February 14, 2006
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Financial Qualified Housing Tax Credits L.P. IV
Report on Form 10-QSB for the Quarter Ended December 31, 2005
File Number 0-19765
Dear Sir/Madam:
Pursuant to the requirements of section 15(d) of the Securities Exchange Act of
1934, filed herewith a copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH4-Q3.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 December 31, 2005
--------------------------------------------
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
incorporation or organization) Identification No.)
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 QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Balance Sheet (Unaudited) - December 31, 2005 1
Statements of Operations (Unaudited) - For the Three and Nine
Months Ended December 31, 2005 and 2004 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 2005 3
Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 2005 and 2004 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Items 1-6 16
SIGNATURE 17
CERTIFICATIONS 18
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
BALANCE SHEET
December 31, 2005
(Unaudited)
Assets
Cash and cash equivalents $ 1,880,404
Investment securities, at fair value (Note 1) 2,472,920
Investments in Local Limited Partnerships (Note 2) 5,758,141
Other assets 20,380
---------------
Total Assets $ 10,131,845
===============
Liabilities and Partners' Equity
Accrued expenses $ 325,182
Deposit on sale 2,083
---------------
Total Liabilities 327,265
---------------
General, Initial and Investor Limited Partners' Equity 9,814,063
Net unrealized losses on investment securities (9,483)
---------------
Total Partners' Equity 9,804,580
---------------
Total Liabilities and Partners' Equity $ 10,131,845
===============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended December 31, 2005 and 2004
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
---------------- ---------------- ---------------- ---------------
Revenue
Investment $ 34,831 $ 14,326 $ 111,559 $ 22,177
Other 6,690 - 107,968 842,215
---------------- ---------------- ---------------- ---------------
Total Revenue 41,521 14,326 219,527 864,392
---------------- ---------------- ---------------- ---------------
Expenses:
Asset management fees, affiliate 34,548 45,977 103,632 137,933
Provision for valuation of advances
to Local Limited Partnerships (Note 2) 43,073 6,219 61,049 11,904
Provision for valuation of investments
in Local Limited Partnerships - - - 349,587
General and administrative
(includes reimbursement to affiliate
in the amounts of $84,446 and
$209,113 in 2005 and 2004,
respectively) 351,821 141,302 511,332 354,917
Amortization 7,125 6,018 21,374 26,358
---------------- ---------------- ---------------- ---------------
Total Expense 436,567 199,516 697,387 880,699
---------------- ---------------- ---------------- ---------------
Loss before equity in income (losses) of
Local Limited Partnerships and gain on
sale of investments in Local
Limited Partnerships (395,046) (185,190) (477,860) (16,307)
Equity in income (losses) of Local Limited
Partnerships (Note 2) (11,159) 114,898 (215,230) 102,793
Gain on sale of investments in Local
Limited Partnerships (Note 2) - - 4,167 -
---------------- ---------------- ---------------- ---------------
Net Income (Loss) $ (406,205) $ (70,292) $ (688,923) $ 86,486
================ ================ ================ ===============
Net Income (Loss) allocated:
General Partners $ (4,062) $ (703) $ (6,889) $ 865
Limited Partners (402,143) (69,589) (682,034) 85,621
---------------- ---------------- ----------------- ---------------
$ (406,205) $ (70,292) $ (688,923) $ 86,486
================ ================ ================ ===============
Net Income (Loss) Per Limited Partner
Unit (68,043) Units $ (5.91) $ (1.02) $ (10.02) $ 1.26
================ ================ ================ ===============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Nine Months Ended December 31, 2005
(Unaudited)
Initial Investor Net
General Limited Limited Unrealized
Partners Partner Partners Losses Total
Balance of March 31, 2005 $ (486,057) $ 5,000 $ 10,984,043 $ - $ 10,502,986
-------------- -------------- -------------- ---------------- --------------
Comprehensive Loss:
Change in net unrealized
losses on investment
securities available for sale - - - (9,483) (9,483)
Net Loss (6,889) - (682,034) - (688,923)
-------------- -------------- -------------- -------------- -------------
Comprehensive Loss (6,889) - (682,034) (9,483) (698,406)
-------------- -------------- -------------- -------------- -------------
Balance at December 31, 2005 $ (492,946) $ 5,000 $ 10,302,009 $ (9,483) $ 9,804,580
============== ============== ============== ============== =============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31, 2005 and 2004
(Unaudited)
2005 2004
------------- --------
Net cash used for operating activities $ (226,646) $ (989,889)
Net cash provided by (used for) investing activities (2,369,153) 4,999,274
------------- -------------
Net increase (decrease) in cash and cash equivalents (2,595,799) 4,009,385
Cash and cash equivalents, beginning 4,476,203 560,614
------------- -------------
Cash and cash equivalents, ending $ 1,880,404 $ 4,569,999
============= =============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE 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
Partnership's Form 10-KSB for the year ended March 31, 2005. 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 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 of the Partnership has elected to report results of
the Local Limited Partnerships in which the Partnership 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 of the Local Limited Partnerships that is included in the
accompanying financial statements is as of September 30, 2005 and 2004.
