August 11, 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 Edgar for Quarter Ended June 30, 1999
File Number 0-19765
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
QH4-10Q1.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
(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, 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 June 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>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
Item 1. Combined Financial Statements
Combined Balance Sheet - June 30, 1999 (Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 1999 and 1998 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 1999 3
Combined Statements of Cash Flows (Unaudited) - For the
Three Months Ended June 30, 1999 and 1998 4
Notes to Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Items 1-6 14
SIGNATURE 15
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEET
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 584,989
Marketable securities, at fair value 642,828
Accounts receivable, net of allowance for bad debt of $5,800 33,660
Tenant security deposits 99,209
Investments in Local Limited Partnerships,
net of reserve for valuation of $2,094,646 (Note 1) 15,124,282
Rental property at cost, net of
accumulated depreciation 11,648,366
Mortgagee escrow deposits 181,264
Deferred charges, net of $1,675 accumulated amortization 209,934
Other assets 25,035
--------------
Total Assets $ 28,549,567
==============
Liabilities and Partners' Equity
Mortgage note payable $ 8,342,683
Accounts payable to affiliates 116,699
Accounts payable and accrued expenses 71,093
Interest payable 46,302
Tenant security deposits payable 71,010
Payable to affiliated developer 2,482,000
--------------
Total Liabilities 11,129,787
Minority interest in Local Limited Partnership 277,130
--------------
General, Initial and Investor Limited Partners' Equity 17,143,734
Net unrealized losses on marketable securities (1,084)
Total Partners' Equity 17,142,650
--------------
Total Liabilities and Partners' Equity $ 28,549,567
==============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, 1999 and 1998
1999 1998
------------- -------------
Revenue:
<S> <C> <C>
Rental $ 421,142 $ 435,763
Investment 17,941 25,368
Other 85,782 81,886
------------- -------------
Total Revenue 524,865 543,017
------------- -------------
Expenses:
Asset management fee, related party 46,669 49,626
General and administrative (includes reimbursement
to affiliate in the amounts of $28,324 and
$25,218, respectively) 67,590 64,744
Bad debt expense 221,039 699
Rental operations, exclusive of depreciation 168,021 219,332
Property management fee, related party 21,277 28,346
Interest 200,949 245,143
Depreciation 137,654 157,338
Amortization 187,097 21,620
------------- -------------
Total Expenses 1,050,296 786,848
------------- -------------
Loss before equity in income (losses) of Local Limited
Partnerships, minority interest, loss on liquidation of
interest in Local Limited
Partnership and gain on transfer of assets (525,431) (243,831)
Equity in income (losses) of Local
Limited Partnerships (Note 1) 198,566 (5,943)
Minority interest in losses of
Local Limited Partnerships 108,487 15,812
Loss on liquidation of interest in Local Limited
Partnership (Note 2) (6,486) -
------------- -------------
Loss before gain on transfer of assets (224,864) (233,962)
Gain on transfer of assets (Note 2) 218,408 -
------------- -------------
Net Loss $ (6,456) $ (233,962)
============= =============
Net Loss allocated:
To General Partners $ (65) $ (2,340)
To Limited Partners (6,391) (231,622)
------------- -------------
$ (6,456) $ (233,962)
============= =============
Loss before gain transfer of assets per
Limited Partnership Unit (68,043 Units) $ (3.27) $ (3.40)
============= =============
Gain on transfer of assets per Limited
Partnership Unit (68,043 Units) $ 3.18 $ -
============== =============
Net Loss per Limited Partnership Unit
(68,043 Units) $ (0.09) $ (3.40)
============= ============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Three Months Ended June 30, 1999
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <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 - - - (4,557) (4,557)
Net Loss (65) - (6,391) - (6,456)
------------- ------------ ------------ ------------- -------------
Comprehensive Loss (65) - (6,391) (4,557) (11,013)
------------- ------------ ------------ ------------- -------------
Balance at June 30, 1999 $ (419,649) $ 5,000 $ 17,558,383 $ (1,084) $ 17,142,650
============= ============ ============ ============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended June 30, 1999 and 1998
1999 1998
------------- ------------
<S> <C> <C>
Net cash used for operating activities $ (478,043) $ (24,925)
Net cash provided by investing activities 359,285 46,200
Net cash provided by (used for) financing activities 342,678 (12,531)
