August 14, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Financial Qualified Housing Tax Credits L.P. IV
Report on Form 10-QSB for Quarter Ended June 30, 2000
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
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-19765
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. Financial Statements
Balance Sheet - June 30, 2000 (Unaudited) 1
Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 2000 and 1999 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 2000 3
Statements of Cash Flows (Unaudited) - For the
Three Months Ended June 30, 2000 and 1999 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Items 1-6 11
SIGNATURE 12
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
BALANCE SHEET
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 61,448
Marketable securities, at fair value 891,884
Investments in Local Limited Partnerships, net (Note 1) 16,724,479
Other assets 14,174
--------------
Total Assets $ 17,691,985
==============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 373,129
Accounts payable and accrued expenses 66,859
--------------
Total Liabilities 439,988
General, Initial and Investor Limited Partners' Equity 17,254,534
Net unrealized losses on marketable securities (2,537)
Total Partners' Equity 17,251,997
--------------
Total Liabilities and Partners' Equity $ 17,691,985
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999
2000 (Restated)
Revenue:
<S> <C> <C>
Investment $ 13,314 $ 12,519
Other 119,552 75,507
------------- -------------
Total Revenue 132,866 88,026
------------- -------------
Expenses:
Asset management fees, related party 45,776 46,669
General and administrative (includes reimbursements
to affiliate in the amounts of $38,460 and
$28,324, respectively) 69,445 67,590
Provision for valuation of investments in Local Limited Partnerships 58,429 221,039
Amortization 16,401 16,452
------------- -------------
Total Expenses 190,051 351,750
------------- -------------
Loss before equity in losses of Local Limited
Partnerships and loss on liquidation of interest in
Local Limited Partnership (57,185) (263,724)
Equity in losses of Local Limited Partnerships (Note 1) (109,130) (27,867)
Loss on liquidation of interest in Local Limited
Partnership (Note 2) - (6,486)
------------- -------------
Net Loss $ (166,315) $ (298,077)
============= =============
Net Loss allocated:
To General Partners $ (1,663) $ (2,981)
To Limited Partners (164,652) (295,096)
------------- -------------
$ (166,315) $ (298,077)
============= =============
Net Loss per Limited Partnership Unit
(68,043 Units) $ (2.42) $ (4.34)
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Three Months Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Initial Investor Net
General Limited Limited Unrealized
Partners Partners Partners Losses Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 2000 $ (416,878) $ 5,000 $ 17,832,727 $ (3,991) $ 17,416,858
----------- ----------- -------------- ----------- -------------
Comprehensive Loss:
Change in net unrealized losses
on marketable securities
available for sale - - - 1,454 1,454
Net Loss (1,663) - (164,652) - (166,315)
----------- ----------- -------------- ----------- -------------
Comprehensive Loss (1,663) - (164,652) 1,454 (164,861)
----------- ----------- -------------- ----------- -------------
Balance at June 30, 2000 $ (418,541) $ 5,000 $ 17,668,075 $ (2,537) $ 17,251,997
=========== =========== ============== =========== =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999
2000 (Restated)
<S> <C> <C>
Net cash used for operating activities $ (28,389) $ (136,149)
Net cash provided by investing activities 2,650 367,686
------------- -------------
Net increase (decrease) in cash and cash equivalents (25,739) 231,537
Cash and cash equivalents, beginning 87,187 243,072
------------- -------------
Cash and cash equivalents, ending $ 61,448 $ 474,609
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included with the Partnership's Form 10-KSB for the
year ended March 31, 2000. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Partnership's financial position
and results of operations. The results of operations for the periods may not be
indicative of the results to be expected for the year.
The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90 day lag basis, because the Local Limited Partnerships
report their results on a calendar year basis. Accordingly, the financial
information of the Local Limited Partnerships that is included in the
accompanying financial statements is as of March 31, 2000 and 1999.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-three Local Limited Partnerships which own and operate
multi-family housing complexes, most of which are government-assisted. The
Partnership, as Investor Limited Partner pursuant to the various Local Limited
Partnership Agreements, which contain certain operating and distribution
restrictions, has acquired a 99% interest in the profits, losses, tax credits
and cash flows from operations of each of the Local Limited Partnerships. Upon
dissolution, proceeds will be distributed according to each respective
partnership agreement.