1. Investment Securities
The Partnership's investment securities are classified as "Available for Sale"
and are carried at fair value as reported by the brokerage firms at which they
are held, with unrealized gains or losses excluded from earnings and reported as
a separate component of partner's equity.
2. Investments in Local Limited Partnerships
The Partnership has limited partnership interests in fifteen Local Limited
Partnerships which were organized for the purpose of owning and operating
multi-family housing complexes, all of which are government-assisted. The
Partnership's ownership interest in each Local Limited Partnership is 99%,
except for Leawood Manor where the Partnership's ownership interest is 89%. The
Partnership may have negotiated or may negotiate options with the Local General
Partners to purchase or sell the Partnership's interests in the Local Limited
Partnerships at the end of the Compliance Period at nominal prices. In the event
that Properties are sold to a third party or upon dissolution of the Local
Limited Partnerships, 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, 2005:
Capital contributions and advances paid to Local Limited Partnerships
and purchase price paid to withdrawing partners of Local Limited Partnerships $ 38,147,307
Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
unrecognized losses of $14,133,501) (21,399,559)
Cumulative cash distributions received from Local Limited Partnerships (9,169,003)
---------------
Investments in Local Limited Partnerships before adjustments 7,578,745
Excess investment costs over the underlying assets acquired:
Acquisition fees and expenses 3,092,293
Cumulative amortization of acquisition fees and expenses (1,026,824)
---------------
Investments in Local Limited Partnerships before impairment allowance 9,644,214
Impairment allowance on investments in Local Limited Partnerships (3,886,073)
---------------
Investments in Local Limited Partnerships $ 5,758,141
===============
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Investments in Local Limited Partnerships (continued)
For the nine months ended December 31, 2005, the Partnership advanced $61,049 to
one of the Local Limited Partnerships, all of which was impaired. The
Partnership has 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 Partnership's share of the net losses of the Local Limited Partnerships for
the nine months ended December 31, 2005 is $1,064,695. For the nine months ended
December 31, 2005, the Partnership has not recognized $1,509,588 of equity in
losses relating to certain Local Limited Partnerships in which cumulative equity
in losses and cumulative distributions exceeded its total investments in these
Local Limited Partnerships. Previously unrecognized losses of $660,123 were
included in losses recognized in the nine months ended December 31, 2005.
During the nine months ended December 31, 2005, the Partnership received
additional proceeds from the sale of its interest in two Local Limited
Partnerships which occurred during the year ended March 31, 2005, resulting in
the recognition of a net gain of $4,167.
3. Significant Equity Investee
The following Local Limited Partnerships invested in by the Partnership
represent more than 20% of the Partnership's total assets or equity as of either
December 31, 2005 or 2004 or net losses for the three months ended either
December 31, 2005 or 2004. The following financial information represents the
performance of these Local Limited Partnerships for the three months ended
December 31, 2005 and/or 2004:
Leawood Associates, L.P. A Limited Partnership 2005 2004
------------- -------------
Revenue $ N/A $ 411,784
Net Loss $ N/A $ (182,903)
Allentown Towne House, L.P.
Revenue $ N/A $ 337,726
Net Loss $ N/A $ (34,678)
Prince Street Towers L.P. A Limited Partnership
Revenue $ N/A $ 448,262
Net Loss $ N/A $ (118,383)
Sencit Towne House L.P.
Revenue $ 13,784 $ 487,810
Net Income $ (44,151) $ 37,691
Lakeside Square Limited Partnership an Illinois
Limited Partnership
Revenue $ N/A $ 1,012,553
Net Income $ N/A $ 390,393
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 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.
Critical Accounting Policies
The Partnership's accounting policies include those that relate to its
recognition of investments in Local Limited Partnerships using the equity method
of accounting. The Partnership's policy is as follows:
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting. Under the equity method, the investment is
carried at cost, adjusted for the Partnership'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
Partnership'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 Partnership'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 Local Limited
Partnerships, 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 Partnership, that distribution is recorded as income on
the books of the Partnership and is included in "Other Revenue" in the
accompanying financial statements.
