance at September 30, 1999 $ (422,625) $ 5,000 $ 17,263,660 $ (2,415) $ 16,843,620
============= ============= ============= ============= =============
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, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net cash provided by (used for) operating activities $ (506,982) $ 13,146
Net cash provided by (used for) investing activities 339,900 (95,544)
Net cash provided by (used for) financing activities 233,365 (42,193)
------------- -------------
Net increase (decrease) in cash and cash equivalents 66,283 (124,591)
Cash and cash equivalents, beginning 361,069 386,059
------------- -------------
Cash and cash equivalents, ending $ 427,352 $ 261,468
============= =============
Supplemental disclosure:
Cash paid for interest $ 825,254 $ 332,896
============= =============
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-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 uses the equity method to account for its limited partnership
interests in twenty-four Local Limited Partnerships (excluding the Combined
Entity) 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.
<TABLE>
<CAPTION>
The following is a summary of investments in Local Limited Partnerships,
excluding the Combined Entity, at September 30, 1999:
Capital contributions paid to Local Limited
Partnerships and purchase price paid to
<S> <C>
withdrawing partners of Local Limited Partnerships $ 41,676,500
Cumulative equity in losses of Local Limited
Partnerships (excludes cumulative unrecognized
losses of $9,924,247) (24,579,156)
Cash distributions received from Local
Limited Partnerships (2,337,972)
Investments in Local Limited Partnerships
before adjustment 14,759,372
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 2,999,362
Accumulated amortization of acquisition
fees and expenses (691,520)
Investments in Local Limited Partnerships 17,067,214
Reserve for valuation of investments
in Local Limited Partnerships (2,094,646)
$ 14,972,568
</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 Entity, for the six months ended September 30, 1999
totaled $920,383. For the six months ended September 30, 1999, the Partnership
has not recognized $1,112,248 of equity in losses relating to fourteen Local
Limited Partnerships where cumulative equity in losses and cumulative
distributions exceeded its total investments in these Local Limited
Partnerships.
2. Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of the Texas
Partnerships, subject to their liabilities, to unaffiliated entities. The last
Texas Partnership, Gateway Village was transferred on May 27, 1999.
For financial reporting purposes, loss on liquidation of interest in Local
Limited Partnership of $6,486 and gain on transfer of assets of $218,408 were
recognized in the six months ended September 30, 1999 as a result of the
transfer of Gateway Village.
For tax purposes, these events result in both Section 1231 Gain and cancellation
of indebtedness income. In addition, the transfer of ownership will result in a
nominal amount of recapture of tax credits.
3. Litigation
As previously reported, Bentley Court, located in Columbia, South Carolina,
continues to generate deficits. Further, 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 retained
counsel to appeal the findings in the IRS report in order to minimize the loss
of credits. In June of 1998, the Managing General Partner was informed that an
individual associated with the non-affiliated Local General Partner for this
property was indicted on various criminal charges related to this IRS audit.
This individual pled guilty to two of these counts and is now awaiting
sentencing. In the opinion of Management, there is a substantial risk that
Limited Partners will suffer significant tax credit recapture and/or credit
disallowance as a result of the problems at this property. However, it is not
possible to quantify the risk until the IRS completes its audits. Additionally,
the Local General Partner was removed as general partner from the Local Limited
Partnership and replaced with an affiliate of the Managing General Partner. In
addition, the Managing General Partner terminated the property management
company from management of the property and replaced it with a new property
management group. The Managing General Partner will continue to monitor property
operations closely. As a result of the continuing tax issues at this property,
Management fully reserved the Partnership's investment in Bentley Court.
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)
4. Supplemental Combining Schedules
Balance Sheets
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing Combined
Tax Credits Entity Combined
L.P. IV (A) (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 364,290 $ 92,636 $ (29,574) $ 427,352
Marketable securities, at fair value 732,263 - - 732,263
Accounts receivable, net 83,316 14,200 - 97,516
Tenant security deposits - 81,963 - 81,963
Investments in Local
Limited Partnerships, net 15,852,096 - (879,528) 14,972,568
Rental property at cost, net - 10,886,795 625,395 11,512,190
Mortgagee escrow deposits - 226,945 - 226,945
Deferred charges, net - 205,052 - 205,052
Other assets 8,429 23,350 - 31,779
------------- ------------- ------------- -------------
Total Assets $ 17,040,394 $ 11,530,941 $ (283,707) $ 28,287,628
============= ============= ============= =============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 8,320,488 $ - $ 8,320,488
Accounts payable to affiliates 147,788 7,392 - 155,180
Accounts payable and accrued expenses 37,026 60,196 - 97,222
Interest payable - 46,179 - 46,179
Tenant security deposits payable - 70,255 - 70,255
Payable to affiliated Developer - 2,482,000 - 2,482,000
------------- ------------- ------------- -------------
Total Liabilities 184,814 10,986,510 - 11,171,324
------------- ------------- ------------- -------------
Minority interest in Local Limited
Partnerships - - 272,684 272,684
------------- ------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity 16,857,995 544,431 (556,391) 16,846,035
Net unrealized losses on
marketable securities (2,415) - - (2,415)
------------- ------------- ------------- -------------
Total Partners' Equity 16,855,580 544,431 (556,391) 16,843,620
------------- ------------- ------------- -------------
Total Liabilities and Partners' Equity $ 17,040,394 $ 11,530,941 $ (283,707) $ 28,287,628
============= ============= ============= =============
</TABLE>
(A) As of September 30, 1999.