The following is a summary of investments in Local Limited Partnerships at June
30, 2000:
<TABLE>
<CAPTION>
Capital contributions and advances paid to Local
Limited Partnerships and purchase price paid to
<S> <C>
withdrawing partners of Local Limited Partnerships $ 46,970,168
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative unrecognized
losses of $7,942,716) (27,685,424)
Cumulative cash distributions received from Local
Limited Partnerships (2,765,206)
-------------
Investments in Local Limited Partnerships before
adjustment 16,519,538
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 3,669,346
Accumulated amortization of acquisition fees
and expenses (933,481)
-------------
Investments in Local Limited Partnerships 19,255,403
Reserve for valuation of investments in Local
Limited Partnerships (2,530,924)
-------------
$ 16,724,479
=============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
The Partnership's share of the net losses of the Local Limited Partnerships for
the three months ended June 30, 2000 is $567,862. For the three months ended
June 30, 2000, the Partnership has not recognized $458,732 of equity in losses
relating to certain 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
For financial reporting purposes, loss on liquidation of interest in Local
Limited Partnership of $6,486 was recognized in the three months ended June 30,
1999 as a result of the transfer of Gateway Village.
3. Litigation
As previously reported, the IRS finalized its report from an audit of the 1993
tax return for Bentley Court. The IRS audit of the 1993 tax return for the
project questioned the treatment of certain items and has findings of
non-compliance in 1993. The Managing General Partner 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 the Local General Partner for this property
was indicted on various criminal charges. The Local General Partner pled guilty
to two of these counts. In the opinion of Management, there is a substantial
risk that Bentley Court and, consequently, the Partnership 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 Managing General Partner
replaced the Local General Partner with an affiliated entity and replaced the
property management company with an unaffiliated entity. The Managing General
Partner will continue to monitor property operations closely. As a result of the
continuing tax issues at this property, Management has decided to fully reserve
the Partnership's investment in Bentley Court.
On April 28, 2000, the Managing General Partner, on behalf of the Partnership,
filed suit against the former General Partners of Bentley Court alleging
mismanagement of the Local Limited Partnership.
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)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and is including this statement
for purposes of complying with these safe harbor provisions. Although the
Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions and interest rates.
Liquidity and Capital Resources
At June 30, 2000, the Partnership had a decrease in cash and cash equivalents of
$25,739 from $87,187 at March 31, 2000 to $61,448 at June 30, 2000. The decrease
is mainly attributable to cash used for operating activities and cash used for
purchases of marketable securities. These decreases are partially offset by cash
provided by proceeds from sales and maturities of marketable securities and cash
distributions received from Local Limited Partnerships.
The Managing General Partner initially designated 4% of the Gross Proceeds as
Reserves, as defined in the Partnership Agreement. The Reserves were established
to be used for working capital of the Partnership and contingencies related to
the ownership of Local Limited Partnership interests. Funds totaling
approximately $1,304,000 have been withdrawn from the Reserve account to pay
legal fees relating to various property issues. To date, Reserve funds in the
amount of approximately $304,000 have been used to make additional capital
contributions to a Local Limited Partnership. To date, the Partnership has used
approximately $968,000 of operating funds to replenish Reserves. At June 30,
2000, approximately $792,000 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. In addition to the $1,304,000 noted above, the Partnership also
advanced approximately $1,292,000 to Local Limited Partnerships to fund
operating deficits.
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, 2000, 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, 2000.
<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, 2000
resulted in a net loss of $166,315 as compared to a net loss of $298,077 for the
same period in 1999. The decrease in net loss is primarily attributable to a
decrease in provision for valuation of investments in Local Limited
Partnerships. Provision for valuation of investments in Local Limited
Partnerships was incurred during the three months ended June 30, 1999 due to
the write-off of advances to the Local Limited Partnerships.