The Partnership has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. The investments are
reviewed for impairment whenever events or changes in circumstances indicate
that the Partnership may not be able to recover its carrying value. If an other
than temporary impairment in carrying value exists, a provision to reduce the
asset to fair value will be recorded in the Partnership's financial statements.
In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"),
"Consolidation of Variable Interest Entities", which provides new criteria for
determining whether or not consolidation accounting is required. The
Interpretation, which was modified in December 2003 in order to address certain
technical and implementation issues, requires the Partnership to consider
consolidation or provide additional disclosures of financial information for
Local Limited Partnerships meeting the definition of a Variable Interest Entity
("VIE"). The Partnership was required to apply the Interpretation to the Local
Limited Partnerships meeting the definition of a VIE as of March 31, 2005.
This Interpretation requires consolidation by the Partnership of the Local
Limited Partnerships' assets and liabilities and results of operations if the
Partnership determined that the Local Limited Partnerships were VIEs and that
the Partnership was the "Primary Beneficiary". Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other investors. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the Interpretation
and concluded that it is not the Primary Beneficiary of any of the Local Limited
Partnerships that meet the definition of a VIE. The Partnership is involved with
those VIEs as a non-controlling limited partner equity holder. The Partnership
is required to disclose its maximum exposure to economic and financial statement
losses as a result of its involvement with the VIEs. The Partnership's exposure
to economic and financial statement losses from the VIEs is limited to its
investment in the VIEs ($5,758,141 at December 31, 2005). The Partnership may be
subject to additional losses to the extent of any financial support that the
Partnership voluntarily provides in the future.
<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 (continued)
Liquidity and Capital Resources
The Partnership had a decrease in cash and cash equivalents of $2,595,799 from
$4,476,203 at March 31, 2005 to $1,880,404 at December 31, 2005. The decrease is
primarily attributable to purchases of investment securities, advances to one
Local Limited Partnership and cash used for operations partially offset by
maturities of investment securities and cash distributions received from Local
Limited Partnerships. Cash used for operations includes $138,173 paid to the
Managing General Partner for accrued asset management fees.
The Managing General Partner originally 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. The Managing General
Partner may increase or decrease such Reserves from time to time, as it deems
appropriate. At December 31, 2005, $4,353,324 of cash, cash equivalents and
investment securities has been designated as Reserves.
To date, professional fees relating to various Property issues totaling
approximately $1,481,000 have been paid from Reserves. To date, Reserve funds in
the amount of approximately $304,000 also have been used to make additional
capital contributions to one Local Limited Partnership. In the event a Local
Limited Partnership encounters operating difficulties requiring additional
funds, the Managing General Partner might deem it in its best interest to
voluntarily provide such funds in order to protect its investment. As of
December 31, 2005, the Partnership has advanced approximately $1,372,000 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
Partnership's ongoing operations. Reserves may be used to fund Partnership
operating deficits, if the Managing General Partner deems funding appropriate.
If Reserves are not adequate to cover the Partnership's operations, the
Partnership will seek other financing sources including, but not limited to, the
deferral of Asset Management Fees paid to an affiliate of the Managing General
Partner or working with Local Limited Partnerships to increase cash
distributions. To date, the Partnership has used approximately $4,789,000 of
operating funds to replenish Reserves.
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, 2005, 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 to Limited Partners during the nine months ended
December 31, 2005. During 2006, the Managing General Partner will continue to
monitor the Partnership's Reserve levels to determine whether amounts of
available cash, due in large part to proceeds from the disposition of Local
Limited Partnerships, exceed reasonably necessary levels. If so, a distribution
to Limited Partners may be warranted. However, there can be no assurances as to
the amounts or timing of such a distribution.
Results of Operations
Three Month Period
The Partnership's results of operations for the three months ended December 31,
2005 resulted in a net loss of $406,205 as compared to a net loss of $70,292 for
the same period in 2004. The increase in net loss is primarily attributable to
an increase in general and administrative expenses, a decrease in equity in
income and an increase in provisions for valuation of advances to Local Limited
Partnerships, partially offset by an increase in investment revenue and a
decrease in asset management fees. General and administrative costs increased
primarily due to an increase in legal expenses associated with litigation in
which the Partnership is currently involved, partially offset by a decrease in
charges due to an affiliate of the Managing General Partner for operations and
administrative expenses necessary for the operation of the Partnership. The
decrease in equity in income of Local Limited Partnerships is
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Three Month Period (continued)
primarily due to an increase in unrecognized losses by the Partnership of Local
Limited Partnerships with carrying values of zero. The increase in provision for
valuation of advances to Local Limited Partnerships is the result of an increase
in advances made to one Local Limited Partnership in 2005, as compared to the
same three month period of 2004. The increase in investment revenue is primarily
attributable to an increase in investment securities arising from sale and
refinancing proceeds received in 2005 and the Partnership investing in more
lucrative securities. The decrease in asset management fees is due to the
Partnership's sale of interest in seven Local Limited Partnerships during the
year ended March 31, 2005; since asset management fees are charged per Local
Limited Partnership, the previous year's sales reduced the current year's
charges.