------------- -------------
Net increase in cash and cash equivalents 223,920 8,744
Cash and cash equivalents, beginning 361,069 386,059
------------- -------------
Cash and cash equivalents, ending $ 584,989 $ 394,803
============= =============
Supplemental disclosure:
Cash paid for interest $ 686,471 $ 180,882
============= =============
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 about the Local Limited Partnerships that is included in the
accompanying combined financial statements is as of March 31, 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 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 Entity, at June 30, 1999:
<TABLE>
<CAPTION>
<S> <C>
Capital contributions paid to Local Limited
Partnerships and purchase price paid to
withdrawing partners of Local Limited Partnerships $ 41,688,356
Cumulative equity in losses of Local Limited
Partnerships (includes cumulative unrecognized
losses of $9,228,001) (24,498,965)
Cash distributions received from Local
Limited Partnerships (2,288,614)
Investments in Local Limited Partnerships
before adjustment 14,900,777
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 2,999,362
Accumulated amortization of acquisition
fees and expenses (681,211)
Investments in Local Limited Partnerships 17,218,928
Reserve for valuation of investments
in Local Limited Partnerships (2,094,646)
$ 15,124,282
</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 three months ended June 30, 1999 is
$144,039. For the three months ended June 30, 1999, the Partnership has not
recognized $416,002 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. Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of all of the
Texas Partnerships, subject to their liabilities, to unaffiliated entities. The
transfers of 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, Pine Manor Apartments and Pinewood Terrace Apartments were
transferred prior to March 31, 1999. 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 three months ended June 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, since the Texas Partnerships
represent only 3% of the Partnership's tax credits.
3. Litigation
As previously reported, Bentley Court, located in Columbia, South Carolina,
continues to generate deficits. Further, as previously reported, 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. Accordingly, as of July 1999 an
affiliate of the Managing General Partner of the Partnership is now the Local
Managing General Partner of Bentley Court. 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. The Managing General Partner will continue to monitor
property operations closely. Additionally, it is likely that the non-affiliated
Local General Partner will be removed as general partner from the Local Limited
Partnership and its affiliated property management company will be terminated
from management of the property. Further, as a result of the continuing tax
issues at this property, Management has decided to fully reserve the
Partnership's investment in Bentley Court.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
4. Supplemental Combining Schedules
Balance Sheets
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 $ 474,609 $ 110,380 $ - $ 584,989
Marketable securities, at fair value 642,828 - - 642,828
Accounts receivable, net 20,067 13,593 - 33,660
Tenant security deposits - 99,209 - 99,209
Investments in Local
Limited Partnerships, net 16,150,513 - (1,026,231) 15,124,282
Rental property at cost, net - 11,016,827 631,539 11,648,366
Mortgagee escrow deposits - 181,264 - 181,264
Deferred charges, net - 209,934 - 209,934
Other assets 8,614 16,421 - 25,035
------------- ------------- ------------- -------------
Total Assets $ 17,296,631 $ 11,647,628 $ (394,692) $ 28,549,567
============= ============= ============= =============
Liabilities and Partners' Equity
Mortgage note payable $ - $ 8,342,683 $ - $ 8,342,683
Accounts payable to affiliates 109,675 7,024 - 116,699
Accounts payable and accrued expenses 44,306 26,787 - 71,093
Interest payable - 46,302 - 46,302
Tenant security deposits payable - 71,010 - 71,010
Payable to affiliated developer - 2,482,000 - 2,482,000
------------- ------------- ------------- -------------
Total Liabilities 153,981 10,975,806 - 11,129,787
------------- ------------- ------------- -------------
Minority interest in Local Limited
Partnership - - 277,130 277,130
------------- ------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity 17,143,734 671,822 (671,822) 17,143,734
Net unrealized losses on
marketable securities (1,084) - - (1,084)
------------- ------------- ------------- -------------
Total Partners' Equity 17,142,650 671,822 (671,822) 17,142,650
------------- ------------- ------------- -------------
Total Liabilities and Partners' Equity $ 17,296,631 $ 11,647,628 $ (394,692) $ 28,549,567
============= ============= ============= =============
(A) As of June 30, 1999.
