June 29, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Boston Financial Qualified Housing Tax Credits L.P. IV
Form 10-KSB Annual Report for Year Ended March 31, 2000
File Number 0-19765
Dear Sir/Madam:
Pursuant to the requirements of section 15(d) of the Securities Exchange Act of
1934, filed herewith is one copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH410K-K
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 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 Identification No.)
incorporation or organization)
101 Arch Street, Boston, Massachusetts 02110-1106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-3911
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
100,000
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Subsection 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
State the aggregate sales price of partnership units held by nonaffiliates of
the registrant.
$67,653,000 as of March 31, 2000
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-KSB INTO WHICH THE
DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS:
(2) ANY PROXY OR INFORMATION STATEMENT: AND (3) ANY PROSPECTUS FILED PURSUANT
TO RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933.
<TABLE>
<CAPTION>
Part of Report on
Form 10-KSB into
Which the Document
Documents incorporated by reference is Incorporated
Post-effective Amendments No. 1 through 3 to the
<S> <C>
Registration Statement, File # 33-26394 Part I, Item 1
Acquisition Reports Part I, Item 1
Prospectus - Sections Entitled:
"Estimated Use of Proceeds" Part III, Item 13
"Management Compensation and Fees" Part III, Item 13
"Profits and Losses for Tax Purposes, Tax Credits
and Cash Distributions" Part III, Item 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I Page No.
<S> <C>
Item 1 Business K-3
Item 2 Properties K-6
Item 3 Legal Proceedings K-13
Item 4 Submission of Matters to a
Vote of Security Holders K-14
PART II
Item 5 Market for the Registrant's Units
and Related Security Holder Matters K-14
Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations K-14
Item 7 Financial Statements and Supplementary Data K-18
Item 8 Changes in and Disagreements with accountants
on Accounting and Financial Disclosure K-18
PART III
Item 9 Directors and Executive Officers
of the Registrant K-18
Item 10 Management Remuneration K-20
Item 11 Security Ownership of Certain Beneficial
Owners and Management K-20
Item 12 Certain Relationships and Related
Transactions K-20
PART IV
Item 13 Exhibits and Reports on Form 8-K K-23
SIGNATURES K-24
</TABLE>
<PAGE>
PART I
Item 1. Business
Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") is a
limited partnership formed on March 30, 1989 under the Revised Uniform Limited
Partnership Act of the Commonwealth of Massachusetts. The Partnership's
partnership agreement ("Partnership Agreement") authorized the sale of up to
100,000 units of Limited Partnership Interest ("Units") at $1,000 per Unit,
adjusted for certain discounts. The Partnership raised $67,653,000 ("Gross
Proceeds"), net of discounts of $390,000, through the sale of 68,043 Units. Such
amounts exclude five unregistered Units previously acquired for $5,000 by the
Initial Limited Partner, which is also one of the General Partners. The offering
of Units terminated on January 31, 1990. No further sale of Units is expected.
The Partnership is engaged solely in the business of real estate investment.
However, a presentation of information about industry segments is not applicable
and would not be material to an understanding of the Partnership's business
taken as a whole.
The Partnership has invested as a limited partner in other limited partnerships
("Local Limited Partnerships") which own and operate residential apartment
complexes ("Properties"), most of which benefit from some form of federal, state
or local assistance programs and all of which qualify for the low-income housing
tax credits ("Tax Credits") added to the Internal Revenue Code (the "Code") by
the Tax Reform Act of 1986. The investment objectives of the Partnership include
the following: (i) to provide current tax benefits in the form of Tax Credits
which qualified limited partners may use to offset their federal income tax
liability; (ii) to preserve and protect the Partnership's capital; (iii) to
provide limited cash distributions from property operations which are not
expected to constitute taxable income during the expected duration of the
Partnership's operations; and (iv) to provide cash distributions from sale or
refinancing transactions. There cannot be any assurance that the Partnership
will attain any or all of these investment objectives. A more detailed
discussion of these investment objectives, along with the risks in achieving
them, is contained in the section of the prospectus entitled "Investment
Objectives and Policies - Principal Investment Policies" which is herein
incorporated by this reference.
Table A on the following page lists the properties originally acquired by the
Local Limited Partnerships in which the Partnership has invested. Item 6 of this
Report contains other significant information with respect to such Local Limited
Partnerships. As required by applicable rules, the terms of the acquisition of
Local Limited Partnership interests have been described in supplements to the
Prospectus (and collected in three post-effective amendments to the Registration
Statement) listed in Part IV of this Report (collectively, the "Acquisition
Reports"); such descriptions are incorporated herein by this reference.
<PAGE>
<TABLE>
<CAPTION>
TABLE A
SELECTED LOCAL LIMITED
PARTNERSHIP DATA
(Unaudited)
Properties Owned by Local
Limited Partnerships Date Interest
Location Acquired
--------------------------- --------------------- ---------------
<S> <C> <C>
Brookscrossing Atlanta, GA 06/30/89
Dorsett Philadelphia, PA 10/20/89
Willow Ridge Prescott, AZ 08/28/89
Town House Allentown, PA 12/26/89
Lancaster House North Lancaster, PA 03/13/89
Sencit Towne House Shillington, PA 12/26/89
Pinewood Terrace** Rusk, TX 12/27/89
Justin Place** Justin, TX 12/27/89
Grandview** Grandview, TX 12/27/89
Hampton Lane Buena Vista, GA 12/20/89
Audobon Boston, MA 12/22/89
Bent Tree** Jackson, TX 12/27/89
Royal Crest** Bowie, TX 12/27/89
Nocona Terrace** Nocona, TX 12/27/89
Pine Manor** Jacksboro, TX 12/27/89
Hilltop** Rhome, TX 12/27/89
Valley View** Valley View, TX 12/27/89
Bentley Court Columbia, SC 12/26/89
Orocovix IV Orocovix, PR 12/30/89
Leawood Manor* Leawood, KS 12/29/89
Pecan Hill** Bryson, TX 12/28/89
Carolina Woods Greensboro, NC 01/31/90
Mayfair Mansions Washington, DC 03/21/90
Oakview Square Chesterfield, MI 03/22/89
Whitehills II Howell, MI 04/21/90
Orchard View Gobles, MI 04/29/90
Lakeside Square Chicago, IL 05/17/90
Lincoln Green Old Town, ME 03/21/90
Brown Kaplan Boston, MA 07/01/90
Green Tree Village Greenville, GA 07/06/90
Canfield Crossing Milan, MI 08/20/90
Findlay Market** Cincinnati, OH 08/15/90
Seagraves** Seagraves, TX 11/28/90
West Pine Findlay, PA 12/31/90
BK Apartments Jamestown, ND 12/01/90
46th & Vincennes Chicago, IL 03/29/91
Gateway Village Garden** Azle, TX 06/24/91
</TABLE>
* The Partnership's interest in profits and losses of each Local Limited
Partnership arising from normal operations is 99%, with the exception of
Leawood Manor which is 89%. Profits and losses arising from sale or
refinancing transactions are allocated in accordance with the respective
Local Limited Partnership Agreements.
** The Partnership has transferred its interests in these Local Limited
Partnerships to unaffiliated entities.
Although the Partnership's investments in Local Limited Partnerships are not
subject to seasonal fluctuations, the Partnership's equity in losses of Local
Limited Partnerships, to the extent they reflect the operations of individual
Properties, may vary from quarter to quarter based upon changes in occupancy and
operating expenses as a result of seasonal factors.
