February 11, 2000
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Qualified Housing Tax Credits L.P. IV
Report on Form 10-QSB for Quarter Ended December 31, 1999
File No. 0-19765
Gentlemen:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act
of 1934, there is filed herewith is one copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH4-Q3.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
------------------------------------------
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
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Combined Financial Statements
Combined Balance Sheet - December 31, 1999 (Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three and Nine
Months Ended December 31, 1999 and 1998 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 1999 4
Combined Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 1999 and 1998 5
Notes to Combined Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
Items 1-6 15
SIGNATURE 16
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEET
December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 274,479
Marketable securities, at fair value 825,856
Accounts receivable, net of allowance for bad debt
of $5,800 100,061
Tenant security deposits 109,625
Investments in Local Limited Partnerships,
net of reserve for valuation of $455,400 (Note 2) 15,038,687
Rental property at cost, net of accumulated depreciation 19,794,687
Mortgage escrow deposits 1,244,674
Deferred charges, net of accumulated amortization of
$12,352 398,881
Other assets 26,798
Total Assets ---------------
$ 37,813,748
===============
Liabilities and Partners' Equity
Mortgage notes payable (Note 5) $ 15,153,800
Accounts payable to affiliates 2,108,437
Accounts payable and accrued expenses 179,774
Interest payable 46,053
Tenant security deposits payable 99,501
Other Liabilities 409,766
---------------
Total Liabilities 17,997,331
Minority interests in Local Limited Partnerships 913,887
---------------
General, Initial and Investor Limited Partners' Equity 18,906,714
Net unrealized losses on marketable securities (4,184)
Total Partners' Equity 18,902,530
---------------
Total Liabilities and Partners' Equity $ 37,813,748
===============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------- --------------- ------------- ------------
Revenue:
<S> <C> <C> <C> <C>
Rental $ 674,546 $ 447,639 $ 1,518,386 $ 1,315,369
Investment 16,987 26,770 53,784 78,774
Other (13,797) 20,775 135,460 119,960
------------- --------------- ------------- --------------
Total Revenue 677,736 495,184 1,707,630 1,514,103
------------- --------------- ------------- --------------
Expenses:
Asset management fee,
related party 46,669 49,626 136,273 148,878
General and administrative,
(includes reimbursements to an
affiliate in the amounts of
$80,468 and $77,714 in 1999
and 1998, respectively) 94,420 87,090 306,019 194,979
Bad debt expense - 268,501 215,345 514,095
Rental operations, exclusive of
depreciation 398,744 210,187 747,734 631,469
Property management fee, related party 33,554 24,169 76,847 77,285
Interest 252,210 225,556 591,819 697,097
Depreciation 220,090 146,774 495,397 450,886
Amortization 21,947 21,586 230,524 64,832
------------- --------------- ------------- --------------
Total Expenses 1,067,634 1,033,489 2,799,958 2,779,521
------------- --------------- ------------- --------------
Loss before equity in income of Local
Limited Partnerships, minority interest,
loss on liquidation of interests in
Local Limited Partnerships gain on
transfer of assets and gain on
cancellation of indebtedness (389,898) (538,305) (1,092,328) (1,265,418)
Equity in income of Local
Limited Partnerships (Note 2) 229,008 119,413 302,428 99,000
Minority interest in (income) losses of
Local Limited Partnerships (260,431) 15,388 (147,498) 114,281
Loss on liquidation of interests in
Local Limited Partnerships (Note 3) - - (6,486) (3,750)
------------- --------------- ------------- --------------
Net loss before gain on transfer of assets
and extraordinary item (421,321) (403,504) (943,884) (1,055,887)
Gain on transfer of assets (Note 3) - - 218,408 589,338
Extrordinary gain on cancellation of
Indebtedness 2,482,000 - 2,482,000 -
------------- --------------- ------------- --------------
Net Income (Loss) $ 2,060,679 $ (403,504) $ 1,756,524 $ (466,549)
============= =============== ============= ==============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS (continued)
For the Three and Nine Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------- --------------- ------------- -------------
Net Income (Loss) allocated:
<S> <C> <C> <C> <C>
To General Partners $ 20,606 $ (4,034) $ 17,565 $ (4,665)
To Limited Partners 2,040,073 (399,470) 1,738,959 (461,884)
------------- --------------- ------------- --------------
$ 2,060,679 $ (403,504) $ 1,756,524 $ (466,549)
============= =============== ============= ==============
Net Loss before gain on cancellation
of indebtedness item per Limited
Partnership Unit (68,043 Units) $ (6.13) $ (5.87) $ (13.73) $ (15.36)
============= =============== ============= ==============
Gain on transfer of assets per Limited
Partnership Unit (68,043 Units) $ - $ - $ 3.18 $ 8.57
============= =============== ============== ===============
Extraordinary gain per Limited
Partnership Unit (68,043 Units) $ 36.11 $ - $ 36.11 $ -
