February 12, 1997
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Qualified Housing Tax Credits L.P. IV
Report on Form 10-Q Edgar for Quarter Ended December 31, 1996
File No. 0-19765
Dear Sir/Madam:
Pursuant to the requirements of Rule 901(d) of Regulation S-T, enclosed is one
copy of subject report.
Very truly yours,
/s/Veronica J. Curioso
Veronica J. Curioso
Assistant Controller
QH4-10Q2.DOC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
(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, 1996
-----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended December 31, 1996 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. Combined Financial Statements
Combined Balance Sheets - December 31, 1996 (Unaudited)
and March 31, 1996 1
Combined Statements of Operations (Unaudited) - For the Three
and Nine Months Ended December 31, 1996 and 1995 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 1996 3
Combined Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 1996 and 1995 4
Notes to Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Items 1-6 16
SIGNATURE 17
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEETS - December 31, 1996 and March 31, 1996
December 31, March 31,
1996 1996
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 378,569 $ 414,451
Accounts receivable, net 23,259 39,646
Tenant security deposits 89,406 109,969
Mortgagee escrow deposits 135,965 113,368
Other current assets 42,780 35,465
------------- -------------
Total current assets 669,979 712,899
Investments in Local Limited Partnerships,
net of reserve for valuation of $949,906 and
$913,047, respectively (Note 2) 20,862,051 22,748,929
Marketable securities, at fair value (Note 1) 1,079,478 1,428,765
Rental property at cost, net of
accumulated depreciation 16,201,490 16,628,572
Deferred charges, net of $156,012 and $140,931 of
accumulated amortization, respectively 209,832 224,913
------------- -------------
Total Assets $ 39,022,830 $ 41,744,078
============= =============
Liabilities and Partners' Equity (Deficiency)
Current liabilities:
Accounts payable to affiliates $ 293,746 $ 126,151
Accounts payable and accrued expenses 433,401 409,693
Current portion of mortgage notes payable 3,591,709 3,707,570
Interest payable 620,811 218,437
Tenant security deposits payable 90,022 85,705
------------- -------------
Total current liabilities 5,029,689 4,547,556
Mortgage notes payable 7,483,918 7,521,294
Payable to affiliated Developer 2,482,000 2,482,000
------------- -------------
Total Liabilities 14,995,607 14,550,850
------------- -------------
Minority interest in Local Limited Partnerships 353,628 421,420
------------- -------------
General, Initial and Investor Limited Partners' Equity (Deficiency) 23,671,296 26,771,540
Net unrealized gains on marketable securities 2,299 268
------------- -------------
Total Partners' Equity (Deficiency) 23,673,595 26,771,808
------------- -------------
Total Liabilities and Partners' Equity (Deficiency) $ 39,022,830 $ 41,744,078
============= =============
The accompanying notes are an integral part of the combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Nine Months Ended December 31, 1996 and 1995
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------- ------------- ------------- ---------
Revenue:
Rental $ 444,241 $ 589,949 $ 1,334,813 $ 1,791,651
Investment 25,362 33,828 71,936 88,065
Other 39,637 19,999 120,659 60,913
------------- --------------- ------------- --------------
Total Revenue 509,240 643,776 1,527,408 1,940,629
------------- --------------- ------------- --------------
Expenses:
Asset management fee,
related party 64,343 62,752 193,029 188,256
General and administrative,
includes reimbursements to an
affiliate in the amounts of
$91,887 and $104,255 in 1996
and 1995, respectively 92,200 160,120 261,054 438,506
Bad debt 9,158 46,519 254,331 46,519
Rental operations, exclusive of
depreciation 289,167 444,246 823,786 1,235,616
Property management fee,
related party 31,769 18,261 97,069 54,029
Interest 263,672 327,885 803,624 978,854
Depreciation 189,595 191,546 568,790 581,890
Amortization 29,030 33,102 87,088 99,306
------------- --------------- ------------- --------------