With the exception of Leawood Manor, each Local Limited Partnership has as its
general partners ("Local General Partners") one or more individuals or entities
not affiliated with the Partnership or its General Partners. In accordance with
the partnership agreements under which such entities are organized ("Local
Limited Partnership Agreements"), the Partnership depends on the Local General
Partners for the management of each Local Limited Partnership. As of March 31,
2000, the following Local Limited Partnerships have a common Local General
Partner or affiliated group of Local General Partners accounting for the
specified percentage of the capital contributions to Local Limited Partnerships:
Sencit Townhouse L.P., Allentown Townhouse L.P. and Prince Street Ltd.,
representing 11.35%, have AIMCO Properties as Local General Partner; Greentree
Village L.P. and Buena Vista Properties L.P., representing 0.61%, have Norsouth
Corporation as Local General Partner; and Whitehills Apartments Co., L.P., Milan
Apartments Co., L.P. and Gobles LDHA, L.P., representing 1.14%, have First
Centrum as Local General Partner. The Local General Partners of the remaining
Local Limited Partnerships are identified in the Acquisition Reports, which are
incorporated herein by reference.
The Properties owned by Local Limited Partnerships in which the Partnership has
invested are and will continue to be subject to competition from existing and
future apartment complexes in the same areas. The continued success of the
Partnership will depend on many outside factors, most of which are beyond the
control of the Partnership and which cannot be predicted at this time. Such
factors include general economic and real estate market conditions, both on a
national basis and in those areas where the Properties are located, the
availability and cost of borrowed funds, real estate tax rates, operating
expenses, energy costs and government regulations. In addition, other risks
inherent in real estate investment may influence the ultimate success of the
Partnership, including: (i) possible reduction in rental income due to an
inability to maintain high occupancy levels or adequate rental levels; (ii)
possible adverse changes in general economic conditions and adverse local
conditions, such as competitive overbuilding, a decrease in employment or
adverse changes in real estate laws, including building codes; and (iii) the
possible future adoption of rent control legislation which would not permit
increased costs to be passed on to the tenants in the form of rent increases or
which would suppress the ability of the Local Limited Partnerships to generate
operating cash flow. Since most of the Properties benefit from some form of
government assistance, the Partnership is subject to the risks inherent in that
area including decreased subsidies, difficulties in finding suitable tenants and
obtaining permission for rent increases. In addition, any Tax Credits allocated
to investors with respect to a Property are subject to recapture to the extent
that the Property or any portion thereof ceases to qualify for the Tax Credits.
Other future changes in federal and state income tax laws affecting real estate
ownership or limited partnerships could have a material and adverse affect on
the business of the Partnership.
The Partnership is managed by Arch Street IV, Inc., the Managing General Partner
of the Partnership. The other General Partner of the Partnership is Arch Street
IV Limited Partnership. The Partnership, which does not have any employees,
reimburses Lend Lease Real Estate Investments, Inc., an affiliate of the General
Partner, for certain expenses and overhead costs. A complete discussion of the
management of the Partnership is set forth in Item 9 of this Report.
<PAGE>
Item 2. Properties
The Partnership owns limited partnership interests in twenty-four Local Limited
Partnerships which own and operate Properties, some of which benefit from some
form of federal, state or local assistance programs and all of which qualify for
the Tax Credits added to the Code by the Tax Reform Act of 1986. The
Partnership's ownership interest in each Local Limited Partnership is 99% with
the exception of Leawood Manor and BK Associates, which are 89% and 49.5%,
respectively.
Each of the Local Limited Partnerships has received an allocation of Tax Credits
by its relevant state tax credit agency. In general, the Tax Credit runs for ten
years from the date the Property is placed in service. The required holding
period (the "Compliance Period") of the Properties is fifteen years. During
these fifteen years, the Properties must satisfy rent restrictions, tenant
income limitations and other requirements, as promulgated by the Internal
Revenue Service, in order to maintain eligibility for the Tax Credit at all
times during the Compliance Period. Once a Local Limited Partnership has become
eligible for the Tax Credits, it may lose such eligibility and suffer an event
of recapture if its Property fails to remain in compliance with the
requirements.
In addition, some of the Local Limited Partnerships have obtained one or a
combination of different types of loans such as: i) below market rate interest
loans; ii) loans provided by a redevelopment agency of the town or city in which
the property is located at favorable terms; and iii) repayment terms that are
based on a percentage of cash flow.
The schedules on the following pages provide certain key information on the
Local Limited Partnership interests acquired by the Partnership.
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 2000 31, 2000 December 31, Type of March 31,
Property Location 1999 Subsidy* 2000
----------------------------------- --------------------------- --------------- ----------------- ----------- -------------
Brookscrossing Apartments, L.P.
A Limited Partnership
Brookscrossing
<S> <C> <C> <C> <C> <C> <C>
Atlanta, GA 224 $3,363,776 $3,363,776 $5,886,356 None 95%
Willow Ridge Development Co.
Limited Partnership
Willow Ridge
Prescott, AZ 134 2,125,000 2,125,000 3,027,543 None 98%
Leawood Associates, L.P.
A Limited Partnership
Leawood Manor
Leawood, KS 254 7,497,810 7,497,810 8,274,977 None 98%
Dorsett Limited Partnership
Dorsett Apartments
Philadelphia, PA 58 2,482,107 2,482,107 2,043,955 Section 8 95%
Allentown Towne House, L.P.
Towne House Apartments
Allentown, PA 160 1,589,403 1,589,403 6,418,350 Section 8 100%
Prince Street Towers L.P.
A Limited Partnership
Lancaster House North
Lancaster, PA 201 1,996,687 1,996,687 7,701,153 Section 8 99%
Sencit Towne House L.P.
Sencit Towne House
Shillington, PA 201 1,996,687 1,996,687 6,109,282 Section 8 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 2000 31, 2000 December 31, Type of March 31,
Property Location 1999 Subsidy* 2000
------------------------------------ ------------ ---------------- --------------- ----------------- ----------- -----------
East Rusk Housing Associates, LTD (A)
Pinewood Terrace Apartments
Rusk, TX
Gateway Housing Associates, LTD (A)
Gateway Village Garden Apts.
Azle, TX
Justin Housing Associates, LTD(A)
Justin Place
Justin, TX
Grandview Housing Associates, LTD (A)
Grandview
Grandview, TX
Buena Vista Limited Partnership
Hampton Lane (Buena Vista)
<S> <C> <C> <C> <C> <C> <C>
Buena Vista, GA 24 153,474 153,474 714,137 None 63%
Audobon Group, L.P.
A Massachusetts Limited Partnership (B)
Audobon
Boston, MA 37 2,640,419 2,640,419 3,060,725 Section 8 N/A
Bent Tree Housing Associates (A)
Bent Tree
Jacksboro, TX
Bowie Housing Associates, LTD (A)
Royal Crest (Bowie)
Bowie, TX
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 2000 31, 2000 December 31, Type of March 31,
Property Location 1999 Subsidy* 2000
----------------------------------- ------------ --------------- -------------- ----------------- ----------- -----------
Nocona Terrace Housing
Associates, LTD (A)
Nocona Terrace
Nocona, TX
Pine Manor Housing Associates (A)
Pine Manor
Jacksboro, TX
Rhome Housing Associates, LTD (A)
Hilltop Apartments
Rhome, TX
Valley View Housing Associates, LTD (A)
Valley View
Valley View, TX
Bentley Court II Limited Partnership
Bentley Court
<S> <C> <C> <C> <C> <C> <C>
Columbia, SC 273 5,000,000 5,000,000 6,845,104 None 83%
Bryson Housing Associates, LTD (A)
Pecan Hill Apartments
Bryson, TX
Orocovix Limited Dividend
Partnership, S.E.
Orocovix IV
Orocovix, PR 40 361,444 361,444 1,638,578 FmHA 100%
Carolina Woods Associates, L.P.