Nine Month Period
The Partnership's results of operations for the nine months ended December 31,
2005 resulted in a net loss of $688,923 as compared to net income of $86,486 for
the same period in 2004. The decrease in net income is primarily attributable to
a decrease in other revenue, a decrease in equity in income of Local Limited
Partnerships, an increase in general and administrative expenses and an increase
in provision for valuation of advances to Local Limited Partnerships, partially
offset by a decrease in provision for valuation of investments in Local Limited
Partnerships, an increase in investment revenue and a decrease in asset
management fees. The decrease in other revenue is primarily due to a decrease in
distributions from Local Limited Partnerships with carrying values of zero. The
decrease in equity in income of Local Limited Partnerships is primarily due an
increase in unrecognized losses by the Partnership of Local Limited Partnerships
with carrying values of zero. General and administrative expenses increased due
to an increase in legal expenses associated with litigation in which the
Partnership is currently involved, partially offset by a decrease in charges due
to an affiliate of the Managing General Partner for operations and
administrative expenses necessary for the operation of the Partnership. The
increase in provision for valuation of advances to Local Limited Partnerships is
the result of an increase in advances made to one Local Limited Partnership in
2005, as compared to the same period of 2004. The decrease in provision for
valuation of investments in Local Limited Partnerships is due to the Partnership
recording an impairment allowance for its investments in certain Local Limited
Partnerships in the prior year. The increase in investment revenue is primarily
attributable to an increase in investment securities arising from sale and
refinancing proceeds received in 2005 and the Partnership investing in more
lucrative securities. The decrease in asset management fees is due to the
Partnership's sale of interest in seven Local Limited Partnerships during the
year ended March 31, 2005; since asset management fees are charged per Local
Limited Partnership, the previous year's sales reduced the current year's
charges.
Portfolio Update
As of December 31, 2005, the Partnership's investment portfolio consisted of
limited partnership interests in fifteen Local Limited Partnerships, each of
which owns and operates a multi-family apartment complex and each of which has
generated Tax Credits. The Partnership's interest in one Local Limited
Partnership was transferred on January 1, 2006. Since inception, the Partnership
has generated Tax Credits, net of recapture, of approximately $1,287 per Limited
Partner Unit. The aggregate amount of Tax Credits generated by the Partnership
is consistent with the objective specified in the Partnership's prospectus.
Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set-aside requirements for at least 15 years from the
date the property is completed. Failure to do so would result in recapture of a
portion of the property's Tax Credits. The Compliance Period of the fourteen
remaining Properties in which the Partnership has an interest either have
already expired or will expire by December 31, 2006. The Managing General
Partner has negotiated agreements that will ultimately allow the Partnership to
dispose of its interest in five Local Limited Partnerships. It is unlikely that
the disposition of any of these Local Limited Partnership interests will
generate any material cash distributions to the Partnership.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Portfolio Update (continued)
The Managing General Partner will continue to closely monitor the operations of
the Properties during the Compliance Period and will formulate disposition
strategies with respect to the Partnership's remaining Local Limited Partnership
interests. It is unlikely that the Managing General Partner's efforts will
result in the Partnership disposing of all of its remaining Local Limited
Partnership interests concurrently with the expiration of each Property's
Compliance Period. The Partnership shall dissolve and its affairs shall be wound
up upon the disposition of the final Local Limited Partnership interest and
other assets of the Partnership. Investors will continue to be Limited Partners,
receiving K-1s and quarterly and annual reports, until the Partnership is
dissolved.
On or about July 13, 2004, Park G.P., Inc. ("Park") commenced litigation against
the Partnership and its purported general partners (collectively, the
"Defendants") in Clay County, Missouri (the "Missouri Action"), claiming that
the Defendants breached the relevant partnership agreement and their fiduciary
duties owed to Park by, among other things, failing to permit inspection of
certain alleged "books and records" of the Partnership. On or about October 7,
2004, Park sought leave of the court to amend its petition to include claims for
inspection of the alleged "books and records" against Boston Financial Qualified
Housing Tax Credits L.P., Boston Financial Qualified Housing Tax Credits L.P.