(B) As of March 31, 1999.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
4. Supplemental Combining Schedules (continued)
Statements of Operations
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. IV (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 421,142 $ - $ 421,142
Investment 12,519 5,422 - 17,941
Other 75,507 10,275 - 85,782
------------- ------------- ------------- -------------
Total Revenue 88,026 436,839 - 524,865
------------- ------------- ------------- -------------
Expenses:
Asset management fee, related party 46,669 - - 46,669
General and administrative 67,590 - - 67,590
Bad debt expense 221,039 - - 221,039
Rental operations, exclusive of depreciation - 168,021 - 168,021
Property management fee, related party - 21,277 - 21,277
Interest - 200,949 - 200,949
Depreciation - 137,654 - 137,654
Amortization 16,452 170,645 - 187,097
------------- ------------- ------------- -------------
Total Expenses 351,750 698,546 - 1,050,296
------------- ------------- ------------- -------------
Loss before equity in income of Local Limited
Partnerships, minority interest Loss on
liquidation of interest in Local Limited
Partnership and gain on transfer of assets (263,724) (261,707) - (525,431)
Equity in income of Local Limited
Partnerships 263,754 - (65,188) 198,566
Minority interest in losses of
Local Limited Partnerships - - 108,487 108,487
Loss on liquidation of interest in Local
Limited Partnership (6,486) - - (6,486)
------------- ------------- ------------- -------------
Net Loss before gain on transfer (6,456) (261,707) 43,299 (224,864)
Gain on transfer of assets - 218,408 - 218,408
------------- ------------ ------------- -------------
Net loss $ (6,456) $ (43,299) $ 43,299 $ (6,456)
============= ============ ============= =============
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
</TABLE>
<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 Cash Flows
<TABLE>
<CAPTION>
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 $ (136,149) $ (341,894) $ - $ (478,043)
Net cash provided by (used for)
investing activities 367,686 (8,401) - 359,285
Net cash provided by financing activities - 342,678 - 342,678
------------- ------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents 231,537 (7,617) - 223,920
Cash and cash equivalents, beginning 243,072 117,997 - 361,069
------------- ------------- ------------- -------------
Cash and cash equivalents, ending $ 474,609 $ 110,380 $ - $ 584,989
============= ============= ============= =============
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
</TABLE>
<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 are 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 their suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
The Partnership (including the Combined Entities) had an increase in cash and
cash equivalents of $223,920 from $361,069 at March 31, 1999 to $584,989 at June
30, 1999. The increase is mainly attributable to proceeds from a refinanced
mortgage for the combined entity, proceeds from sales and maturities of
marketable securities in excess of purchases of marketable securities and cash
distributions received from Local Limited Partnerships. The increase is offset
partially by cash used for operations and refinancing costs associated with the
Combined Entity's refinanced mortgage.
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 $1,229,000 have been
withdrawn from the Reserve account to pay legal fees relating to various
property issues. This amount includes approximately $1,105,000 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 $753,000 of operating funds to replenish
Reserves. At June 30, 1999, approximately $1,061,000 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 interest to voluntarily provide such funds in order
to protect its investment. To date, in addition to the $1,229,000 noted above,
the Partnership has also advanced approximately $556,000 to the Texas
Partnerships to fund operating deficits. Approximately $325,000 has also been
advanced to three 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 June 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 three 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 (continued)
Results of Operations
The Partnership's results of operations for the three months ended June 30, 1999
resulted in a net loss of $6,456 as compared to a net loss of $233,962 for the
same period in 1998. In addition to the gain on transfer of assets, 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 property management fee. 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, depreciation and property management
fee is attributable to the transfer of one of the Combined Entities in the third
quarter of calendar 1998 and the transfer of Gateway during the three months
ended June 30, 1999. In addition, the decrease in net loss was partially offset
by an increase in bad debt expense and Amortization. Bad debt expense increased
due to the write-off of advances to the Local Limited Partnerships. Amortization
increased due to acceleration of certain financing costs in connection with the
Leawood refinancing.