============= =============== ============= ==============
Net Income (Loss) per Limited
Partnership Unit (68,043 Units) $ 29.98 $ (5.87) $ 25.56 $ (6.79)
============= =============== ============= ==============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Nine Months Ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999 $ (419,584) $ 5,000 $ 17,564,774 $ 3,473 $ 17,153,663
------------- ------------- ------------- ------------- -------------
Comprehensive Income:
Net change in net unrealized
gains on marketable securities
available for sale - - - (7,657) (7,657)
Net Income 17,565 - 1,738,959 - 1,756,524
------------- ------------- ------------- ------------- -------------
Comprehensive Income 17,565 - 1,738,959 (7,657) 1,748,867
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1999 $ (402,019) $ 5,000 $ 19,303,733 $ (4,184) $ 18,902,530
============= ============= ============= ============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net cash used for operating activities $ (589,074) $ (774,856)
------------- -------------
Net cash provided by investing activities 322,666 500,654
------------- -------------
Net cash provided by financing activities 137,352 30,498
------------- -------------
Net decrease in cash and cash equivalents (129,056) (243,704)
Cash and cash equivalents, beginning 403,535 386,059
------------- -------------
Cash and cash equivalents, ending $ 274,479 $ 142,355
============= =============
Supplemental disclosure:
Cash paid for interest $ 1,077,590 $ 645,759
============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included with the Partnership's Form 10-K for the
year ended March 31, 1999. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Partnership's financial position
and results of operations. The results of operations for the periods may not be
indicative of the results to be expected for the year.
The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90-day lag basis because the Local Limited Partnerships report
their results on a calendar year basis. Accordingly, the financial information
of the Local Limited Partnerships that is included in the accompanying combined
financial statements is as of September 30, 1999 and 1998.
1. Significant Accounting Policies
On July 21, 1999, an affiliate of the Partnership's Managing General Partner
became the Local General Partner of Bentley Court II, Limited Partnership
("Bentley"), a Local Limited Partnership in which the Partnership has invested.
Since the Local General Partner of Bentley is an affiliate of the Partnership,
these combined financial statements include all activity of Bentley effective as
of on July 21, 1999. All significant intercompany balances and transactions have
been eliminated.
2. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-three Local Limited Partnerships (excluding the Combined
Entities) which own and operate multi-family housing complexes, most of which
are government-assisted. The Partnership, as Investor Limited Partner pursuant
to the various Local Limited Partnership Agreements, which contain certain
operating and distribution restrictions, has generally acquired a 99% interest
in the profits, losses, tax credits and cash flows from operations of each of
the Local Limited Partnerships. Upon dissolution, proceeds will be distributed
according to each respective partnership agreement.
<TABLE>
<CAPTION>
The following is a summary of investments in Local Limited Partnerships,
excluding the Combined Entities, at December 31, 1999:
<S> <C>
Capital contributions paid to Local Limited
Partnerships and purchase price paid to
withdrawing partners of Local Limited Partnerships $ 36,676,500
Cumulative equity in losses of Local Limited
Partnerships (excludes cumulative unrecognized
losses of $9,955,068) (20,662,766)
Cash distributions received from Local
Limited Partnerships (2,349,113)
Investments in Local Limited Partnerships
before adjustment 13,664,621
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Investments in Local Limited Partnerships (continued)
<TABLE>
<CAPTION>
<S> <C>
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 2,398,439
Accumulated amortization of acquisition
fees and expenses (568,973)
Investments in Local Limited Partnerships 15,494,087
Reserve for valuation of investments
in Local Limited Partnerships (455,400)
$ 15,038,687
</TABLE>
The Partnership's share of the net losses of the Local Limited Partnerships,
excluding the Combined Entities, for the nine months ended December 31, 1999 is
$1,173,570. For the nine months ended December 31, 1999, the Partnership has not
recognized $1,452,847 of equity in losses relating to twelve Local Limited
Partnerships where cumulative equity in losses and cumulative distributions
exceeded its total investments in these Local Limited Partnerships.
3. Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of the Texas
Partnerships, subject to their liabilities, to unaffiliated entities. The last
Texas Partnership, Gateway Village, was transferred on May 27, 1999.
For financial reporting purposes, a loss on liquidation of interest in Local
Limited Partnership of $6,486 and a gain on transfer of assets of $218,408 were
recognized in the nine months ended December 31, 1999 as a result of the
transfer of Gateway Village.