II, Boston Financial Qualified Housing Tax Credits L.P. III, Boston Financial
Qualified Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund Plus, A
Limited Partnership, Boston Financial Tax Credit Fund VII, A Limited
Partnership, and their purported general partners (collectively, the "New
Defendants"). On November 15, 2004, the court granted the requested amendment to
the petition. On or about October 8, 2004, Park moved the court for entry of a
temporary restraining order (a "TRO") compelling the Defendants and the New
Defendants to turn over the alleged "books and records" in conjunction with a
transaction Park was proposing entering into. On October 12, 2004, the court
denied Park's request for a TRO.
In October 2005, Park again sought leave of the court in the Missouri Action to
amend its petition, claiming that the Defendants were in violation of the
Partnership Agreement by disposing of interests in Local Limited Partnerships
following expiration of the Local Limited Partnerships' applicable Compliance
Period(s) without first obtaining limited partner consent. On or about October
11, 2005, Park moved the court for entry of a TRO prohibiting the Defendants
from entering into any agreement to sell, transfer or otherwise convey any
interest in Local Limited Partnerships. On October 14, 2005, the court denied
Park's request for a TRO. In December 2005, the court granted Park's request to
amend its petition, and the case remains in discovery.
The Defendants and New Defendants maintain that Park is not entitled to review
the alleged "books and records" requested and/or use the materials in secondary
market transactions because, among other things: (i) they are not "books and
records" of the relevant partnerships; (ii) Park does not seek to review them
for a proper purpose; and (iii) selective disclosure of the information to Park
would give it an unfair informational advantage in secondary market transactions
and may violate federal and/or state securities laws. Likewise, the Defendants
maintain that the Partnership may continue to periodically dispose of its
interests in Local Limited Partnerships because, among other things, said
dispositions do not constitute the sale "at one time" of "all or substantially
all of the assets of the partnership" pursuant to Section 5.4.2 of the
Partnership Agreement. The Defendants and New Defendants accordingly intend on
defending against all of the aforementioned claims vigorously. These entities
have not, however, formed an opinion that an unfavorable outcome is either
probable or remote. Therefore, their counsel refrains from expressing an opinion
as to the likely outcome of the case or the range of any loss.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Portfolio Update (continued)
On October 27, 2005, Bond Purchase, L.L.C. ("Bond"), an entity affiliated with
Park, commenced litigation in the District Court for Johnson County, Kansas
against the Partnership, its purported general partners (collectively, the "QH
IV Defendants"), Leawood Associates, L.P. and BF Leawood Limited Partnership,
claiming that, among other things: (i) section 5.4.2 of the Partnership
Agreement prohibits the QH IV Defendants from engaging in their plan to dispose
of the Partnership's interests in Local Limited Partnerships; (ii) the QH IV
Defendants violated the Partnership Agreement by failing to submit Bond's
request to amend the Partnership Agreement to the Partnership's limited partners
for a vote, instead calling a meeting; (iii) the QH IV Defendants breached the
Partnership Agreement by, among other things, failing to permit inspection of
certain alleged "books and records" of the Partnership; and (iv) the QH IV
Defendants have violated their fiduciary duties owed to Bond. On January 6,
2006, Bond filed a motion to voluntarily dismiss its lawsuit without prejudice.
The QH IV Defendants anticipate that the motion to dismiss will be granted.
On August 24, 2004, the Partnership, Boston Financial Qualified Housing Tax
Credits L.P., Boston Financial Qualified Housing Tax Credits L.P. II, Boston
Financial Qualified Housing Tax Credits L.P. III, Boston Financial Qualified
Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund Plus, A Limited
Partnership, Boston Financial Tax Credit Fund VII, A Limited Partnership, and
Boston Financial Tax Credit Fund VIII, A Limited Partnership (collectively, the
"Partnerships"), and their general partners commenced litigation against Everest
Housing Investors 2, LLC ("Everest 2") and several other Everest-related
entities (collectively , the "Everest Entities") 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 counterclaim against the
Partnerships and their purported 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. On January 12, 2005, the Partnerships served a motion to amend their
complaint to, among other things, add a claim based on Everest 2's breach of a
November 24, 2003 letter agreement which compelled Everest 2 to keep
confidential certain information contemporaneously disseminated by four of the
Partnerships to Everest 2. Having received no opposition within the specified
time, the Partnerships filed the motion to amend with the proposed first amended
complaint on January 31, 2005. The Court has granted this Motion, and the
discovery process is continuing.
