February 14 , 2005
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 December 31, 2004
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
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, 2004
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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
(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.
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Item 1. Financial Statements
Balance Sheet (Unaudited) - December 31, 2004 1
Statements of Operations (Unaudited) - For the Three and Nine
Months Ended December 31, 2004 and 2003 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 2004 3
Statements of Cash Flows (Unaudited) - For the Nine
Months Ended December 31, 2004 and 2003 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 10
PART II - OTHER INFORMATION
Items 1-6 11
SIGNATURE 12
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A Limited Partnership
BALANCE SHEET
December 31, 2004
(Unaudited)
Assets
Cash and cash equivalents $ 346,722
Marketable securities, at fair value 7,109
Investments in Local Limited Partnerships (Note 1) 9,578,057
Other assets 186
--------------
Total Assets $ 9,932,074
==============
Liabilities and Partners' Equity
Due to affiliate $ 1,147,507
Accrued expenses 43,886
--------------
Total Liabilities 1,191,393
--------------
General, Initial and Investor Limited Partners' Equity 8,740,599
Net unrealized gains on marketable securities 82
--------------
Total Partners' Equity 8,740,681
--------------
Total Liabilities and Partners' Equity $ 9,932,074
==============
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 Nine Months Ended December 31, 2004 and 2003
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
2004 2003 2004 2003
--------------- ------------- -------------- ---------------
Revenue:
Investment $ 1,454 $ 1,484 $ 4,093 $ 5,124
---------------- ------------- -------------- ---------------
Total Revenue 1,454 1,484 4,093 5,124
---------------- ------------- -------------- ---------------
Expenses:
Asset management fees, affiliates 57,721 56,645 174,239 169,935
General and administrative (includes
reimbursements to an affiliate in the
amounts of $84,079 and $48,746
in 2004 and 2003, respectively) 47,046 30,075 140,106 109,243
Provision for valuation of advances
to Local Limited Partnerships (Note 1) 73,076 - 73,076 40,000
Provision for valuation of investments
in Local Limited Partnerships (Note 1) - 1,060,283 - 1,060,283
Amortization 7,032 7,486 21,096 22,457
---------------- ------------- -------------- ---------------
Total Expenses 184,875 1,154,489 408,517 1,401,918
---------------- ------------- -------------- ---------------
Loss before equity in losses of
Local Limited Partnerships (183,421) (1,153,005) (404,424) (1,396,794)
Equity in losses of Local
Limited Partnerships (Note 1) (121,986) (211,512) (507,056) (1,103,538)
---------------- ------------- -------------- ---------------
Net Loss $ (305,407) $ (1,364,517) $ (911,480) $(2,500,332)
================ ============= ============== ===========
Net Loss allocated
General Partner $ (3,054) $ (13,645) $ (9,115) $(25,003)
Limited Partners (302,353) (1,350,872) (902,365) (2,475,329)
---------------- ------------- -------------- ---------------
$ (305,407) $ (1,364,517) $ (911,480) $ (2,500,332)
================ ============= ============== ===============
Net Loss per Limited
Partner Unit (36,497 Units) $ (8.28) $ (37.01) $ (24.72) $ (67.82)
================ ============= ============== ===============
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 Nine Months Ended December 31, 2004
(Unaudited)
Initial Investor Net
General Limited Limited Unrealized
Partner Partner Partners Gains Total
------------ ------------- ----------- ---------- ---------
Balance at March 31, 2004 $ (219,826) $ 100 $ 9,871,805 $ 520 $ 9,652,599
------------ --------- -------------- ----------- -------------
Comprehensive Loss:
Change in net unrealized gains
on marketable securities
available for sale - - - (438) (438)
Net Loss (9,115) - (902,365) - (911,480)
----------- --------- -------------- ----------- -------------
Comprehensive Loss (9,115) - (902,365) (438) (911,918)
----------- --------- -------------- ----------- -------------
Balance at December 31, 2004 $ (228,941) $ 100 $ 8,969,440 $ 82 $ 8,740,681
=========== ========= ============== =========== =============
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 Nine Months Ended December 31, 2004 and 2003
(Unaudited)
2004 2003
------------- -------------
Net cash used for operating activities $ (38,278) $ (48,128)
Net cash provided by investing activities 43,567 154,130
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Net increase in cash and cash equivalents 5,289 106,002
Cash and cash equivalents, beginning 341,433 203,002
------------- -------------
Cash and cash equivalents, ending $ 346,722 $ 309,004
============= =============
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, 2004. 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 September 30, 2004 and 2003.