For tax purposes, these events result in both Section 1231 Gain and cancellation
of indebtedness income. In addition, the transfer of ownership will result in a
nominal amount of recapture of tax credits.
4. Rental Property
Rental property includes real estate and personal property of Leawood Manor. In
addition, the Partnership's combined balance sheet as of December 31, 1999
includes the assets of Bentley Court. Real estate and personal property
belonging to Bentley are recorded at cost, the components of which are as
follows at September 30, 1999:
Buildings and Improvements $ 13,093,931
Land 362,623
-------------
13,456,554
Less: accumulated depreciation 4,628,362
-------------
Total $ 8,828,192
=============
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Mortgage Payable
As previously reported, mortgage notes payable includes the mortgage obligation
of Leawood Manor. In addition, the Partnership's combined balance sheet as of
December 31, 1999 includes the liabilities of Bentley Court. The 8.5% mortgage
payable in the original amount of $6,971,600 is payable to Whitehall Funding,
Inc. in monthly installments of $52,129 (including interest) through August
2031. The apartment project is pledged as collateral for the note.
Under agreements with the mortgage lender and HUD, the partnership is required
to make monthly escrow deposits for property taxes and insurance, mortgage
insurance and replacement of project assets, and is subject to restrictions as
to operating policies, rental charges, operating expenditures and distributions
to partners.
The liability of the partnership under the mortgage is limited to the underlying
value of the real estate collateral plus other amounts deposited with the
lender.
The aggregate mortgage payable principle, as of December 31 1999, is due to the
mortgagee as follows:
Payment Due Dates Amount
1999 (remaining three months) $ 10,775
2000 45,456
2001 49,674
2002 53,847
2003 58,606
2004 and thereafter 6,637,521
-------------
$ 6,855,879
6. Litigation
As previously reported, Bentley Court, located in Columbia, South Carolina,
continues to generate deficits. Further, the IRS finalized its report from an
audit of the 1993 tax return for the project. The IRS report includes the
questioning of the treatment of certain items and findings for non-compliance in
1993. Management understands that the audit now also focuses on 1994 and 1995
tax credits. On behalf of the Partnership, the Managing General Partner retained
counsel to appeal the findings in the IRS report in order to minimize the loss
of credits. In June of 1998, the Managing General Partner was informed that an
individual associated with the non-affiliated Local General Partner for this
property was indicted on various criminal charges related to this IRS audit.
This individual pled guilty to two of these counts and is now awaiting
sentencing. In the opinion of Management, there is a substantial risk that
Limited Partners will suffer significant tax credit recapture and/or credit
disallowance as a result of the problems at this property. However, it is not
possible to quantify the risk until the IRS completes its audits. Additionally,
the Local General Partner was removed as general partner from the Local Limited
Partnership and replaced with an affiliate of the Managing General Partner. In
addition, the Managing General Partner terminated the property management
company from management of the property and replaced it with a new property
management group. The Managing General Partner will continue to monitor property
operations closely. As a result of the continuing tax issues at this property,
Management fully reserved the Partnership's investment in Bentley Court.
The Partnership is not a party to any other pending legal or administrative
proceeding, and to the best of its knowledge, no legal or administrative
proceeding is threatened or contemplated against it.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
7. Supplemental Combining Schedules
<TABLE>
<CAPTION>
Balance Sheets
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. IV (A) (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 127,713 $ 105,454 $ 41,312 $ 274,479
Marketable securities, at fair value 825,856 - - 825,856
Accounts receivable, net - 100,061 - 100,061
Tenant security deposits - 109,625 - 109,625
Investments in Local
Limited Partnerships, net 17,997,164 - (2,958,477) 15,038,687
Rental property at cost, net - 19,628,277 166,410 19,794,687
Mortgagee escrow deposits - 1,244,674 - 1,244,674
Deferred charges, net - 398,881 - 398,881
Other assets 11,654 15,144 - 26,798
------------- ------------- ------------- -------------
Total Assets $ 18,962,387 $ 21,602,116 $ (2,750,755) $ 37,813,748
============= ============= ============= =============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 15,153,800 $ - $ 15,153,800
Accounts payable to affiliates 199,495 2,045,037 (136,095) 2,108,437
Accounts payable and accrued expenses 56,514 123,260 - 179,774
Interest payable - 46,053 - 46,053
Tenant security deposits payable - 99,501 - 99,501
Other Liabilities - 409,766 - 409,766
------------- ------------- ------------- -------------
Total Liabilities 256,009 17,877,417 (136,095) 17,997,331
------------- ------------- ------------- -------------
Minority interest in Local Limited
Partnerships - - 913,887 913,887
------------- ------------- ------------- -------------
General, Initial and Investor
Limited Partners' Equity 18,710,562 3,724,699 (3,528,547) 18,906,714
Net unrealized losses on
marketable securities (4,184) - - (4,184)
------------- ------------- ------------- -------------
Total Partners' Equity 18,706,378 3,724,699 (3,528,547) 18,902,530
------------- ------------- ------------- -------------
Total Liabilities and Partners' Equity $ 18,962,387 $ 21,602,116 $ (2,750,755) $ 37,813,748
============= ============= ============= =============
</TABLE>
(A) As of December 31, 1999.