The Partnerships maintain that the Everest Entities are not entitled to review
the materials requested and/or use the materials in secondary market
transactions because, among other things: (i) they are not "books and records"
of the Partnerships; (ii) the Everest Entities do not seek to review them for a
proper purpose; and (iii) selective disclosure of the information to the Everest
Entities would give them an unfair informational advantage in secondary market
transactions and may violate federal and/or state securities laws. The
Partnerships have not formed an opinion that an unfavorable outcome is either
probable or remote. Therefore, the Partnerships' counsel refrains from
expressing an opinion as to the likely outcome of the case or the range of any
loss.
On or about October 3, 2005, the Partnership and its general partners commenced
litigation against Park in Suffolk Superior Court, Massachusetts and requested
the court to issue a declaration that the Partnership and its general partners
were not in violation of section 5.4.2 of the Partnership Agreement by virtue of
its periodic disposition of interests in Local Limited Partnerships following
expiration of the Local Limited Partnerships' applicable Compliance Period(s).
In November 2005, the plaintiffs amended the complaint to include Bond as a
defendant and to claim: (i) that the plaintiffs need not furnish the purported
"books and records" of the Partnership requested by Bond, since (among other
things) Bond's request is clearly designed to elicit information concerning the
assets and operations of the Local Limited Partnerships; and (ii) that Park and
Bond intentionally and improperly took action to undermine the sale of Leawood
Manor, a Kansas property, resulting in the withdrawal of the highest bid and
depriving the Partnership of an economic opportunity.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Portfolio Update (continued)
On December 19, 2005, Park and Bond served a motion to dismiss the amended
complaint. The plaintiffs served an opposition to that motion to dismiss on or
about January 20, 2006. The plaintiffs also likely will be serving a motion for
summary judgment seeking to obtain a declaration from the court that (i) the
plaintiffs are not acting in violation of the Partnership Agreement by
periodically disposing of interests in Local Limited Partnerships without
limited partner consent and (ii) Bond is not entitled to access to the purported
"books and records" that it has requested.
Property Discussions
Most of the Properties in which the Partnership has an interest have stabilized
operations and operate above breakeven. 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 Partnership's liquidity; ii) result in their
foreclosure; or iii) result in the Managing General Partner deeming it
appropriate for the Partnership 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 Partnership'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 Green Tree Village, located
in Greenville, Georgia, expressed to the Managing General Partner some concerns
over the long-term financial health of the Property. In response to these
concerns and to reduce possible future risk, the Managing General Partner
entered into a put agreement with the Local General Partner in which the
Partnership has the right to ultimately transfer ownership of the Local Limited
Partnership to the Local General Partner for a nominal price after the
expiration of the Compliance Period. The Managing General Partner currently has
an agreement to transfer its interest in the Local Limited Partnership to the
Local General Partner for $4,000, or $0.04 per Unit. This transfer will be
consummated upon receipt of these proceeds and is projected to result in taxable
income of approximately $207,000, or $2 per Unit. The Property has generated all
of its Tax Credits and the Compliance Period ended on December 31, 2005.
As previously reported, the Managing General Partner negotiated an agreement
with an unaffiliated entity to have the ability to transfer its interest in
Orchard View, located in Gobles, Michigan, to the unaffiliated entity or its
designee. The Managing General Partner had the right to put its interest in the
Local Limited Partnership at any time in exchange for a contingent note that
granted the Partnership 50% of all future net cash receipts from such Local
Limited Partnership interest. Effective January 1, 2006, the Partnership put its
interest in Orchard View to an unaffiliated entity for approximately $2,100 in
lieu of the Partnership carrying a remaining interest in the form of a
contingent note. This transfer is projected to result in taxable income of
approximately $299,000, or $4 per Unit. The Compliance Period for the Property
ended on December 31, 2005. The Partnership no longer has an interest in this
Local Limited Partnership.
As previously reported, an IRS audit of the 1993 tax return for the Bentley
Court Local Limited Partnership questioned the treatment of certain items and
had findings of non-compliance in 1993. The IRS then expanded the scope of the
audit to include the 1994 and 1995 tax returns. As a result, the IRS disallowed
the Property's Tax Credits for each of these years. On behalf of the
Partnership, the Managing General Partner retained counsel to appeal the IRS's
findings in order to minimize the loss of Tax Credits. This administrative
appeal has been unsuccessful and the IRS continues to take the position of
disallowing Tax Credits for 1993, 1994 and 1995, a total of approximately
$2,562,000, or $38 per Unit, not including interest. Based on advice of tax
counsel, the Managing General Partner recently determined to concede the
disallowance of tax credits for those three years.
