August 14, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Financial Tax Credit Fund VIII, A Limited Partnership
Report on Form 10-QSB for the Quarter Ended June 30, 2002
File Number 0-26522
Dear Sir/Madam:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, filed herewith is a copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
TC8-Q1.DOC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-26522
Boston Financial Tax Credit Fund VIII, A Limited Partnership
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3205879
- ---------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 Arch Street, Boston, Massachusetts 02110-1106
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-3911
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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 .
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Balance Sheet (Unaudited) - June 30, 2002 1
Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 2002 and 2001 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 2002 3
Statements of Cash Flows (Unaudited) - For the Three
Months Ended June 30, 2002 and 2001 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II - OTHER INFORMATION
Items 1-6 9
SIGNATURE 10
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
BALANCE SHEET
June 30, 2002
(Unaudited)
Assets
Cash and cash equivalents $ 111,024
Marketable securities, at fair value 283,121
Investments in Local Limited Partnerships (Note 1) 16,107,155
Other assets 3,268
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Total Assets $ 16,504,568
==============
Liabilities and Partners' Equity
Accounts payable to affiliate $ 420,725
Accrued expenses 19,258
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Total Liabilities 439,983
--------------
General, Initial and Investor Limited Partners' Equity 16,057,201
Net unrealized gains on marketable securities 7,384
--------------
Total Partners' Equity 16,064,585
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Total Liabilities and Partners' Equity $ 16,504,568
===============
The accompanying notes are an integral part of
these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
------------- -------------
Revenue:
Investment $ 16,686 $ 21,702
Other 1,260 550
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Total Revenue 17,946 22,252
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Expenses:
Asset management fees, related party 55,317 54,446
General and administrative (includes reimbursements
to an affiliate in the amounts of $19,956 and
$14,165 in 2002 and 2001, respectively) 36,325 33,229
Provision for valuation of advances to Local Limited
Partnerships - 242,851
Amortization 7,486 7,486
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Total Expenses 99,128 338,012
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Loss before equity in losses
of Local Limited Partnerships (81,182) (315,760)
Equity in losses of Local Limited Partnerships (Note 1) (448,250) (464,692)
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Net Loss $ (529,432) $ (780,452)
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Net Loss allocated:
General Partner $ (5,294) $ (7,804)
Limited Partners (524,138) (772,648)
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$ (529,432) $ (780,452)
============= =============
Net Loss per Limited Partner Unit
(36,497 Units) $ (14.36) $ (21.17)
============= ==============
The accompanying notes are an integral part of
these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Three Months Ended June 30, 2002
(Unaudited)
Initial Investor Net
General Limited Limited Unrealized
Partner Partner Partners Gains Total
----------- --------- -------------- ----------- -------------
Balance at March 31, 2002 $ (150,481) $ 100 $ 16,737,014 $ 14,109 $ 16,600,742
----------- --------- -------------- ----------- -------------
Comprehensive Loss:
Change in net unrealized gains
on marketable securities
available for sale - - - (6,725) (6,725)
Net Loss (5,294) - (524,138) - (529,432)
----------- --------- -------------- ----------- -------------
Comprehensive Loss (5,294) - (524,138) (6,725) (536,157)
----------- --------- -------------- ----------- -------------
Balance at June 30, 2002 $ (155,775) $ 100 $ 16,212,876 $ 7,384 $ 16,064,585
=========== ========= ============== =========== =============
The accompanying notes are an integral part of
these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
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Net cash used for operating activities $ (338,338) $ (63,465)
Net cash provided by investing activities 391,792 126,949
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Net increase in cash and cash equivalents 53,454 63,484
Cash and cash equivalents, beginning 57,570 80,578
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Cash and cash equivalents, ending $ 111,024 $ 144,062
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The accompanying notes are an integral part of
these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
Notes to 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 accounting principles generally
accepted in the United States of America. These statements should be read in
conjunction with the financial statements and notes thereto included with the
Fund's Form10-KSB for the year ended March 31, 2002. In the opinion of
management, these financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the Fund'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 of the Fund has elected to report results of the
Local Limited Partnerships in which the Fund has a limited partnership interest,
on a 90 day lag basis because the Local Limited Partnerships report their
results on a calendar year basis. Accordingly, the financial information about
the Local Limited Partnerships that is included in the accompanying financial
statements is as of March 31, 2002 and 2001.