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. The Fund's ownership
interest in the Local Limited Partnership is 99%, with the exception of
Springwood which is 79.20%, Hemlock Ridge which is 77%, and Pike Place and West
End Place which are 90%. The Fund may have negotiated or may negotiate options
with the Local General Partners to purchase or sell the Fund's interests in the
Properties at the end of the Tax Credit Compliance Period at nominal prices. In
the event that Properties are sold to third parties, proceeds will be
distributed according to the terms of each Local Limited Partnership agreement.
The following is a summary of investments in Local Limited Partnerships at
December 31, 2004:
Capital contributions and advances paid to Local Limited Partnerships $ 30,513,168
Cumulative equity in losses of Local Limited Partnerships (excluding
cumulative unrecognized losses of $2,046,597) (17,914,517)
Cumulative cash distributions received from Local Limited Partnerships (1,111,725)
-------------
Investments in Local Limited Partnerships before adjustments 11,486,926
Excess of investment costs over the underlying assets acquired:
Acquisition fees and expenses 1,048,010
Cumulative amortization of acquisition fees and expenses (280,444)
-------------
Investments in Local Limited Partnerships before impairment allowance 12,254,492
Reserve for valuation of investments in Local Limited Partnerships (2,676,435)
-------------
Investments in Local Limited Partnerships $ 9,578,057
=============
For the nine months ended December 31, 2004, the Fund advanced $73,076 to one of
the Local Limited Partnerships, all of which was impaired. The Fund has also
recorded an impairment allowance 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 nine
months ended December 31, 2004 is $849,733. For the nine months ended December
31, 2004, the Fund has not recognized $342,677 of equity in losses relating to
two Local Limited Partnerships where cumulative equity in losses and cumulative
distributions exceeded its total investment in the Local Limited Partnerships.
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
investment is analyzed to consider the Fund's ability to recover its carrying
value. If an other than temporary 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 December 31, 2004, the Fund had cash and cash equivalents of $346,722, as
compared to $341,433 at March 31, 2004. This increase is primarily attributable
to cash distributions received from Local Limited Partnerships. These increases
were partially offset by cash used for operations.
The 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 General Partner may increase or
decrease such Reserves from time to time, as it deems appropriate. At December
31, 2004, $353,831 of cash, cash equivalents and marketable securities has been
designated as Reserves.
To date, professional fees relating to various Property issues totaling
approximately $51,000 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 December 31, 2004, the Fund has
advanced approximately $1,248,000 to Local Limited Partnerships to fund
operating deficits.
The 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 operating deficits, if the General Partner deems
funding appropriate.
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)
To date, the Fund has used approximately $172,000 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 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 December 31, 2004, 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 nine months ended December 31, 2004.
Results of Operations
Three Month Period
For the three months ended December 31, 2004, the Fund's operations resulted in
a net loss of $305,406, as compared to $1,364,517 for the three months ended
December 31, 2003. The decrease in net loss is primarily attributable to a
decrease in provision for valuation of investments in Local Limited
Partnerships. The decrease in provision for valuation of investments in Local
Limited Partnerships is a result of the Fund recognizing non-temporary declines
in the carrying value of its investments in certain Local Limited Partnerships
for the three months ended December 31, 2003.
Nine Month Period
For the nine months ended December 31, 2004, the Fund's operations resulted in a
net loss of $911,480, as compared to $2,500,332 for the nine months ended
December 31, 2003. The decrease in net loss is primarily attributable to a
decrease in equity in losses of Local Limited Partnerships and a decrease in
provision for valuation of investments in Local Limited Partnerships. Equity in
losses of Local Limited Partnerships decreased due to an increase in
unrecognized losses in the current year for two Local Limited Partnerships whose
cumulative losses and distributions exceeded the Fund's total investment and an
increase in rental income at some of the Local Limited Partnerships. The
decrease in provision for valuation of investments in Local Limited Partneships
is a result of the Fund recognizing larger non-temporary declines in the
carrying value of its investment in certain Local Limited Partnerships for the
nine months ended December 31, 2003.