Carolina Woods
Greensboro, NC 48 1,000,000 1,000,000 1,060,498 None 89%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 2000 31, 2000 December 31, Type of March 31,
Property Location 1999 Subsidy* 2000
------------------------------------ ------------ --------------- -------------- ----------------- ----------- --------------
Kenilworth Associates LTD
A Limited Partnership
Mayfair Mansions
<S> <C> <C> <C> <C> <C> <C>
Washington, DC 569 4,250,000 4,250,000 19,365,191 Section 8 98%
Oakview Square Limited Partnership
A Michigan Limited Partnership
Oakview Square
Chesterfield, MI 192 5,299,652 5,299,652 5,961,146 None 86%
Whitehills II Apartments Company
Limited Partnership
Whitehills II
Howell, MI 24 169,276 169,276 751,358 FmHA 96%
Gobles Limited Dividend
Housing Associates
Orchard View
Gobles, MI 24 162,022 162,022 735,308 FmHA 100%
Lakeside Square Limited Partnership
An Illinois Limited Partnership
Lakeside Square
Chicago, IL 308 3,978,813 3,978,813 5,814,053 Section 8 100%
Lincoln Green Associates, A Limited
Partnership
Lincoln Green
Old Towne, ME 30 352,575 352,575 1,638,925 Section 8 97%
Brown Kaplan Limited Partnership
Brown Kaplan
Boston, MA 60 3,024,663 3,024,663 7,949,424 Section 8 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 2000 31, 2000 December 31, Type of March 31,
Property Location 1999 Subsidy* 2000
------------------------------------- ------------ ---------------- --------------- ----------------- ----------- -----------
Green Tree Village Limited Partnership
A Limited Partnership
Green Tree Village
<S> <C> <C> <C> <C> <C> <C>
Greenville, GA 24 145,437 145,437 655,590 FmHA 100%
Milan Apartments Company
Limited Partnership
Canfield Crossing
Milan, MI 32 230,500 230,500 1,012,702 FmHA 100%
Findlay Market Limited Partnership (A)
Findlay Market
Cincinnati, OH
Seagraves Housing Associates, LTD. (A)
Seagraves
Seagraves, TX
West Pine Associates
West Pine
Findlay, PA 38 313,445 313,445 1,670,431 FmHA 100%
B-K Apartments Limited Partnership
BK Apartments
Jamestowne, ND 48 290,000 290,000 834,583 Section 8 92%
46th and Vincennes Limited
Partnership
46th and Vincennes
Chicago, IL 28 751,120 751,120 1,305,198 Section 8 90%
------ ------------- ----------- --------------
3,031 $ 49,174,310 $49,174,310 $ 100,474,567
====== ============= =========== ==============
</TABLE>
* FmHA This subsidy, which is authorized under Section 515 of the
Housing Act of 1949, can be one or a combination of
many different types. For instance, FmHA may provide: 1)
direct below-market-rate mortgage loans for rural
rental housing; 2) mortgage interest subsidies which
effectively lower the interest rate of the loan to 1%; 3)
rental assistance subsidies to tenants which allow them to
pay no more than 30% of their monthly income as rent
with the balance paid by the federal government; or 4) a
combination of any of the above.
Section 8 This subsidy, which is authorized under Section 8 of Title
II of the Housing and Community Development Act of 1974,
allows qualified low-income tenants to pay 30% of their
monthly income as rent with the balance paid by the federal
government. Also includes comparable state subsidies.
(A) The Managing General Partner has transferred all of the assets
of these Local Limited Partnerships subject to their
liabilities. They had total capital contributions and mortgage
payable amounts of $2,883,718 and $8,050,597, respectivley, as
of the transfer dates.
(B) Audobon Apartments was foreclosed on March 30, 2000.
<PAGE>
Three Local Limited Partnerships invested in by the Partnership each represent
more than 10% of the total capital contributions made to Local Limited
Partnerships by the Partnership. The first is Leawood Associates, L.P. ("Leawood
Manor"). Leawood Manor, representing 15.25% of the total capital contributions
to Local Limited Partnerships, is a 254-unit apartment complex located in
Leawood, Kansas. Leawood Manor is financed by a first mortgage at an annual rate
of 6.66% with monthly installments of $53,659 of principal and interest. The
mortgage matures on February 1, 2009.
The second Local Limited Partnership which represents more than 10% of the total
capital contributions to Local Limited Partnerships is Oakview Square Limited
Partnership ("Oakview Square"). Oakview Square, representing 10.78% of the total
capital contributions to Local Limited Partnerships, is a 192-unit apartment
complex located in Chesterfield, Michigan. Oakview Square is financed by a first
mortgage loan at 9.75% interest and a 35 year term with monthly installments of
approximately $52,100. The loan matures in April 2010.
The third Local Limited Partnership which represents more than 10% of the total
capital contributions to Local Limited Partnerships is Bentley Court II Limited
Partnership ("Bentley Court"). Bentley Court, representing 10.17% of the total
capital contributions to Local Limited Partnerships, is a 273 unit apartment
complex located in Columbia, South Carolina. Bentley Court is financed by a
first mortgage loan at 8.5% interest with monthly installment of $52,129. The
loan matures in August 2031.
Duration of leases for occupancy in the Properties described above is six to
twelve months. The Managing General Partner believes the described herein are
adequately covered by insurance.
Additional information required under this Item, as it pertains to the
Partnership, is contained in Items 1, 7 and 8 of this Report.
Item 3. Legal Proceedings
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. As a result of the existing operating deficits,
Audobon Apartments was foreclosed on March 30, 2000. This foreclosure will
result in recapture of credits, the allocation of taxable income to the
Partnership and loss of future benefits associated with this property. Since the
property's carrying value was zero, the transaction had no financial statement
impact.
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 ownership of 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. 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.
<PAGE>
As previously reported, the IRS finalized its report from an audit of the 1993
tax return for Bentley Court. The IRS report includes the questioning of the
treatment of certain items and findings for non-compliance in 1993. Management
understands that the audit now also focuses on 1994 and 1995 tax credits. On
behalf of the Partnership, the Managing General Partner hired attorneys to
appeal the findings in the IRS report in order to minimize the loss of credits.
In June 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 pleaded guilty to two of these counts and is now awaiting
sentencing. In the opinion of management, there is a risk that Bentley Court
and, consequently, the Partnership will suffer substantial tax credit recapture
or credit disallowance for this Local Limited Partnership investment. However,
management cannot quantify the risk at this time. The Partnership has fully
reserved its 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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
There is no public market for the Units, and it is not expected that a public
market will develop. If a Limited Partner desires to sell Units, the buyer of
those Units will be required to comply with the minimum purchase and retention
requirements and investor suitability standards imposed by applicable federal or
state securities laws and the minimum purchase and retention requirements
imposed by the Partnership. The price to be paid for the Units, as well as the
commissions to be received by any participating broker-dealers, will be subject
to negotiation by the Limited Partner seeking to sell his Units. Units will not
be redeemed or repurchased by the Partnership.
The Partnership Agreement does not impose on the Partnership or its General
Partners any obligation to obtain periodic appraisals of assets or to provide
Limited Partners with any estimates of the current value of Units.
As of June 15, 2000, there were 3,808 record holders of Units of the
Partnership.
Cash distributions, when made, are paid annually. No cash distributions were
paid for the years ended March 31, 2000 and 1999.
Item 6. 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, and interest rates.
<PAGE>
Liquidity and Capital Resources
The Partnership had a decrease in cash and cash equivalents of $155,885 from
$243,072 at March 31, 1999 to $87,187 at March 31, 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 $304,000 have been used to make additional capital contributions to a
Local Limited Partnership. To date, the Partnership has used approximately
$858,000 of operating funds to replenish Reserves. At March 31, 2000,
approximately $739,000 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 $1,233,000 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 March 31, 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 in the years ended March 31, 2000 or 1999. It is
not expected that cash available for distribution, if any, will be significant
during the 2000 calendar year. Based on the results of 1999 operations, the
Local Limited Partnerships are not expected to distribute significant amounts of
cash to the Partnership because such amounts will be needed to fund Property
operating costs. In addition, many of the Properties benefit from some type of
federal or state subsidy and, as a consequence, are subject to restrictions on
cash distributions.
