November 13, 2003
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 September 30, 2003
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-Q2.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 September 30, 2003
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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
- --------------------------------------------- --------------------------
(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 .
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) - September 30, 2003 1
Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 2003 and 2002 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 2003 3
Statements of Cash Flows (Unaudited) - For the Six
Months Ended September 30, 2003 and 2002 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Controls and Procedures 9
PART II - OTHER INFORMATION
Items 1-6 10
SIGNATURE 11
BOSTON FINANCIAL TAX CREDIT FUND VIII, A Limited Partnership
BALANCE SHEET
September 30, 2003
(Unaudited)
Assets
Cash and cash equivalents $ 258,374
Marketable securities, at fair value 75,073
Investments in Local Limited Partnerships (Note 1) 13,238,648
Other assets 931
--------------
Total Assets $ 13,573,026
==============
Liabilities and Partners' Equity
Due to affiliate $ 732,894
Accrued expenses 24,738
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Total Liabilities 757,632
--------------
General, Initial and Investor Limited Partners' Equity 12,814,200
Net unrealized gains on marketable securities 1,194
--------------
Total Partners' Equity 12,815,394
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Total Liabilities and Partners' Equity $ 13,573,026
==============
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 and Six Months Ended September 30, 2003 and 2002
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
--------------- ------------- ------------- ---------------
Revenue:
Investment $ 1,665 $ 3,851 $ 3,640 $ 20,537
Other - 100 - 1,360
---------------- ------------- -------------- ---------------
Total Revenue 1,665 3,951 3,640 21,897
---------------- ------------- -------------- ---------------
Expenses:
Asset management fees, affiliates 56,645 55,317 113,290 110,634
General and administrative (includes
reimbursements to an affiliate in the
amounts of $31,800 and $34,522
in 2003 and 2002, respectively) 46,326 39,788 79,168 76,113
Provision for valuation of advances
to Local Limited Partnerships - - 40,000 -
Amortization 7,486 7,486 14,971 14,972
---------------- ------------- -------------- ---------------
Total Expenses 110,457 102,591 247,429 201,719
---------------- ------------- -------------- ---------------
Loss before equity in losses of
Local Limited Partnerships (108,792) (98,640) (243,789) (179,822)
Equity in losses of Local
Limited Partnerships (Note 1) (484,813) (508,282) (892,026) (956,532)
---------------- ------------- -------------- ---------------
Net Loss $ (593,605) $ (606,922) $ (1,135,815) $(1,136,354)
================ ============= ============== ===============
Net Loss allocated
General Partner $ (5,936) $ (6,070) $ (11,358) $ (11,364)
Limited Partners (587,669) (600,852) (1,124,457) (1,124,990)
---------------- ------------- -------------- ---------------
$ (593,605) $ (606,922) $ (1,135,815) $ (1,136,354)
================ ============= ============== ===============
Net Loss per Limited
Partner Unit (36,497 Units) $ (16.10) $ (16.46) $ (30.81) $ (30.82)
=============== ============= ============= ===============
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 Six Months Ended September 30, 2003
(Unaudited)
Initial Investor Net
General Limited Limited Unrealized
Partner Partner Partners Gains Total
------------ ---------- -------------- ------------ -------------
Balance at March 31, 2003 $ (176,847) $ 100 $ 14,126,762 $ 3,206 $ 13,953,221
----------- --------- -------------- ----------- -------------
Comprehensive Loss:
Change in net unrealized gains
on marketable securities
available for sale - - - (2,012) (2,012)
Net Loss (11,358) - (1,124,457) - (1,135,815)
----------- --------- -------------- ----------- -------------
Comprehensive Loss (11,358) - (1,124,457) (2,012) (1,137,827)
----------- --------- -------------- ----------- -------------
Balance at September 30, 2003 $ (188,205) $ 100 $ 13,002,305 $ 1,194 $ 12,815,394
=========== ========= ============== =========== =============
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 Six Months Ended September 30, 2003 and 2002
(Unaudited)
2003 2002
------------- -------------
Net cash used for operating activities $ (43,861) $ (400,256)
Net cash provided by investing activities 99,233 512,114
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Net increase in cash and cash equivalents 55,372 111,858
Cash and cash equivalents, beginning 203,002 57,570
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Cash and cash equivalents, ending $ 258,374 $ 169,428
============= =============
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 Form 10-KSB for the year ended March 31, 2003. In the opinion of the
Managing General Partner, 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 June 30, 2003 and 2002.
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
September 30, 2003:
Capital contributions and advances paid to Local Limited Partnerships $ 30,440,092
Cumulative equity in losses of Local Limited Partnerships (15,560,040)
Cumulative cash distributions received from Local Limited Partnerships (956,421)
--------------
Investments in Local Limited Partnerships before adjustments 13,923,631
Excess of investment costs over the underlying assets acquired:
Acquisition fees and expenses 1,048,010
Cumulative amortization of acquisition fees and expenses (245,634)
-------------
Investments in Local Limited Partnerships before reserve for valuation 14,726,007
Reserve for valuation of investments in Local Limited Partnerships (1,487,359)
-------------
Investments in Local Limited Partnerships $ 13,238,648
==============
For the six months ended September 30, 2003, the Fund advanced $40,000 to one of
the Local Limited Partnerships, all of which was reserved. The Fund has recorded
a reserve for valuation for its investments in certain Local Limited
Partnerships in order to appropriately reflect the estimated net realizable
value of these investments.
The Fund's share of net losses of the Local Limited Partnerships for the six
months ended September 30, 2003 is $892,026.
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 Policies
The Fund's accounting policies 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.
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.