(B) As of June 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO 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. IV (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 843,840 $ - $ 843,840
Investment 26,582 10,215 - 36,797
Other 122,566 26,691 - 149,257
------------ ------------- ------------- -------------
Total Revenue 149,148 880,746 - 1,029,894
------------ ------------- ------------- -------------
Expenses:
Asset management fees, related party 89,604 - - 89,604
General and administrative 199,639 - 11,960 211,599
Bad debt expense 215,345 - - 215,345
Rental operations, exclusive of depreciation - 348,990 - 348,990
Property management fee, related party - 43,293 - 43,293
Interest - 339,609 - 339,609
Depreciation - 275,307 - 275,307
Amortization 32,905 175,672 - 208,577
------------ ------------- ------------- -------------
Total Expenses 537,493 1,182,871 11,960 1,732,324
------------ ------------- ------------- -------------
Loss before equity in income of Local Limited
Partnerships, minority interest,
loss of liquidation of interest in Local
Limited Partnership and gain on transfer
of assets (388,345) (302,125) (11,960) (702,430)
Equity in income of Local
Limited Partnerships 102,636 - (29,216) 73,420
Minority interest in losses of
Local Limited Partnerships - - 112,933 112,933
Loss on liquidation of interest in Local
Limited Partnership (6,486) - - (6,486)
------------ ------------- ------------- -------------
Net loss before gain on transfer of assets (292,195) (302,125) 71,757 (522,563)
Gain on transfer of Assets - 218,408 - 218,408
------------ ------------- ------------- -------------
Net Loss $ (292,195) $ (83,717) $ 71,757 $ (304,155)
============ ============= ============= =============
</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. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. 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)
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (264,278) $ (242,704) $ - $ (506,982)
Net cash provided by (used for) investing
activities 385,496 (16,022) (29,574) 339,900
Net cash provided by financing activities - 233,365 - 233,365
------------- ------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents 121,218 (25,361) (29,574) 66,283
Cash and cash equivalents, beginning 243,072 117,997 - 361,069
------------- ------------- ------------- -------------
Cash and cash equivalents, ending $ 364,290 $ 92,636 $ (29,574) $ 427,352
============= ============= ============= =============
</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. IV
(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, interest rates and unanticipated delays or expenses on the
part of the Partnership and its suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
The Partnership (including the Combined Entity) had an increase in cash and cash
equivalents of $66,283, from $361,069 at March 31, 1999 to $427,352 at September
30, 1999. The increase is primarily attributed to proceeds from a refinanced
mortgage for the combined entity and cash distributions from Local Limited
Partnerships. The increase is partially offset by cash used for operations,
refinancing costs associated with the combined entity's refinanced mortgage and
purchase of marketable securities in excess of proceeds.
The Managing General Partner initially designated 4% of the 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. Funds totaling
approximately $1,302,000 have been withdrawn from the Reserve account to pay
legal fees relating to various property issues. This amount includes
approximately $1,106,000 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
$881,000 of operating funds to replenish Reserves. At September 30, 1999,
approximately $1,052,000 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 $1,302,000 noted above, the
Partnership has also advanced approximately $556,000 to the Texas Partnerships
to fund operating deficits. Approximately $388,000 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, 1999, 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, 1999.
<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 (continued)
Results of Operations
The Partnership's results of operations for the six months ended September 30,
1999 resulted in a net loss of $304,155, as compared to a net loss of $63,045
for the same period in 1998. The increase in net loss is primarily due to a
decrease in gains on transfers of assets, increases in general and
administrative expense, and an increase in amortization due to the Combined
Entity's mortgage refinancing. The increase is partially offset by a decrease in
equity in losses of Local Limited Partnerships. The decrease in the 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
Partnership is expected to continue.
Property Discussions
Currently the Partnership consists of 25 properties. Most of the 25 Local
Limited Partnerships have stable operations and are operating at break-even or
are generating positive 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 certain 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. In particular, Audobon
Apartments is experiencing significant operating deficits, which may affect the
ability of the Partnership to retain its interest in Audobon through 1999. A
foreclosure would result in recapture of credits, the allocation of taxable
income to the Partnership and loss of future benefits associated with this
property. As previously reported, 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 predictions
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 Local General Partner of Buena Vista, located in Buena Vista, Georgia, and
Greentree Village, located in Greenville, 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 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.