Results of Operations
2000 versus 1999
The Partnership's results of operations for the fiscal year ended March 31, 2000
resulted in a net loss of $20,962 as compared to a net loss of $723,215 for the
same period in 1999. The decrease in net loss is primarily attributable to a
decrease in equity in losses of Local Limited Partnerships. 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 is partially offset
by an increase in Provision for valuation of investments in Local Limited
Partnerships and a decrease in bad debt recovery and other income.
<PAGE>
Low-Income Housing Tax Credits
The 2000 and 1999 Tax Credits per Unit were $115.56 and $131.49, respectively,
for individual investors. The 2000 and 1999 Tax Credits per Unit were $118.23
and $134.17, respectively, for corporate investors.
The Tax Credits per Unit for corporate investors will be slightly higher for the
remaining years of the credit period than that for individual investors because
certain of the properties took advantage of 1990 federal legislation that
allowed the acceleration of future tax credits to individuals in the tax year
ended December 31, 1990. For those properties that elected to accelerate the
individual credit, the accelerated portion is being amortized over the remainder
of the credit period, thereby causing a reduction of this and future year's tax
credits passed through by those properties. In total, both individual and
corporate investors will be allocated equal amounts of Tax Credits.
Property Discussions
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. As a result of the existing operating deficits,
Audobon Apartments was foreclosed on March 30, 2000. This foreclosure will
result in recapture of credits, the allocation of taxable income to the
Partnership and loss of future benefits associated with this property. Since the
property's carrying value was zero, the transaction had no financial statement
impact.
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 ownership of 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. 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>
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 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 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 remained stable and as of March 31, 2000 was 90%.
Effective January 13, 2000, the Managing General Partner and Local General
Partner were successful 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 monitor the new management agent, property
operations and marketing efforts.
As previously reported, negotiations among the Managing General Partner, lender
and prospective buyer for Gateway Village continued and resulted in the transfer
of Gateway Village in May, 1999. For 1999 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.
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.
Inflation and Other Economic Factors
Inflation had no material impact on the operations or financial condition of the
Partnership for the years ended March 31, 2000 and 1999.
Since some of the Properties benefit from some sort of government assistance,
the Partnership is subject to the risks inherent in that area including
decreased subsidies, difficulties in finding suitable tenants and obtaining
permission for rent increases. In addition, any Tax Credits allocated to
investors with respect to a Property are subject to recapture to the extent that
the Property or any portion thereof ceases to qualify for the Tax Credits.
<PAGE>
Certain of the Properties listed in this Report are located in areas suffering
from poor economic conditions. Such conditions could have an adverse effect on
the rent or occupancy levels at such Properties. Nevertheless, management
believes that the generally high demand for below-market rate housing will tend
to negate such factors. However, no assurance can be given in this regard.
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, acquired The Boston
Financial Group Limited Partnership ("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).
Item 7. Financial Statements and Supplementary Data
Information required under this Item is submitted as a separate section of this
Report. See Index on page F-1 hereof.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors and Executive Officers of the Registrant
The Managing General Partner of the Partnership is Arch Street IV, Inc., a
Massachusetts corporation (the "Managing General Partner"), an affiliate of Lend
Lease. The Managing General Partner was incorporated in December 1988. Randolph
G. Hawthorne is the Chief Operating Officer of the Managing General Partner and
had the primary responsibility for evaluating, selecting and negotiating
investments for the Partnership. The Investment Committee of the Managing
General Partner approved all investments. The names and positions of the
principal officers and the directors of the Managing General Partner are set
forth below.
Name Position
Jenny Netzer President, Managing Director
Michael H. Gladstone Vice President, Managing Director
Randolph G. Hawthorne Vice President, Managing Director
Paul F. Coughlan Vice President
William E. Haynsworth Vice President
<PAGE>
The other General Partner of the Partnership is Arch Street IV Limited
Partnership, a Massachusetts Limited Partnership ("Arch Street IV L.P.") that
was organized in December 1988. Arch Street IV, Inc. is the managing general
partner of Arch Street IV L.P.
The Managing General Partner provides day-to-day management of the Partnership.
Compensation is discussed in Item 10 of this Report. Such day-to-day management
does not include the management of the Properties.
The business experience of each of the persons listed above is described
below. There is no family relationship between any of the persons listed in
this section.
Jenny Netzer, age 44, Principal, Head of Housing and Community Investing. -
Responsible for tax credit investment programs to institutional clients. Joined
Lend Lease through its 1999 acquisition of Boston Financial, started with Boston
Financial in 1987. Previously, led Boston Financial's new business initiatives
and managed firm's Asset Management division, responsible for performance of 750
properties and providing service to 35,000 investors. Prior to joining Boston
Financial, served as Deputy Budget Director for Commonwealth of Massachusetts,
responsible for Commonwealth's health care and public pension program's budgets,
served as Assistant Controller at Yale University and former member of Watertown
Zoning Board of Appeals Officer of Affordable Housing Tax Credit Coalition and
frequent speaker on affordable housing and tax credit industry issues, BA
Harvard University; Master's in Public Policy Harvard's Kennedy School of
Government.
Michael H. Gladstone, age 43, Principal, Legal - Responsible for legal work in
the areas of affordable and conventional housing and investment products and
services. Joined Lend Lease through its 1999 acquisition of Boston Financial,
started with Boston Financial in 1985; served as firm's General Counsel. Prior
to joining Boston Financial, associated with law firm of Herrick & Smith, served
on advisory board of Housing and Development Reporter. Lectured at Harvard
University on affordable housing matters, Member, The National Realty Committee,
Cornell Real Estate Council, National Association of Real Estate Investment
Managers and Massachusetts Bar, BA Emory University; JD & MBA Cornell
University.
Randolph G. Hawthorne, age 50, Principal, Housing and Community Investing -
Responsible for structuring and acquiring real estate investments. Joined Lend
Lease through its 1999 acquisition of Boston Financial, started with Boston
Financial in 1973. Previously, served as Boston Financial's Treasurer, Past
Chairman of the Board of the National Multi Housing Council, having served on
the board since 1989, Past President of the National Housing and Rehabilitation
Association, Member, Multifamily Council of the Urban Land Institute, Frequent
speaker at industry conferences. Serves on the Editorial Advisory Boards of the
Tax Credit Advisor and Multi-Housing News, BS Massachusetts Institute of
Technology; MBA Harvard Graduate School of Business. Board of Directors National
Housing Conference. Graduated MIT 1971, HBS 1973.
Paul F. Coughlan, age 56, Principal, Housing and Community Investing -
Responsible for marketing and sales of institutional tax credit investments.
Joined Lend Lease through its 1999 acquisition of Boston Financial, started with
Boston Financial in 1975. Previously, served as sales manager for Boston
Financial's retail tax credit fund, AB Brown University.
William E. Haynsworth, age 60, Principal, Housing and Community Investing -
Responsible for the structuring of real estate investments and the acquisition
of property interests. Joined Lend Lease through its 1999 acquisition of Boston
Financial, started with Boston Financial in 1977. Prior to joining Boston
Financial, Acting Executive Director and General Counsel of the Massachusetts
Housing Finance Agency. Served as Director of Non-Residential Development of the
Boston Redevelopment Authority and Associate of Goodwin, Proctor & Hoar, Past
President and current Chairman of the Board of Directors of Affordable Housing
Tax Credit Coalition, BA Dartmouth College; LLB and LLM Harvard Law School.