Property Discussions
As previously reported, Audobon Apartments (Boston, Massachusetts) and Brown
Kaplan (Dorchester, Massachusetts), operate below break-even. Both properties
receive a material amount of income subsidies through the State Housing
Assistance Rental Program (SHARP). 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) to find a
solution to the problems that will result from the withdrawn subsidies. 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.
As a result of the existing operating deficits, Audobon was foreclosed on March
30, 2000. Given the existing operating deficits and its dependence on the SHARP
subsidy, Brown Kaplan may default on its mortgage obligation in the near future.
Due to concerns regarding the long-term viability of Brown Kaplan, the Managing
General Partner negotiated a plan with the Local General Partner that will
ultimately transfer the Partnership's interest in the property to the Local
General Partner. The plan includes provisions to minimize the risk of recapture.
Effective November 30, 1999, the Managing General Partner consummated the
transfer of 49.5% of the Partnership's capital and profits in the properties to
the Local General Partner. The Managing General Partner has the right to
transfer the Partnership's remaining interest in the properties to the Local
General Partner any time after one year has elapsed. In addition, effective
November 30, 1999, a new investor was admitted into the lower tier partnership.
This new investor will receive the remaining tax credits and a percentage of the
losses for the property going forward.
The Local General Partner of Buena Vista, (Buena Vista, Georgia) and Greentree
Village (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 negotiating with the Local General Partner to develop a plan that will
ultimately the Partnership's interest in 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, an IRS audit of the 1993 tax return for
the project questioned the treatment of certain items and has findings of
non-compliance in 1993. The Managing General Partner 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 the Local General Partner for this property
was indicted on various criminal charges. The Local General Partner pled guilty
to two of these counts. In the opinion of Management, there is a substantial
risk that Bentley Court and, consequently, the Partnership 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 Managing General Partner
replaced the Local General Partner with an affiliated entity and replaced the
property management company with an unaffiliated entity. The Managing General
Partner will continue to monitor property operations closely. As a result of the
continuing tax issues at this property, Management has decided to fully reserve
the Partnership's investment in Bentley Court.
On April 28, 2000, the Managing General Partner, on behalf of the Partnership,
filed suit against the former General Partners of Bentley Court alleging
mismanagement of the local limited partnership.
On June 11, 2000, one of the buildings at Bentley Court caught on fire and was
determined to be a total loss. Three out of the 16 units in that building were
vacant, and the rest of the tenants were transferred to vacant units at the
property. The insurance company has agreed to pay the limit of the policy
coverage, however, estimates indicate that the insurance proceeds will not cover
the costs to rebuild. It is possible that the Local Limited Partnership will not
rebuild the building, which would decrease the property's future tax credits and
cause recapture of tax credits previously taken with respect to such building.
It also would likely cause a decrease in the property's cash flow. The Managing
General Partner is currently evaluating the Local Limited Partnership's options
with respect to the ruined building.
As previously reported, BK Apartments (Jamestown, North Dakota) continues to
generate operating deficits despite improved occupancy. In November 1997, due to
concerns about the property's long term viability, 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
June 17, 2000. 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 (Chicago, Illinois) continues to operate
below break-even due to occupancy problems. A new site manager with significant
experience in managing properties in similar inner city Chicago neighborhoods
was recently hired at the property. In addition, the neighborhood has seen
significant improvement in the last few years, with several buildings in the
area renovated for market rate use. Effective January 13, 2000, the Managing
General Partner and Local General Partner succeeded in gaining HUD's approval
for a refinancing, thereby reducing the interest rate and increasing the loan
maturity to a new 40 year term. The Managing General Partner continues to work
closely with the Local General Partner and will continue to closely monitor
property operations.
<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)
The Partnership has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. The investments are
analyzed by real estate experts to determine if impairment indicators exist. If
so, the carrying value is compared to the undiscounted future cash flows
expected to be derived from the asset. If there is a significant impairment in
carrying value, a provision to write down the asset to fair value will be
recorded in the Partnership's financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. 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, 2000.
<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 14, 2000 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>