1. Investments in Local Limited Partnerships
The Fund has limited partnership interests in ten Local Limited Partnerships
which were organized for the purpose of owning and operating multi-family
housing complexes, all of which are government-assisted. Upon dissolution of the
Local Limited Partnerships, proceeds will be distributed according to the
respective Local Limited Partnership agreements.
The following is a summary of investments in Local Limited Partnerships at June
30, 2002:
Capital contributions and advances paid to Local Limited Partnerships $ 30,400,092
Cumulative equity in losses of Local Limited Partnerships (13,170,854)
Cumulative cash distributions received from Local Limited Partnerships (826,655)
------------- --
Investments in Local Limited Partnerships before adjustments 16,402,583
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 1,048,010
Accumulated amortization of acquisition fees and expenses (208,205)
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Investments in Local Limited Partnerships prior to reserve for valuation 17,242,388
Reserve for valuation of investments in Local Limited Partnerships (1,135,233)
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Investments in Local Limited Partnerships $ 16,107,155
=============
The Fund has provided a reserve for valuation for its investments in certain
Local Limited Partnerships because there is evidence of non-temporary declines
in the recoverable amount of these investments.
The Fund's share of net losses of the Local Limited Partnerships for the three
months ended June 30, 2002 is $448,250.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(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 Fund
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 Fund
believes the forward-looking statements are based on reasonable assumptions, the
Fund can give no assurance that its 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.
Accounting Polices
The Fund's accounting polices include those that relate to its recognition of
investments in Local Limited Partnerships using the equity method of accounting.
The Fund's policy is as follows:
The Fund accounts for its investments in Local Limited Partnerships using the
equity method of accounting because the Fund does not have control of 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 Fund's share of net income or loss and for cash distributions from the
Local Limited Partnerships; equity in income or loss of the Local Limited
Partnerships is included currently in the Fund 's operations. Under the equity
method, a Local Limited Partnership investment will not be carried below zero.
To the extent that equity in losses are incurred when the Fund's carrying value
of the respective Local Limited Partnership has been reduced to a zero balance,
the losses will be suspended and offset against future income. Income from Fund
investments where cumulative equity in losses plus cumulative distributions have
exceeded the total investment in Local Limited Partnerships will not be recorded
until all of the related unrecorded losses have been offset. To the extent that
a Local Limited Partnership with a carrying value of zero distributes cash to
the Fund, that distribution is recorded as income on the books of the Fund and
is included in "Other Revenue" in the accompanying financial statements.
Liquidity and Capital Resources
At June 30, 2002, the Fund had cash and cash equivalents of $111,024, as
compared to $57,570 at March 31, 2002. This increase is primarily attributable
to cash distributions received from Local Limited Partnerships and proceeds from
sales and maturities of marketable securities. These increases were partially
offset by cash used for operations.
The Managing General Partner initially designated 5% of the Gross Proceeds as
Reserves as defined in the Partnership Agreement. The Reserves were established
to be used for working capital of the Fund and contingencies related to the
ownership of Local Limited Partnership interests. The Managing General Partner
may increase or decrease such Reserves from time to time, as it deems
appropriate. At March 31, 2002, approximately $394,000 of cash, cash equivalents
and marketable securities has been designated as Reserves.
To date, professional fees relating to various Property issues totaling
approximately $29,000 have been paid from Reserves. In the event a Local Limited
Partnership encounters operating difficulties requiring additional funds, the
Fund's management might deem it in its best interest to voluntarily provide such
funds in order to protect its investment. As of June 30, 2002, the Fund has
advanced approximately $1,135,000 to Local Limited Partnerships to fund
operating deficits.