<PAGE>
Item 10. Management Remuneration
Neither the directors nor officers of Arch Street IV, Inc., nor the partners of
Arch Street IV L.P. nor any other individual with significant involvement in the
business of the Partnership receives any current or proposed remuneration from
the Partnership.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of March 31, 2000, the following is the only entity known to the Partnership
to be the beneficial owner of more than 5% of the Units outstanding:
<TABLE>
<CAPTION>
Amount
Title of Name and Address of Beneficially
Class Beneficial Owner Owned Percent of Class
<S> <C> <C>
Limited AMP, Incorporated 10,000 Units 14.70%
Partner P.O. Box 3608
Harrisburg, PA
</TABLE>
The equity securities registered by the Partnership under Section 12(g) of the
Act consist of 100,000 Units, of which 68,043 were sold to the public. The
remaining Units were deregistered in Post-Effective Amendment No. 3, dated
February 21, 1990. Holders of Units are permitted to vote on matters affecting
the Partnership only in certain unusual circumstances and do not generally have
the right to vote on the operation or management of the Partnership.
Arch Street IV L.P. owns five (unregistered) Units not included in the 68,043
Units sold to the public.
Except as described in the preceding paragraph, neither Arch Street IV, Inc.,
Arch Street IV L.P., Lend Lease nor any of their executive officers, directors,
partners or affiliates is the beneficial owner of any Units. None of the
foregoing persons possess a right to acquire beneficial ownership of Units.
There is no arrangement in existence, to the Partnership's knowledge, that would
result in a change in control of the Partnership.
Item 12. Certain Relationships and Related Transactions
The Partnership paid certain fees to and reimbursed certain expenses of the
Managing General Partner or its affiliates (including Lend Lease) in connection
with the organization of the Partnership and the offering of Units. The
Partnership was also required to pay certain fees to and reimburse certain
expenses of the Managing General Partner or its affiliates (including Lend
Lease) in connection with the administration of the Partnership and its
acquisition and disposition of investments in Local Limited Partnerships. In
addition, the General Partners are entitled to certain Partnership distributions
under the terms of the Partnership Agreement. Also, an affiliate of the General
Partners will receive up to $10,000 from the sale or refinancing proceeds of
each Local Limited Partnership, if it is still a limited partner at the time of
such transaction. All such fees and distributions are more fully described in
the sections entitled "Estimated Use of Proceeds", "Management Compensation and
Fees" and "Profits and Losses for Tax Purposes, Tax Credits and Cash
Distributions" of the Prospectus. Such sections are incorporated herein by
reference. In addition, an affiliate of the Managing General Partner serves as
property management agent for the properties owned by Leawood Associates, L.P.,
Oakview Square, L.P., Whitehills II Apartments Company, L.P., Gobles Limited
Dividend Housing Association and Milan Apartments Company, L.P.
<PAGE>
The Partnership is permitted to enter into transactions involving affiliates of
the Managing General Partner, subject to certain limitations established in the
Partnership Agreement.
Information regarding the fees paid and expense reimbursements made in the two
years ending March 31, 2000 is presented as follows:
Organizational fees and expenses
In accordance with the Partnership Agreement, affiliates of the General Partner
are to be reimbursed by the Partnership for organizational, offering and selling
expenses advanced on behalf of the Partnership for salaries and direct expenses
of certain employees of the Managing General Partner and its affiliates in
connection with the registration and organization of the Partnership. Such
expenses include printing expenses and legal, accounting, escrow agent and
depository fees and expenses. Such expenses also include a non-accountable
expense allowance for marketing expenses equal to 1% of gross offering proceeds.
From inception through March 31, 2000, $8,351,601 of organization and offering
fees and expenses incurred on behalf of the Partnership were paid and reimbursed
to an affiliate of the Managing General Partner. Total organization and offering
expenses did not exceed 5.5% of the gross offering proceeds. No payment were
made or expenses reimbursed in each of two years ended March 31, 2000.
Acquisition fees and expenses
In accordance with the Partnership Agreement, the Partnership is required to pay
acquisition fees to and reimburse acquisition expenses of the Managing General
Partner or its affiliates for selecting, evaluating, structuring, negotiating
and closing the Partnership's investments in Local Limited Partnerships.
Acquisition fees totaled 7.5% of the gross offering proceeds. Acquisition
expenses, which include such expenses as legal fees and expenses, travel and
communications expenses, costs of appraisals, accounting fees and expenses, did
not exceed 1.75% of the gross offering proceeds. Acquisition fees totaling
$5,080,756 for the closing of the Partnership's Local Limited Partnership
Investments have been paid to an affiliate of the Managing General Partner.
Acquisition expenses totaling $974,240 were incurred and have been reimbursed to
an affiliate of the Managing General Partner. No payments were made or expenses
reimbursed in each of the two years ended March 31, 2000.
Asset Management Fees
In accordance with the Partnership Agreement, an affiliate of the Managing
General Partner is paid an annual fee for services in connection with the
administration of the affairs of the Partnership. The affiliate currently
receives $7,629 (as adjusted by the CPI factor) per Local Limited Partnership
annually as the Asset Management Fee. Fees earned in each of the two years ended
March 31, 2000 are as follows:
2000 1999
------------- --------
Asset Management Fees $ 182,041 199,280
Salaries and benefits expense reimbursements
An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries and benefits expenses. The reimbursements are based upon
the size and complexity of the Partnership's operations. Reimbursements paid or
payable in each of the two years ended March 31, 2000 are as follows:
2000 1999
------------- ---------
Salaries and benefits expense
reimbursements $ 136,918 $ 108,586
<PAGE>
Property Management Fees
An affiliate of the Managing General Partner is the management agent for five
properties in which the Partnership invested. The Property Management Fee
charged is generally 5% of the properties' gross revenues. Fees earned by this
affiliate, for the years ended December 31, 1999, are as follows:
1999 1998
------------- ---------
Property Management Fees $ 165,894 $ 177,713
Cash distributions paid to the General Partners
In accordance with the Partnership Agreement, the General Partners of the
Partnership, Arch Street IV, Inc. and Arch Street IV Limited Partnership,
receive 1% of cash distributions paid to partners. No cash distributions were
paid to the General Partners in any of the two years ended March 31, 2000.
Additional information concerning cash distributions and other fees paid or
payable to the Managing General Partner and its affiliates and the reimbursement
of expenses paid or payable to Lend Lease Real Estate Investments, Inc. and its
affiliates during each of the two years ended March 31, 2000 is presented in
Note 5 to the Financial Statements.
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a)(1) and (a)(2) Documents filed as a part of this Report.
In response to this portion of Item 13, the financial statements and the
auditors' report relating thereto are submitted as a separate section of this
Report. See Index to the Financial Statements on page F-1 hereof.
The reports of auditors of the Local Limited Partnerships, relating to the
audits of the financial statements of such Local Limited Partnerships appear in
Exhibit 28.1 of this Report.
All other financial statement schedules and exhibits for which provision is made
in the applicable accounting regulations of the Securities and Exchange
Commission are not required under related instructions or are inapplicable and
therefore have been omitted.
(a)(3) See Exhibit Index contained herein.
(a)(3)(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the year ended March 31,
2000.
(a)(3)(c) Exhibits
Number and Description in Accordance with
Item 601 of Regulation S-K
18. Letter on Change in Accounting Principle
27. Financial Data Schedule
28. Additional Exhibits
28.1 (a) Reports of Other Independent Auditors
(a)(3)(d) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
By: Arch Street IV, Inc.
its Managing General Partner
By: /s/Randolph G. Hawthorne Date: June 29, 2000
------------------------------- -------------
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Managing General
Partner of the Partnership and in the capacities and on the dates indicated:
By: /s/Randolph G. Hawthorne Date: June 29, 2000
------------------------------- -------------
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
By: /s/Michael H. Gladstone Date: June 29, 2000
------------------------------ -------------
Michael H. Gladstone
Managing Director, Vice President
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Annual Report on Form 10-KSB
For the Year Ended March 31, 2000
Index
Page No.