Liquidity and Capital Resources
At September 30, 2003, the Fund had cash and cash equivalents of $258,374, as
compared to $203,002 at March 31, 2003. 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 September 30, 2003, $333,447 of cash, cash equivalents and
marketable securities has been designated as Reserves.
To date, professional fees relating to various Property issues totaling
approximately $46,000 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 September 30, 2003, the Fund has
advanced approximately $1,175,000 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 Fund operating deficits, if the
Managing General Partner
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)
deems funding appropriate. To date, the Fund has used approximately $270,000 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.
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 September 30, 2003, 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 six months ended September 30, 2003.
Results of Operations
Three Month Period
For the three months ended September 30, 2003, the Fund's operations resulted in
a net loss of $593,605, as compared to $606,922 for the three months ended
September 30, 2002. The decrease in net loss is primarily attributable to a
small decrease in equity in losses of Local Limited Partnerships.
Six Month Period
For the six months ended September 30, 2003, the Fund's operations resulted in a
net loss of $1,135,815, as compared to $1,136,354 for the six months ended
September 30, 2002. The Fund's net loss change was negligible, as a slight
increase in provision for valuation of advances to Local Limited Partnerships
was offset by a slight decrease in equity in losses of Local Limited
Partnerships.
Portfolio Update
The Fund's investment portfolio consists of limited partnership interests in ten
Local Limited Partnerships, each of which owns and operates a multi-family
apartment complex and each of which has generated Tax Credits. Since inception,
the Fund has generated Tax Credits of approximately $1,101 per Limited Partner
Unit, with approximately $142, $134 and $52 of Tax Credits expected to be
generated for 2003, 2004 and 2005, respectively. In the aggregate, actual and
estimated Tax Credits will enable the Fund to meet the objectives specified in
the Fund's prospectus.
Properties that receive low income housing Tax Credits must remain in compliance
with rent restrictions and set aside requirements for at least 15 years from the
date the property is completed (the "Compliance Period"). Failure to do so would
result in the recapture of a portion of the Property's Tax Credits. Between 2008
and continuing through 2009, the Compliance Period of the ten Properties in
which the Fund has an interest will expire. It is unlikely that the Managing
General Partner will be able to dispose of the Fund's Local Limited Partnership
interests concurrently with the expiration of each Property's Compliance Period.
The Fund shall dissolve and its affairs shall be wound up upon the disposition
of the final Local Limited Partnership interest and other assets of the Fund.
Investors will continue to be Limited Partners, receiving K-1s and quarterly and
annual reports, until the Fund is dissolved.
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)
Several of the Properties in which the Fund has an interest 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 expense loans, subordinated loans or operating escrows. However, some
Properties have had 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 prior to the
expiration of the Compliance Period. Also, the Managing General Partner, in the
normal course of the Fund's business, may arrange for the future disposition of
its interest in certain Local Limited Partnerships. The following Property
discussions focus only on such Properties.
As previously reported, the Local General Partner of Live Oaks Plantation,
located in West Palm Beach, Florida, indicated a desire to transfer its interest
in the Local Limited Partnership to a replacement Local General Partner.
Accordingly, the Managing General Partner began working with the Local General
Partner to identify an acceptable replacement. Negotiations to replace the Local
General Partner were then delayed due to an audit by the Internal Revenue
Service ("IRS"). The audit focused 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 Local General Partner
filed an appeal of the report to the Washington D.C. office of the IRS. The
appeal was successful, and during April 2003 a settlement was reached whereby
the eligible basis was reduced by approximately $93,000. As a result, the Fund
will have recapture and a reduction of previously taken Tax Credits that will
amount to approximately $2 per Unit. Future Tax Credits will also be reduced by
approximately $0.25 per Unit.
Subsequent to reaching a settlement with the IRS, negotiations to replace the
Local General Partner resumed. Effective June 28, 2003, an affiliate of the
Managing General Partner replaced the Local General Partner. The Managing
General Partner continues to seek a permanent replacement Local General Partner.
As previously reported, turnover at Green Wood Apartments, located in Gallatin,
Tennessee, has caused a decline in Property operations. Although the economy in
Gallatin is growing, the major employers of tenants qualifying for affordable
housing have had layoffs. Rents have been reduced in an effort to stabilize
occupancy, but rental revenues and working capital levels have decreased. The
Local General Partner has funded the operating deficits, enabling the Property
to remain current on its loan obligations, but it is likely that the Fund will
need to use some of its Reserves to fund the Property's operating deficits.
Other Development
During the quarter ended September 30, 2003, Lend Lease Real Estate Investments,
Inc. sold its interest in, and association with, the General Partner and its
affiliated business unit, Housing and Community Investing ("HCI"), to Municipal
Mortgage and Equity, LLC ("Muni Mae"). Muni Mae is in the business of
originating, servicing and investing in multi-family housing. HCI will be
combined with Muni Mae's Midland subsidiary to operate under the name MMA
Financial.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A Limited Partnership
CONTROLS AND PROCEDURES
Controls and Procedures
Based on the Fund's evaluation as of the end of the period covered by this
report, the Fund's director has concluded that the Fund's disclosure controls
and procedures are effective to ensure that information required to be disclosed
in the reports that the Fund files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
There have been no significant changes in the Fund's internal controls or in
other factors that could significantly affect those controls subsequent to the
date of their evaluation.
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
31.1 Certification of Jenny Netzer pursuant to section
302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Jenny Netzer pursuant to section 906
of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended September 30, 2003
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: November 13, 2003 BOSTON FINANCIAL TAX CREDIT FUND VIII,
A LIMITED PARTNERSHIP
By: Arch Street VIII Limited Partnership,
its General Partner
/s/Jenny Netzer
Jenny Netzer
Executive Vice President
MMA Financial, LLC