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 $1,243 per Limited Partner
Unit, with approximately $135 and $53 of Tax Credits expected to be generated
for 2004 and 2005, respectively. In the aggregate, actual and estimated Tax
Credits will enable the Fund to meet the objective 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
BOSTON FINANCIAL TAX CREDIT FUND VIII, A Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Portfolio Update (continued)
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 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.
On August 24, 2004, the Partnership and seven affiliates of the General Partners
(collectively, the "Partnerships"), and their general partners commenced
litigation against Everest Housing Investors 2, LLC and three other
Everest-related entities (collectively, the "Everest entries") in Massachusetts
state court, seeking a declaratory judgment that certain materials the Everest
entities sought to inspect are not "books and records" of the Partnerships and
that the Everest entities are in any case not entitled to inspect said
information under applicable partnership agreements, partnership law or
otherwise. On October 7, 2004, the Everest entities filed an answer and
counterclaimed against the Partnerships and their general partners, claiming
that they breached applicable partnership agreements, partnership law and their
fiduciary duties to the Everest entities by failing to make the purported "books
and records" available. The Partnerships maintain that the Everest entities is
not entitled to review the materials requested and/or use the materials in
secondary market transactions because, among other things, (i) the materials
requested are not "books and records" of the Partnerships, as that term is
defined in the relevant partnership agreements, (ii) the Everest entities does
not seek to review them for a proper purpose, and (iii) that selective
disclosure of the information to the Everest entries would give it an unfair
informational advantage in secondary market transactions and could potentially
violate federal and/or state securities laws. Because of the preliminary nature
of the Massachusetts litigation, including but not limited to the fact that no
discovery has taken place, no estimate of a potential outcome can be made at
this time.
Property Discussions
Most of the Properties in which the Fund has an interest have stabilized
operations and operate above break-even. Some Properties generate cash flow
deficits that the Local General Partners of those Properties fund through
project expense loans, subordinated loans or operating escrows. However, a few
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 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 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 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 had recapture
of previously taken Tax Credits of 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,
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)
2003, an affiliate of the General Partner replaced the Local General Partner.
The General Partner has continued to seek a permanent replacement Local General
Partner. A potential replacement Local General Partner has been identified and
it is anticipated that that the Local General Partner interest will be
transferred during the first quarter of 2005. In addition, while occupancy and
working capital levels have consistently remained adequate, the Property
generated significant operating deficits in 2001 and 2002. The Fund funded
slightly more than $1,000,000 of deficits from Fund reserves. The General
Partner anticipates that the recent increase in cash from operations will
continue and will be sufficient to fund the monthly debt service. Occupancy at
the Property averaged 92% during the first nine months of 2004 and debt service
coverage was at an appropriate level.
As previously reported, turnover at Green Wood Apartments, located in Gallatin,
Tennessee, had caused a decline in Property operations. Although the economy in
Gallatin is growing, the major employers of tenants qualifying for affordable
housing had layoffs. Rents were reduced in an effort to stabilize occupancy and
administrative and maintenance expenses have been higher than budgeted. The
Local General Partner has funded the operating deficits, enabling the Property
to remain current on its loan obligations. However, the Property's occupancy,
working capital and debt service coverage are all below levels adequate to
ensure breakeven operations. The General Partner will continue to closely
monitor Property operations.
As previously reported, Meadow Wood of Pella, located in Pella, Iowa, has
experienced operating deficits for the past several quarters due to reduced
revenues resulting from low occupancy and high expenses. Operating deficits have
continued in 2004. The Local General Partner has funded the operating deficit,
and the property has remained current on its debt service. Occupancy and working
capital deteriorated during the third quarter of 2004. The General Partner will
continue to closely monitor Property operations.
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 executive vice president 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
Item 1 Legal proceedings as discussed in Part I are incorporated herein
by reference.
Items 2-5 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 December 31, 2004
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: February 14, 2005 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