Report of Independent Accountants
For the Years Ended March 31, 2000 and 1999 F-2
Financial Statements
Balance Sheet - March 31, 2000 F-3
Statements of Operations - Years Ended
March 31, 2000 and 1999 F-4
Statements of Changes in Partners' Equity
Years Ended March 31, 2000 and 1999 F-5
Statements of Cash Flows - Years Ended
March 31, 2000 and 1999 F-6
Notes to the Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. IV
(A Limited Partnership)
In our opinion, based on our audits and the reports of other auditors, the
financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of Boston Financial Qualified Housing
Tax Credits L.P. IV (the "Partnership") at March 31, 2000 and the results of its
operations and its cash flows for each of the two years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of certain local limited partnerships for which $30,483,079 of
cumulative equity in losses are included in the balance sheet as of March 31,
2000 and for which net income/(losses) of $1,022,398 and $(535,567) are included
in the accompanying financial statements for the years ended March 31, 2000 and
1999, respectively. Those statements were audited by other auditors whose
reports thereon have been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for the Local Limited
Partnerships, is based solely on the reports of the other auditors. We conducted
our audits of these financial statements in accordance with auditing standard
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits and the reports of other auditors provide a reasonable
basis for the opinions expressed above.
As discussed in Note 2 to the financial statements, in 2000 the Partnership
changed the basis of presentation of its financial statements from a combined
basis to a stand-alone basis. The 1999 financial statements have been restated
to show the effects of this change in reporting entity.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
June 22, 2000
Boston, Massachusetts
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
BALANCE SHEET
March 31, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 87,187
Marketable securities, at fair value (Note 3) 723,331
Investments in Local Limited Partnerships, net (Note 4) 16,960,009
Other assets 6,524
-------------
Total Assets $ 17,777,051
=============
Liabilities and Partners' Equity
Accounts payable to affiliates (Note 5) $ 288,893
Accounts payable and accrued expenses 71,300
-------------
Total Liabilities 360,193
-------------
General, Initial and Investor Limited Partners' Equity 17,420,849
Net unrealized losses on marketable securities (3,991)
-------------
Total Partners' Equity 17,416,858
-------------
Total Liabilities and Partners' Equity $ 17,777,051
=============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
1999
2000 (Restated)
Revenue:
<S> <C> <C>
Investment $ 51,963 $ 65,213
Bad debt recoveries - 119,331
Other 90,325 174,654
------------- -------------
Total Revenue 142,288 359,198
------------- -------------
Expenses:
Asset management fees, related party (Note 5) 182,041 199,280
General and administrative (includes
reimbursements to affiliate in the amounts of
$136,918 and $108,586, respectively) (Note 5) 350,609 268,965
Provision for valuation of investments in Local
Limited Partnerships 587,395 12,792
Amortization 65,603 65,809
------------- -------------
Total Expenses 1,185,648 546,846
------------- -------------
Loss before equity in income (losses) of Local Limited
Partnerships (1,043,360) (187,648)
Equity in income (losses) of Local Limited
Partnerships (Note 4) 1,022,398 (535,567)
------------- -------------
Net Loss $ (20,962) $ (723,215)
============= =============
Net Loss allocated:
General Partners $ (210) $ (7,232)
Limited Partners (20,752) (715,983)
------------- -------------
$ (20,962) $ (723,215)
============= =============
Net Loss per Limited Partnership
Unit (68,043 Units) $ (0.30) $ (10.52)
============= =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Years Ended March 31, 2000 and 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, 1998 (restated) $ (409,436) $ 5,000 $ 18,569,462 $ 1,177 $ 18,166,203
----------- --------- ------------- ----------- --------------
Comprehensive Income (Loss):
Change in net unrealized gains
on marketable securities
available for sale - - - 2,296 2,296
Net Loss (7,232) - (715,983) - (723,215)
----------- --------- ------------- ----------- --------------
Comprehensive Income (Loss) (7,232) - (715,983) 2,296 (720,919)
----------- --------- ------------- ----------- --------------
Balance at March 31, 1999 (restated) (416,668) 5,000 17,853,479 3,473 17,445,284
----------- --------- ------------- ----------- --------------
Comprehensive Loss:
Change in net unrealized gains
on marketable securities
available for sale - - - (7,464) (7,464)
Net Loss (210) - (20,752) - (20,962)
----------- --------- ------------- ----------- --------------
Comprehensive Loss (210) - (20,752) (7,464) (28,426)
----------- --------- ------------- ----------- --------------
Balance at March 31, 2000 $ (416,878) $ 5,000 $ 17,832,727 $ (3,991) $ 17,416,858
=========== ========= ============= =========== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
1999
2000 (Restated)
Cash flows from operating activities
<S> <C> <C>
Net Loss $ (20,962) $ (723,215)
Adjustments to reconcile net loss to net cash
used for operating activities:
Equity in (income) losses of
Local Limited Partnerships (1,022,398) 535,567
Cash distribution income included in
cash distributions received from Local
Limited Partnerships (83,034) (63,929)
Provision for valuation of investments in Local
Limited Partnerships 587,395 -
Bad debt recoveries - (106,539)
Amortization 65,603 65,809
Gain on sales and maturities of
marketable securities (334) (3,651)
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Other assets (237) 13,398
Accounts payable to affiliates (45,224) (483,820)
Accounts payable and accrued expenses 217,353 14,787
------------ ------------
Net cash used for operating activities (301,838) (751,593)
------------ ------------
Cash flows from investing activities:
Purchases of marketable securities (498,861) (922,221)
Proceeds from sales and maturities
of marketable securities 472,042 1,210,375
Cash distributions received from Local
Limited Partnerships 368,111 360,545
(Advances to) reimbursements from
Local Limited Partnerships (195,339) 73,158
------------ ------------
Net cash provided by investing activities 145,953 721,857
------------ ------------
Net decrease in cash and cash equivalents (155,885) (29,736)
Cash and cash equivalents, beginning 243,072 272,808
------------ ------------
Cash and cash equivalents, ending $ 87,187 $ 243,072
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
1. Organization
Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") was
formed on March 30, 1989 under the laws of the Commonwealth of Massachusetts for
the primary purpose of investing, as a limited partner, in other limited
partnerships ("Local Limited Partnerships"), each of which own and operate
apartment complexes, most of which benefit from some form of federal, state or
local assistance program and each of which qualify for low-income housing tax
credits. The Partnership's objectives are to: (i) provide current tax benefits
in the form of tax credits which qualified investors may use to offset their
federal income tax liability; (ii) preserve and protect the Partnership's
capital; (iii) provide limited cash distributions which are not expected to
constitute taxable income during Partnership operations; and iv) provide cash
distributions from sale or refinancing transactions. The General Partners of the
Partnership are Arch Street IV, Inc., which serves as the Managing General
Partner, and Arch Street IV L.P., which also serves as the Initial Limited
Partner. Both of the General Partners are affiliates of Lend Lease Real Estate
Investments, Inc. ("Lend Lease"). The fiscal year of the Partnership ends on
March 31.
The Partnership's partnership agreement ("Partnership Agreement") authorized the
sale of up to 100,000 units of Limited Partnership Interest ("Units") at $1,000
per Unit, adjusted for certain discounts. The Partnership raised $67,653,000
("Gross Proceeds"), net of discounts of $390,000, through the sale of 68,043
Units. Such amounts exclude five unregistered Units previously acquired for
$5,000 by the Initial Limited Partner, which is also one of the General
Partners. The offering of Units terminated on January 31, 1990.
Generally, profits, losses, tax credits and cash flows from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments.