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 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 Fund 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 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.
<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, as previously reported, 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. Accordingly, an affiliate of the
Managing General Partner of the Partnership is now the Local Managing General
Partner of Bentley Court. 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. The
Managing General Partner will continue to monitor property operations closely.
Additionally, it is likely that the non-affiliated Local General Partner will be
removed as general partner from the Local Limited Partnership and its affiliated
property management company will be terminated from management of the property.
Further, 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, 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 its
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
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
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.
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for assessing impairment of
its real estate assets and investments in Local Limited Partnerships. Each asset
is analyzed by real estate experts to determine if an impairment indicator
exists. If so, the carrying value is compared to the future cash flows expected
to be derived from the asset. If the total undiscounted cash flows are less than
the carrying value, a provision to write down the asset to fair value will be
charged against income.
<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
The Managing General Partner's plan to resolve year 2000 issues involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Managing General Partner has fully completed an assessment of all
information systems that may not be operative subsequent to 1999 and has begun
the remediation, testing and implementation phase on both hardware and software
systems. Because the hardware and software systems of both the Partnership and
Local Limited Partnerships are generally the responsibility of obligated third
parties, the plan primarily involves ongoing discussions with and obtaining
written assurances from these third parties that pertinent systems will be 2000
compliant. In addition, neither the Partnership nor the Local Limited
Partnerships are incurring significant additional costs since such expenses are
principally covered under the service contracts with vendors. As of August 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes that 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 in early 1999, 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., 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 has reached a memorandum
of understanding to acquire The Boston Financial Group Limited Partnership. The
transaction remains subject to final due diligence, legal agreements, and
regulatory approvals with no guarantee that the acquisition will be completed.
The two companies are targeting to complete the transactions by the end of
September.
Headquartered in New York and Atlanta, Lend Lease Real Estate Investments, Inc.
has regional offices in 12 cities nationwide. Worldwide, Lend Lease Real Estate
Investments operates from more than 30 cities on five continents: North America,
Europe, Asia, Australia and South America. The company ranks as the leading U.S.
manager of tax-exempt assets invested in real estate. It is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. 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 June 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: August 11, 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 584,989
<SECURITIES> 642,828
<RECEIVABLES> 33,660
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 11,648,366
<DEPRECIATION> 000
<TOTAL-ASSETS> 28,549,567<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 17,142,650
<TOTAL-LIABILITY-AND-EQUITY> 28,549,567<F2>
<SALES> 000
<TOTAL-REVENUES> 524,865<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 849,347<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 200,949
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (6,456)<F5>
<EPS-BASIC> (0.09)
<EPS-DILUTED> 000
<FN>
<F1>Included in Total Assets: Investments in Local Limited Partnerships of
$15,124,282, Deferred charges, net of $209,934, Tenant security deposits of
$99,209, Mortgagee escrow deposits of $181,264 and other assets of $25,035.
<F2>Included in Total Liabilities and Equity: Mortgage note payable of
$8,342,683, Accounts payable to affiliates of $116,699, Accounts payable and
accrued expenses of $71,093, Interest payable of $46,302, Tenant security
deposits payable of $71,010, Payable to affiliated developer of $2,482,000 and
Minority interest in Local Limited Partnership of $277,130. <F3>Total revenue
includes: Rental of $421,142, Investment of $17,941 and Other of $85,782.
<F4>Included in Other Expenses: Asset management fee of $46,669, General and
administrative of $67,590, Rental operations, exclusive of depreciation of
$168,021, Bad debt of $221,039, Property management fee of $21,277, Depreciation
of $137,654 and Amortization of $187,097. <F5>Net Loss reflects: Equity in
income of Local Limited Partnerships of $198,566, Minority interest in losses of
Local Limited Partnerships of $108,487, Loss on liquidation of interest in Local
Limited Partnership of $6,486 and Gain on transfer on assets $218,408.
</FN>
</TABLE>