(B) As of September 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
7. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
Boston Financial
Qualified Housing Combined
Tax Credits Entities
L.P. IV (A) (B) Eliminations Combined
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 1,518,386 $ - $ 1,518,386
Investment 39,996 13,788 - 53,784
Other 88,595 46,865 - 135,460
------------ ------------- ------------- -------------
Total Revenue 128,591 1,579,039 - 1,707,630
------------ ------------- ------------- -------------
Expenses:
Asset management fees, related party 136,273 - - 136,273
General and administrative 294,059 - 11,960 306,019
Bad debt expense 423,457 - (208,112) 215,345
Rental operations, exclusive of depreciation - 747,734 - 747,734
Property management fee, related party - 76,847 - 76,847
Interest - 591,819 - 591,819
Depreciation - 495,397 - 495,397
Amortization 49,202 181,322 - 230,524
------------ ------------- ------------- -------------
Total Expenses 902,991 2,093,119 (196,152) 2,799,958
------------ ------------- ------------- -------------
Loss before equity in income of Local Limited
Partnerships, minority interest,
loss on liquidation of interest in
Local Limited Partnership, gain on
transfer of assets and extraordinary item (774,400) (514,080) 196,152 (1,092,328)
Equity in income of Local Limited Partnerships 2,341,258 - (2,038,830) 302,428
Minority interest in income of Local Limited
Partnerships - - (147,498) (147,498)
Loss on liquidation of interest in Local
Limited Partnership (6,486) - - (6,486)
------------ ------------- ------------- -------------
Net (income) loss before gain on transfer of
assets and extraordinary item 1,560,372 (514,080) (1,990,176) (943,884)
Gain on transfer of assets - 218,408 - 218,408
Extraordinary gain on cancellation
of indebtedness - 2,482,000 - 2,482,000
------------ ------------- ------------- -------------
Net Income $ 1,560,372 $ 2,186,328 $ (1,990,176) $ 1,756,524
============ ============= ============= =============
</TABLE>
(A) For the nine months ended December 31, 1999.
(B) For the nine months ended September 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
7. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Cash Flows
Boston Financial
Qualified Housing Combined
Tax Credits Entities
L.P. IV (A) (B) Eliminations Combined
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (322,643) $ (266,431) $ - $ (589,074)
------------- ------------- ------------- -------------
Net cash provided by (used for)
investing activities 207,284 (62,025) 177,407 322,666
------------- ------------- ------------- -------------
Net cash provided by financing activities - 273,447 (136,095) 137,352
------------- ------------- ------------- -------------
Net decrease in cash and cash equivalents (115,359) (55,009) 41,312 (129,056)
Cash and cash equivalents, beginning 243,072 160,463 - 403,535
------------- ------------- ------------- -------------
Cash and cash equivalents, ending $ 127,713 $ 105,454 $ 41,312 $ 274,479
============= ============= ============= =============
</TABLE>
(A) For the nine months ended December 31, 1999.
(B) For the nine months ended September 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and is including this statement
for purposes of complying with these safe harbor provisions. Although the
Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions and interest rates.
Liquidity and Capital Resources
The Partnership (including the Combined Entities) had a decrease in cash and
cash equivalents of $86,590, from $361,069 at March 31, 1999 to $274,479 at
December 31, 1999. The decrease is primarily attributable to cash used for
operations, refinancing costs associated with one of the combined entities and
purchases of marketable securities in excess of proceeds. The decrease is
partially offset by proceeds from a refinanced mortgage for one the combined
entities, and cash distributions 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 $1,332,000 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
$868,000 of operating funds to replenish Reserves. At December 31, 1999,
approximately $884,000 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
may seek other financing sources including, but not limited to, the deferral of
Asset Management Fees to an affiliate of the Managing General Partner or working
with Local Limited Partnerships to increase cash distributions. In the event a
Local Limited Partnership encounters operating difficulties requiring additional
funds, the Partnership's management might deem it in its best interest to
voluntarily provide such funds in order to protect its investment. The
Partnership has advanced approximately $1,069,000 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 December 31, 1999, the Partnership had
no contractual or other obligation to any Local Limited Partnership which had
not been paid or provided for.