Under the terms of the Partnership Agreement, the Partnership initially
designated 4% of the gross proceeds from the sale of Units as a reserve for
working capital of the Partnership and contingencies related to ownership of
Local Limited Partnership interests. The Managing General Partner may increase
or decrease such amounts from time to time as it deems appropriate. At March 31,
2000, the Managing General Partner has designated approximately $739,000 of
cash, cash equivalents and marketable securities as such Reserves.
2. Significant Accounting Policies
Basis of Presentation
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting because the Partnership does not have control
over the major operating and financial policies of the Local Limited
Partnerships in which it invests. Under the equity method, the investment is
carried at cost, adjusted for the Partnership's share of net income or loss of
the Local Limited Partnerships, additional investments in and cash distributions
from the Local Limited Partnerships. Equity in income or loss of the Local
Limited Partnerships is included in the Partnership's operations. The
Partnership has no obligation to fund liabilities of the Local Limited
Partnerships beyond its investment, therefore the Local Limited Partnership's
investment will not be carried below zero. To the extent that equity losses are
incurred or distributions received when the Partnership's respective carrying
value of the Local Limited Partnership has been reduced to a zero balance, the
losses will be suspended and offset against future income, and distributions
received will be recorded as income.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Basis of Presentation (continued)
Excess investment costs over the underlying net assets acquired have arisen from
acquisition fees paid and expenses reimbursed to an affiliate of the
Partnership. These fees and expenses are included in the Partnership's
Investments in Local Limited Partnerships and are being amortized on a
straight-line basis over 35 years.
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 included in the accompanying
financial statements is as of December 31, 1999 and 1998.
The general partners of Leawood Associates, L.P. and the Texas Partnerships (the
"Combined Entities") and the General Partner of the Partnership are affiliated
entities. In prior periods, the Partnership combined its financial statements
with those of the Combined Entities. During 2000, the General Partner concluded
that the presentation of the financial position and results of operations of the
Partnership, with the Combined Entities accounted for using the equity method,
resulted in a more meaningful presentation. All prior period financial data has
been restated to reflect the change in reporting entity.
The Partnership recognizes a decline in the carrying value of its investments in
Local Limited Partnerships when there is evidence of a non-temporary decline in
the recoverable amount of the investment. There is a possibility that the
estimates relating to reserves for non-temporary declines in carrying value of
investments in Local Limited Partnerships may be subject to material near term
adjustments.
The Partnership, as a limited partner in the Local Limited Partnerships, is
subject to risks inherent in the ownership of property which are beyond its
control, such as fluctuations in occupancy rates and operating expenses,
variations in rental schedules, proper maintenance and continued eligibility for
tax credits. If the cost of operating a property exceeds the rental income
earned thereon, the Partnership may deem it in its best interest to voluntarily
provide funds in order to protect its investment.
Cash Equivalents
Cash equivalents consist of short-term money market instruments with maturities
of ninety days or less at acquisition and approximate fair value.
Marketable Securities
Marketable securities consist primarily of U.S. Treasury instruments and various
asset-backed investment vehicles. The Partnership's marketable securities are
classified as "Available for Sale" securities and reported at fair value as
reported by the brokerage firm at which the securities are held. All marketable
securities have fixed maturities. Realized gains and losses from the sales of
securities are based on the specific identification method. Unrealized gains and
losses are excluded from earnings and reported as a separate component of
partners' equity.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statements of Financial Accounting Standards No. 107 ("SFAS No. 107"),
Disclosures About Fair Value of Financial Instruments, requires disclosure for
the fair value of most on- and off-balance sheet financial instruments for which
it is practicable to estimate that value. The scope of SFAS No. 107 excludes
certain financial instruments, such as trade receivables and payables when the
carrying value approximates the fair value and investments accounted for under
the equity method, and all nonfinancial assets, such as real property. Except as
discussed in Note 7, the fair values of the Partnership's assets and
liabilities, which qualify as financial instruments under SFAS No. 107,
approximate their carrying amounts in the accompanying balance sheets.
Income Taxes
No provision for income taxes has been made, as the liability for such taxes is
the obligation of the partners of the Partnership.
3. Marketable Securities
A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities issued by the
US Treasury and other US
government corporations
<S> <C> <C> <C> <C>
and agencies $ 648,569 $ - $ (4,302) $ 644,267
Mortgage backed securities 78,753 387 (76) 79,064
----------- ---------- -------- -----------
Marketable securities
at March 31, 2000 $ 727,322 $ 387 $ (4,378) $ 723,331
=========== ========== ======== ===========
</TABLE>
The contractual maturities at March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in less than one year $ 424,479 $ 423,446
Due in one to five years 224,090 220,821
Mortgage backed securities 78,753 79,064
----------- -----------
$ 727,322 $ 723,331
=========== ===========
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. Marketable Securities (continued)
Actual maturities may differ from contractual maturities because some borrowers
have the right to call or prepay obligations. Proceeds from sales of marketable
securities were approximately $220,000 and $679,000 during the fiscal years
ended March 31, 2000 and 1999, respectively. Proceeds from the maturities of
marketable securities were approximately $252,000 and $531,000 during the fiscal
years ended March 31, 2000 and 1999, respectively. Included in investment income
are gross gains of $490 and $4,891 and gross losses of $156 and $1,239 that were
realized on the sales during the fiscal years ended March 31, 2000 and 1999,
respectively.
4. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-four Local Limited Partnerships which own and operate
multi-family housing complexes, most of which are government-assisted. The
Partnership, as Investor Limited Partner pursuant to the various Local Limited
Partnership Agreements, which contain certain operating and distribution
restrictions, has acquired a 99% interest in the profits, losses, tax credits
and cash flows from operations of each of the Local Limited Partnerships. Upon
dissolution, proceeds will be distributed according to each respective
partnership agreement.
The following is a summary of investments in Local Limited Partnerships at March
31, 2000:
<TABLE>
<CAPTION>
Capital contributions and advances paid to Local Limited Partnerships and
purchase price paid to withdrawing partners of Local
<S> <C>
Limited Partnerships $ 49,552,159
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative unrecognized
losses of $11,366,601) (30,483,079)
Cumulative cash distributions received from Local
Limited Partnerships (2,537,115)
Investments in Local Limited Partnerships -------------
before adjustment 16,531,965
-------------
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 3,859,616
Accumulated amortization of acquisition
fees and expenses (959,077)
Investments in Local Limited Partnerships 19,432,504
Reserve for valuation of investments
in Local Limited Partnerships (2,472,495)
--------------
$ 16,960,009
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
At March 31, 2000, the Partnership has provided for a reserve for valuation for
its investment in two Local Limited Partnerships, Bentley Court and Sencit
Townhouse, because there is evidence of non-temporary declines in the
recoverable amount of these investments.
Summarized financial information as of December 31, 1999 and 1998 (due to the
Partnership's policy of reporting the financial information of its Local Limited
Partnership interests on a 90 day lag basis) of all the Local Limited
Partnerships in which the Partnership has invested as of that date is as
follows:
<TABLE>
<CAPTION>
Summarized Balance Sheets - as of December 31,
1998
1999 (Restated)
Assets:
<S> <C> <C>
Rental property, net $ 110,904,607 $ 116,216,720
Current assets 4,921,065 4,705,798
Other assets, net 11,130,200 10,579,027
--------------- --------------
Total Assets $ 126,955,872 $ 131,501,545
=============== ===============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 98,124,251 $ 100,521,962
Other liabilities 13,590,317 12,058,393
Current liabilities (includes current
portion of mortgage payable) 5,335,104 8,057,405
--------------- ---------------
Total Liabilities 117,049,672 120,637,760
--------------- ---------------
Partners' Equity:
Partnership's equity 4,604,852 6,306,945
Other partners' equity 5,301,348 4,556,840
--------------- ---------------
Total Partners' Equity 9,906,200 10,863,785
--------------- ---------------
Total Liabilities and Partners' Equity $ 126,955,872 $ 131,501,545
=============== ===============
Summarized Income Statements -
for the years ended December 31,
Rental and other revenue $ 22,315,177 $ 22,314,190
--------------- ---------------
Expenses:
Operating expenses 9,832,883 12,487,360
Interest expense 7,372,627 7,999,384
Depreciation and amortization 5,490,211 5,282,626
Provisions for valuation of real estate - 3,078,687
--------------- ---------------
Total Expenses 22,695,721 28,848,057
--------------- ---------------
Net Loss $ (380,544) $ (6,533,867)
=============== ===============
Partnership's share of Net Loss (including 1999 adjustments from
prior years of $(371,322)) $ (1,449,170) $ (6,330,936)
=============== ===============
Other partners' share of Net Loss $ 697,304 $ (202,931)
=============== ===============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
For the fiscal years ended March 31, 2000 and 1999, the Partnership has not
recognized $2,471,568 and $6,402,522, respectively, of equity in losses relating
to Local Limited Partnerships where cumulative equity in losses and cumulative
distributions exceeded its total investments in these Local Limited
Partnerships. In addition, the Partnership recognized $607,153 of previously
unrecognized losses in the year ended March 31, 1999.