<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 (continued)
Property Discussions (continued)
As previously reported, Bentley Court, located in Columbia, South Carolina,
continues to generate deficits. Further, 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 retained
counsel to appeal the findings in the IRS report in order to minimize the loss
of credits. In June of 1998, the Managing General Partner was informed that an
individual associated with the non-affiliated Local General Partner for this
property was indicted on various criminal charges related to this IRS audit.
This individual pled guilty to two of these counts and is now awaiting
sentencing. In the opinion of Management, there is a substantial risk that
Limited Partners will suffer significant tax credit recapture and/or credit
disallowance as a result of the problems at this property. However, it is not
possible to quantify the risk until the IRS completes its audits. Additionally,
the Local General Partner was removed as general partner from the Local Limited
Partnership and replaced with an affiliate of the Managing General Partner. In
addition, the Managing General Partner terminated the property management
company from management of the property and replaced it with a new property
management group. The Managing General Partner will continue to monitor property
operations closely. As a result of the continuing tax issues at this property,
Management fully reserved the Partnership's investment in Bentley Court.
As previously reported, BK Apartments, located in Jamestown, North Dakota, is
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 the
Partnership's interest in capital and profits of BK Apartments Limited
Partnership to the Local General Partner. Subsequently, effective June 17, 1999,
the Local General Partner transferred its general partner interest and
transferred 48.5% of its interest in capital and profits of BK Apartments
Limited Partnership to a new, nonprofit general partner. Additionally, the
Managing General Partner has the right to put the Partnership's remaining
interest to the new Local General Partner any time after one year from the June
17, 1999 effective date has elapsed. The Partnership will retain its full share
of tax credits until such time as the remaining interest is put to the new Local
General Partner. In addition, the new Local General Partner has the right to
call the remaining interest after the tax credit period has expired.
As previously reported, 46 & Vincennes, located in Chicago, Illinois, has been
operating below break-even due to occupancy problems. On April 1, 1998, the
property management agent was replaced with a new management agent. For the last
two quarters, occupancy has increased slightly and as of June 30, 1999 was 89%.
The Managing General Partner continues to work closely with the Local General
Partner and will continue to monitor the new management agent, property
operations and marketing efforts.
As previously reported, negotiations among the Managing General Partner, lender
and prospective buyer for the last remaining Texas Partnership, Gateway Village,
continued and resulted in the transfer of Gateway Village in May, 1999. For tax
purposes, the transfer event of Gateway Village resulted in both Section 1231
Gain and cancellation of indebtedness income, in addition to credit recapture of
approximately $2.40 per unit for the 1999 tax year.
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
<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 (continued)
Impact of Year 2000 (continued)
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. 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, 1999.
<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 12, 1999 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-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 427,352
<SECURITIES> 732,263
<RECEIVABLES> 97,516
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 11,512,190
<DEPRECIATION> 000
<TOTAL-ASSETS> 28,287,628<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 16,843,620
<TOTAL-LIABILITY-AND-EQUITY> 28,287,628<F2>
<SALES> 000
<TOTAL-REVENUES> 1,029,894<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,392,715<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 339,609
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (304,155)<F5>
<EPS-BASIC> (4.42)
<EPS-DILUTED> 000
<FN>
<F1>Included in total assets: Investments in Local Limited Partnerships of
$14,972,568, Deferred charges, net of $205,052, Tenant security deposits of
$81,963, Mortgagee escrow deposits of $226,945 and other assets of $31,779.
<F2>Included in Total Liabilities and Equity: Mortgage notes payable of
$8,320,488, Accounts payable to affiliates of $155,180, Accounts payable and
accrued expenses of $97,222, Interest payable of $46,179, Tenant security
deposits payable of $70,255, Payable to affiliated developer of $2,482,000 and
Minority interest in Local Limited Partnerships of $272,684. <F3>Included in
Total revenue: Rental of $843,840, Investment of $36,797 and Other of $149,257.
<F4>Included in Other Expenses: Asset management fees of $89,604, General and
administrative of $211,599, Rental operations, exclusive of depreciation of
$348,990, Bad debt of $215,345, Property management fees of $43,293,
Depreciation of $275,307, and Amortization of $208,577. <F5>Included in Net
loss: Equity in income of Local Limited Partnerships of $73,420, Minority
interest in losses of Local Limited Partnerships of $112,933, Loss on
liquidation of interest in Local Limited Partnership of $6,486 and Gain on
transfer of assets of $218,408.
</FN>
</TABLE>