Cash Distributions
No cash distributions were made during the nine months ended December 31, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Partnership's results of operations for the nine months ended December 31,
1999 resulted in net income of $1,756,524, as compared to net losses of $466,549
in 1998. The decrease in net loss is primarily attributed to a $2,482,000 gain
on cancellation of indebtedness, a decrease in bad debt, a decrease in interest
expense, and an increase in equity in income of Local Limited Partnerships. The
gain on cancellation of indebtedness resulted from the extingushment of certain
developer fees payable to the former local general partner of Leawood Manor. The
increase in income from Local Limited Partnerships is due to an increase in
losses not recognized by the Partnerships for Local Limited Partnerships whose
cumulative equity in losses and cumulative distributions exceeded its total
investment in those partnerships. This increase in income is expected to
continue. The decrease in net loss is partially offset by increases in general
and administrative expenses and rental operations.
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. Given the existing operating deficits and the
dependence on these subsidies, Audobon Apartments and Brown Kaplan may default
on their mortgage obligation in the near future. In particular, Audobon
Apartments is experiencing significant operating deficits, which may affect the
ability of the Fund to retain its interest in Audobon through 2000. A
foreclosure would result in recapture of credits, the allocation of taxable
income to the Partnership and loss of future benefits associated with this
property. As previously reported, on September 16, 1998, the Partnership joined
with the RSO and about 20 other SHARP property owners and filed suit against the
MHFA (Mass. Sup. Court Civil Action #98-4720). Among other things, the suit
seeks to enforce the MHFA's previous financial commitments to the SHARP
properties. The lawsuit is complex and in its early stages, so no predictions
can be made at this time as to the ultimate outcome. In the meantime, the
Managing General Partner intends to continue to participate in the RSO's efforts
to negotiate a resolution of this matter with MHFA.
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 to the lower tier partnership. This new investor will
receive the remaining tax credits and a percentage of the losses for the
property going forward.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
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.
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 increased slightly and as of December 31, 1999 was
99%. Effective January 13, 2000, the Managing General Partner and Local General
Partner was 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 the last remaining Texas partnership, Gateway Village,
continued and resulted in the transfer of Gateway Village in May, 1999. For tax
purposes, the transfer event of Gateway Village resulted in both Section 1231
Gain and cancellation of indebtedness income, in addition to credit recapture of
approximately $2.40 per unit for the 1999 tax year.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(a)Exhibits - None
(b)Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended December 31, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: February 11, 2000 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. IV
By: Arch Street IV, Inc.,
its Managing General Partner
/s/Randolph G. Hawthorne
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 274,479
<SECURITIES> 825,856
<RECEIVABLES> 100,061
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 19,794,687
<DEPRECIATION> 000
<TOTAL-ASSETS> 37,813,748<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 18,902,530
<TOTAL-LIABILITY-AND-EQUITY> 37,813,748<F2>
<SALES> 000
<TOTAL-REVENUES> 1,707,630<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 2,208,139<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 591,819
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 1,756,524<F5>
<EPS-BASIC> 25.56
<EPS-DILUTED> 000
<FN>
<F1>Included in Total Assets: Investments in Local Limited Partnerships of
$15,038,687, Deferred charges, net of $398,881, Tenant security deposits of
$109,625, Mortgagee escrow deposits of $1,244,674 and other assets of $26,798.
<F2>Included in Total Liabilities and Equity: Mortgage notes payable of
$15,153,800, Accounts payable to affiliates of $2,108,437, Accounts payable and
accrued expenses of $179,774, Interest payable of $46,053, Tenant security
deposits payable of $99,501, Other Liabilities of $409,766 and Minority interest
in Local Limited Partnerships of $913,887. <F3>Total revenue includes: Rental of
$1,518,386, Investment of $53,784 and Other of $135,460. <F4>Included in Other
Expenses: Asset management fees of $136,273, General and administrative of
$306,019, Rental operations, exclusive of depreciation of $747,734, Bad debt of
$215,345, Property management fees of $76,847, Depreciation of $495,397 and
Amortization of $230,524. <F5>Net Income reflects: Equity in income of Local
Limited Partnerships of $302,428, Minority interest in losses of Local Limited
Partnerships of $147,498, Loss on liquidation of interest in Local Limited
Partnership of $6,486, Gain on transfer of assets of $218,408 and Gain on
transfer cancellation of indebtedness of $2,482,000.
</FN>
</TABLE>