The Partnership's equity as reflected by the Local Limited Partnerships of
$4,604,852 differs from the Partnership's Investment in Local Limited
Partnerships before adjustment of $16,531,965 primarily because of unrecognized
losses as described above.
5. Transactions with Affiliates
An affiliate of the Managing General Partner currently receives $7,629 (as
adjusted by the CPI factor) per Local Limited Partnership annually as the Asset
Management Fee for administering the affairs of the Partnership. Included in the
Statements of Operations are Asset Management Fees of $182,041 and $199,280 for
the years ended March 31, 2000 and 1999, respectively. Payables to an affiliate
of the Managing General Partner relating to the aforementioned fees and expenses
aggregate $232,443 and $50,402 at March 31, 2000 and 1999, respectively.
An affiliate of the Managing General Partner is reimbursed for the actual cost
of the Partnership's operating expenses. Included in general and administrative
expenses for the years ended March 31, 2000 and 1999 is $136,918 and $108,586,
respectively, that has been paid or is payable by the Partnership as
reimbursement for salaries and benefits. At March 31, 2000 and 1999, $56,450 and
$21,138, respectively, were payable to an affiliate of the Managing General
Partner.
During the years ended March 31, 2000 and 1999, affiliates of the Managing
General Partner managed five properties in which the Partnership invested. The
property management fee charged is generally 5% of property's gross revenues.
Included in operating expenses in the summarized income statements in Note 4 to
the Financial Statements is $165,894 and $177,713 of fees earned by this
affiliate for the years ended December 31, 1999 and 1998, respectively.
6. Litigation
As previously reported, the IRS finalized its report from an audit of the 1993
tax return for Bentley Court. The IRS report includes the questioning of the
treatment of certain items and findings for non-compliance in 1993. Management
understands that the audit now also focuses on 1994 and 1995 tax credits. On
behalf of the Partnership, the Managing General Partner hired attorneys to
appeal the findings in the IRS report in order to minimize the loss of credits.
In June 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 pleaded guilty to two of these counts and is now awaiting
sentencing. In the opinion of management, there is a risk that Bentley Court
and, consequently, the Partnership will suffer substantial tax credit recapture
or credit disallowance for this Local Limited Partnership investment. However,
management cannot quantify the risk at this time. The Partnership has fully
reserved its 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 THE FINANCIAL STATEMENTS (continued)
7. Transfer and Liquidation of Interests in Local Limited Partnerships
On May 27, 1999, the Managing General Partner transferred Gateway Village to a
unaffiliated entity.
On November 10, 1997, the Managing General Partner transferred 50% of its
interest in capital and profits of BK Apartments to an affiliate of the local
general partner. Included in this transfer is a put option. The put option
grants the Managing General Partner the right to put the Partnership's remaining
interest to the local general partner anytime after one year has elapsed. For
financial reporting purposes, the Partnership has written-down the carrying
value of this investment in Local Limited Partnership to zero because it is
uncertain as to whether the Partnership will be able to recover its remaining
invested balance. The Partnership will retain its full share of tax credits
until such time as the remaining interest is put to the local general partner.
8. Federal Income Taxes
The following schedule reconciles the reporting financial statement loss for the
fiscal years ended March 31, 2000 and 1999 to the net loss reported on the Form
1065, U.S. Partnership Return of Income for the years ended December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999
2000 (Restated)
<S> <C> <C>
Net Loss per financial statements $ (20,962) $ (723,215)
Amortization of acquisition fees and
expenses not deductible for tax
purposes 65,603 65,809
Adjustment for equity in losses of Local
Limited Partnerships for financial reporting
purposes in excess of equity in losses for
tax purposes 1,267,540 1,977,786
Equity in losses of Local Limited Partnerships not
recognized for financial reporting purposes (2,554,602) (5,859,298)
Related party expenses not currently deductible
for tax purposes 186,675 157,966
Related party expenses paid in current year but
expensed for financial reporting purposes in prior year - (685,796)
Adjustment to reflect March 31 fiscal year
end to December 31 tax year end (847,127) (635,480)
Cash distributions included in loss for financial
reporting purposes (83,035) (63,929)
Other (60,388) -
------------ ------------
Net Loss per tax return $ (352,042) $ (5,766,157)
============ ============
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes and tax reporting purposes for the year ended March 31, 2000
are as follows:
<TABLE>
<CAPTION>
Financial Tax
Reporting Reporting
Purposes Purposes Differences
<S> <C> <C> <C>
Investments in Local Limited Partnerships $ 16,960,009 $ 11,986,658 $ 4,973,351
============== ============= =============
Other assets $ 817,042 $ 9,534,920 $ (8,717,878)
============== ============= =============
Liabilities $ 360,193 $ 69,335 $ 290,858
============== ============= =============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
8. Federal Income Taxes (continued)
The differences in the assets and liabilities of the Partnership for financial
reporting purposes are primarily attributable to: (i) the Partnership has not
recognized approximately $11,367,000 of equity in losses relating to fourteen
Local Limited Partnerships whose cumulative equity in losses exceeded their
total investments; (ii) the Partnership has provided a reserve for valuation of
approximately $2,095,000 against two of its investments in Local Limited
Partnerships for financial reporting purposes; (iii) approximately $959,000 of
amortization has been deducted for financial reporting purposes only; and (iv)
organizational and offering costs of approximately $8,352,000 have been
capitalized for tax reporting purposes but are charged to Limited Partners'
equity for financial reporting purposes.
<PAGE>
June 29, 2000
Boston Financial Qualified Housing Tax Credits L.P. IV
101 Arch Street
Boston, MA 02110-1106
To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. IV:
We are providing this letter to you for inclusion as an exhibit to your Form
10-K filing pursuant to Item 601 of Regulation S-K.
We have audited the financial statements included in Boston Financial Qualified
Housing Tax Credits L.P. IV's (the "Partnership") Annual Report on Form 10-K for
the year ended March 31, 2000 and issued our report thereon dated June 22, 2000.
Note 2 to the financial statements describes a change in reporting entity from a
combined basis presentation to a stand-alone basis presentation. It should be
understood that the preferability of one acceptable method of presenting
entities under common control over another has not been addressed in any
authoritative accounting literature, and in expressing our concurrence below we
have relied on management's determination that this change in reporting entity
is preferable. Based on our reading of management's stated reasons and
justification for this change in reporting entity in the Form 10-K, and our
discussions with management as to their judgment about the relevant business
planning and legal factors relating to the change, we concur with management
that such change represents, in the Partnership's circumstances, the adoption of
a preferable accounting principle in conformity with Accounting Principles Board
Opinion No. 20.
Very truly yours,
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<PAGE>