The Managing General Partner 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 Fund's
ongoing operations. Reserves may be used to fund Partnership operating deficits,
if the Managing General Partner deems funding appropriate. To date, the Fund has
used approximately $266,000 of Reserves to fund operations. If Reserves are not
adequate to cover the Fund's operations, the Fund will seek other financing
sources including, but not limited to, the deferral of Asset Management Fees
paid to an affiliate of the Managing General Partner or working with Local
Limited Partnerships to increase cash distributions.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
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Since the Fund invests as a limited partner, the Fund has no contractual duty to
provide additional funds to Local Limited Partnerships beyond its specified
investment. Thus, as of June 30, 2002, the Fund had no contractual or other
obligation to any Local Limited Partnership which had not been paid or provided
for.
Cash Distributions
No cash distributions were made during the three months ended June 30, 2002.
Results of Operations
For the three months ended June 30, 2002, the Fund's operations resulted in a
net loss of $529,432, as compared to $780,452 for the three months ended June
30, 2001. The decrease in net loss is primarily attributable to a decrease in
provision for valuation of investments in Local Limited Partnerships due to
advances made in the prior year to certain properties that required operating
funds.
Property Discussions
The Fund's investment portfolio consists of limited partnership interests in ten
Local Limited Partnerships, each of which own and operate a multi-family
apartment complex. A majority of the Properties have stabilized operations and
operate above break-even. A few Properties generate cash flow deficits that the
Local General Partners of those Properties fund through project expenses loans,
subordinated loans or operating escrows. However, some properties have
persistent operating difficulties that could either: i) have an adverse impact
on the Fund's liquidity; ii) result in their foreclosure or iii) result in the
Managing General Partner deeming it appropriate for the Fund to dispose of its
interest in the Local Limited Partnership. Also, the Managing General Partner,
in the normal course of the Fund's business, may desire to dispose certain Local
Limited Partnerships. The following Property discussion focuses only on such
Properties.
Live Oaks Plantation, located in West Palm Beach, Florida, has historically
generated operating deficits due to difficulty in attracting and maintaining
quality tenants. In addition, the Property's curb appeal has diminished due to
the deferral of certain maintenance and repair projects. During the fourth
quarter of 2000, the Local General Partner indicated a desire to transfer its
interest in the Local Limited Partnership to a replacement Local General
Partner. The General Partner believes that it would be in the best interests of
the Property to replace the Local General Partner. Accordingly, the General
Partner has been working with the Local General Partner to identify an
acceptable replacement. In conjunction with the potential transfer, the Local
General Partner agreed to replace his affiliated on-site management company, and
in February 2001, a new on-site management company began managing Property
operations. The Fund has also advanced a significant amount of Reserves to the
Local Limited Partnership to fund capital improvements and deferred maintenance
expenses. As a result of the change in site management and the capital
improvements made to the Property, the Property's operations have improved
significantly.
Live Oaks Plantation is undergoing an audit by the Internal Revenue Service
("IRS"). The audit's focus is on the tax treatment of certain items, such as
land improvements, impact fees, utility fees and developer fees. In April 2002,
the Florida office of the IRS issued their report indicating an eligible basis
reduction of approximately $1,000,000, which would reduce the amount of tax
credits and losses generated by the property. The Managing General Partner
believes that this is an aggressive stance taken by the Florida office of the
IRS given a recent memorandum issued by the Washington D.C. office of the IRS
that explicitly allowed the inclusion of impact fees in determining total
eligible basis. Impact fees represent approximately $470,000 of the reduction.
We anticipate that the Local General Partner will file an appeal of the IRS's
decision. As a result of the IRS audit, negotiations to replace the Local
General Partner have been delayed.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
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The Fund has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. Real estate experts
analyze the investments 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 a significant impairment in carrying value exists, a
provision to write down the asset to fair value will be recorded in the Fund's
financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 2002.
BOSTON FINANCIAL TAX CREDIT FUND VIII
(A Limited Partnership)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: August 14, 2002 BOSTON FINANCIAL TAX CREDIT FUND VIII,
A LIMITED PARTNERSHIP
By: Arch Street VIII Limited Partnership,
its General Partner
/s/Jenny Netzer
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Jenny Netzer
Principal, Head of Housing and
Community Investment