In addition, the Local General Partner received formal notification that the IRS
was expanding its claims to recapturing approximately $500,000 of Tax Credits
deducted in 1990, 1991 and 1992, or $7 per Unit, not including interest. Based
on advice of tax counsel, the Managing General Partner has determined to
continue to challenge the
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
IRS's findings with respect to this $500,000 of recapture. A trial was held on
November 28, 2005, and the case is currently pending before the United States
Tax Court. Final briefs will be filed on March 1, 2006. After that filing it is
expected that an opinion from the court will be issued by approximately the fall
of 2006. It is possible, but unlikely at this point, that the IRS will further
expand its claims for additional amounts with respect to other years. Counsel
has advised that the statute of limitations expired for the tax years 1996, 1997
and 1998. The Managing General Partner is currently considering its options
including a possible settlement with the IRS. A Partnership level settlement
could raise certain complications because a portion of the limited partnership
ownership has changed since the tax years in question as a result of Unit
transfers. In other words, not all current Unit holders are subject to the tax
liabilities associated with Bentley Court. The Managing General Partner will
study this issue to determine whether a full or partial Partnership level
settlement is appropriate. The issue may be moot because to date, the IRS has
not expressed any interest in such a settlement. Absent a settlement, it is
anticipated that the IRS will contact Limited Partners directly for any
adjustments that need to be made to returns for those years. Subject to the
considerations stated above, it is possible that the Managing General Partner
may decide to use additional Partnership Reserves or sell Bentley Court to
generate proceeds that may be used in connection with the tax liabilities
described above.
As previously reported, in February 1997, due to concerns about the Property's
long-term viability, the Managing General Partner consummated a transfer of 50%
of the Partnership's interest in capital and profits of BK Apartments, located
in Jamestowne, North Dakota, to the Local General Partner. The Property
generated its final year of Tax Credits in 2001, and the Partnership retained
its full share of the Property's Tax Credits through such time period. The Local
General Partner subsequently transferred its general partner interest to a new,
nonprofit general partner. The Managing General Partner also has the right to
put the Partnership's remaining interest to the new Local General Partner any
time after December 1, 2001. In addition, the new Local General Partner now has
the right to call the remaining interest. The Compliance Period expired on
December 31, 2005. The Property operated above breakeven for the nine months
ended December 31, 2005.
As previously reported, although the Chicago, Illinois neighborhood in which
46th & Vincennes is located has improved in the last few years, potential
tenants are reluctant to occupy the Property due to its location and curb
appeal. As a result, maintaining occupancy, and therefore revenues, continues to
be an issue, and debt service coverage and working capital remain below
appropriate levels as of September 30, 2005. A recent site visit by the Managing
General Partner found the Property in need of repair, as it suffers from
significant deferred maintenance. In addition, the Managing General Partner
believes that the Local General Partner and its affiliated management company
are not adequately performing their responsibilities with respect to the
Property. The Managing General Partner has expressed these concerns to the Local
General Partner and will continue to closely monitor the Property's operations.
Advances from the Local General Partner have enabled the Property to stay
current on its loan obligations.
As previously reported, during 1994 the Local General Partner of Dorsett
Apartments, located in Philadelphia, Pennsylvania, transferred its interest in
the Local Limited Partnership. The IRS subsequently conducted a compliance audit
of the Property and took the position that the Property is subject to recapture
due to non-compliance issues. The Managing General Partner disagrees with the
IRS. In the opinion of the Managing General Partner, there is a risk that the
Property and the Partnership could suffer significant Tax Credit recapture.
However, it is not possible to quantify the potential amount at this time.
Further, the Property suffered from poor location and security issues. Vandalism
caused an increase in maintenance and repair expenses and negatively affected
the Property's occupancy levels and tenant profile, causing debt service
coverage and working capital to drop below appropriate levels. In 2003, the
Managing General Partner and the Local General Partner began to pursue
disposition options of the Partnership's interest in the Local Limited
Partnership. On September 21, 2004, the Property was sold. The Partnership
received $25,000 in sales proceeds in December 2004 and received an additional
$50,000 in February 2005. The Partnership continued to have an interest in this
Local Limited
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
Partnership until January 1, 2005, at which time the Property's Compliance
Period expired, and the Partnership's interest was fully transferred. The sale
resulted in a taxable loss of approximately $89,000, or $1 per Unit. The
Managing General Partner, in accordance with and as permitted by the Partnership
Agreement, retained the entire amount of net proceeds in Reserves.
As previously reported, the Managing General Partner negotiated an agreement to
transfer the Local General Partner interest in West Pine, located in Findlay,
Pennsylvania, to an affiliate of the Allegheny County Housing Authority
("ACHA"), contingent upon receiving approval from the U.S. Department of Housing
and Urban Development ("HUD"). HUD approval was received, and the Local General
Partner interest was transferred on October 17, 2003. In addition, the ACHA had
informed the Managing General Partner of its interest in acquiring the
Partnership's interest in the Local Limited Partnership, pending their
assumption of the Local General Partner interest. Concurrent with the
replacement of the Local General Partner, another ACHA affiliate acquired 30% of
the Partnership's limited partner interest in the Local Limited Partnership. As
part of this transaction, the Partnership acquired a put option for the
remaining 70% exercisable for $1 upon the expiration of the Compliance Period on
December 31, 2006. West Pine generated its final year of Tax Credits in 2001.
As previously reported, Carolina Woods, located in Greensboro, North Carolina,
had experienced decreasing occupancy since early 2003. The Local General Partner
replaced its own management agent affiliate with a third party local management
agent that, in an effort to increase occupancy, evicted several tenants for
non-payment. Throughout the three month period ended September 30, 2005
occupancy was 90%. Although revenues, debt service coverage and working capital
levels remain favorable, the Property, due to high operating costs, continues to
operate at a below breakeven level as of September 30, 2005. The Local General
Partner has advanced funds as necessary to ensure the Property remains current
on its debt service obligations. The Property's Compliance Period expired on
December 31, 2004 and therefore poses minimal risk to the Partnership. The
Managing General Partner anticipates that the Partnership's interest in the
Local Limited Partnership will be transferred upon the sale of the Property to
an unaffiliated entity, currently estimated to take place during the first half
of 2006. This transfer is expected to result in an immaterial amount of proceeds
to the Partnership.
As previously reported, Lakeside Square, located in Chicago, Illinois, has
enjoyed very strong operations for a number of years. In 2003, the Local General
Partner requested approval for a refinancing of the Property. In return for the
Partnership's approval, the Managing General Partner obtained a put option to
transfer the Partnership's interest at any time after December 31, 2006, the end
of the Property's Compliance Period, for $300,000. As part of the agreement, the
Local General Partner received a call option to be exercised any time after
December 31, 2006. The Partnership received Sale or Refinancing Proceeds, as
defined in the Local Limited Partnership Agreement, of $4,922,665 from the
refinancing, which closed on August 31, 2004. The Managing General Partner, in
accordance with and as permitted by the Partnership Agreement, retained the
entire amount of net proceeds in Reserves.
As previously reported, Oakview Square, located in Chesterfield, Michigan,
continues to show the combined effects of a softening local economy and a
surplus of affordable single-family homes. Job losses have adversely impacted a
number of residents at the Property. Despite current asking rents well below the
maximum LIHTC rents, the Property struggles to compete with a number of
affordable and market-rate properties in the area. However, the Property remains
current on its debt obligations. The Property's Compliance Period ended on
December 31, 2005.
The Managing General Partner anticipates that the Partnership's interest in the
Local Limited Partnership that owns Mayfair Mansions, located in Washington, DC,
will be terminated upon the sale of the Property to an unaffiliated entity,
currently estimated to take place during the first half of the 2006.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions (continued)
The Partnership has policies and practices for assessing potential impairment of
its investments in Local Limited Partnerships. The Partnership analyzes these
investments to determine if impairment indicators exist and if an other then
temporary impairment adjustment is necessary. If impairment indicators are
present, the investment is further analyzed to consider the Partnership's
ability to recover the investment's carrying value. If an other than temporary
impairment in carrying value exists, an impairment loss is recorded to write
down the investment to its fair value. Fair value is primarily established from
the current market value estimate of the remaining unused Tax Credits associated
with the Properties owned by the Local Limited Partnerships. During the nine
months ended December 31, 2004, the Partnership concluded one of the Local
Limited Partnerships, Carolina Woods Associates, L.P., had experienced other
than temporary declines in its carrying value, and impairment losses of
approximately $350,000 were recorded. Generally, the carrying values of most
Local Limited Partnerships will decline through losses and distributions in
amounts sufficient to prevent other than temporary impairments. However, the
Partnership may record similar impairment losses in the future if the expiration
of Tax Credits outpaces losses and distributions from any of the Local Limited
Partnerships.
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
31.1 Certification of Principal Executive officer and
Principal Financial Officer pursuant to section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of Principal Executive Officer and
Principal Financial Officer 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, 2005.
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 14, 2006 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. IV
By: Arch Street VIII, Inc.,
its Managing General Partner
/s/Jenny Netzer
Jenny Netzer
Executive Vice President
MMA Financial, LLC