Total Expenses 968,934 1,284,431 3,088,771 3,622,976
------------- --------------- ------------- --------------
Loss before equity in losses of
Local Limited Partnerships (459,694) (640,655) (1,561,363) (1,682,347)
Minority interest in losses of
Local Limited Partnerships 23,824 24,210 67,792 69,946
Equity in losses of Local
Limited Partnerships (505,019) (599,260) (1,606,673) (2,223,593)
------------- --------------- ------------- --------------
Net Loss $ (940,889) $ (1,215,705) $ (3,100,244) $ (3,835,994)
============= =============== ============= ==============
Net Loss allocated:
To General Partners $ (9,408) $ (12,157) $ (31,002) $ (38,360)
To Limited Partners (931,481) (1,203,548) (3,069,242) (3,797,634)
------------- --------------- ------------- --------------
$ (940,889) $ (1,215,705) $ (3,100,244) $ (3,835,994)
============= =============== ============= ==============
Net Loss per Limited
Partnership Unit
(68,043 Units) $ (13.69) $ (17.69) $ (45.11) $ (55.81)
============= ============== ============= ==============
The accompanying notes are an integral part of the combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Nine Months Ended December 31, 1996
Initial Investor Net
General Limited Limited Unrealized
Partners Partners Partners Gains Total
Balance at March 31, 1996 $ (323,370) $ 5,000 $ 27,089,910 $ 268 $ 26,771,808
Net change in net unrealized
gains on marketable securities
available for sale - - - 2,031 2,031
Net Loss (31,002) - (3,069,242) - (3,100,244)
----------- -------- ------------ --------- ------------
Balance at December 31, 1996 $ (354,372) $ 5,000 $ 24,020,668 $ 2,299 $ 23,673,595
========== ======== ============ ========= ============
The accompanying notes are an integral part of the combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended December 31, 1996 and 1995
1996 1995
------------ ---------
Net cash used for operating activities $ (360,024) $ (693,109)
------------ -------------
Cash flows from investing activities:
Investments in Local Limited Partnerships 3,331 -
Purchases of marketable securities (487,098) (1,466,927)
Proceeds from sales and maturities
of marketable securities 897,987 1,995,707
Cash distributions received from Local
Limited Partnerships 204,867 121,905
Purchase of rental property and equipment (141,708) (65,212)
------------ -------------
Net cash provided by investing activities 477,379 585,473
------------ -------------
Cash flows from financing activities:
Payment of mortgage principal (153,237) (37,439)
------------ -------------
Net cash used for financing activities (153,237) (37,439)
------------ -------------
Net decrease in cash and cash equivalents (35,882) (145,075)
Cash and cash equivalents, beginning 414,451 532,287
------------ -------------
Cash and cash equivalents, ending $ 378,569 $ 387,212
============ =============
Supplemental disclosure of cash flow activity:
Cash paid for interest $ 401,250 $ 579,785
============ =============
The accompanying notes are an integral part of the combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included with the Partnership's 10-K for the year
ended March 31, 1996. In the opinion of management, these financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Partnership's financial position and results of
operations. The results of operations for the period may not be indicative of
the results to be expected for the year.
1. Marketable Securities
A summary of marketable securities is as follows:
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities issued by the
US Treasury and other US
Government agencies $ 754,966 $ 3,055 $ (2,558) $ 755,463
Mortgage backed securities 310,265 2,032 (234) 312,063
Other debt securities 11,948 4 - 11,952
----------- -------- -------- -----------
Marketable securities
at December 31, 1996 $ 1,077,179 $ 5,091 $ (2,792) $ 1,079,478
=========== ======== ========= ===========
Debt securities issued by the
US Treasury and other US
Government agencies $ 945,321 $ 280 $ (4,773) $ 940,828
Mortgage backed securities 164,815 2,200 (1,046) 165,969
Other debt securities 318,361 3,979 (372) 321,968
----------- -------- --------- -----------
Marketable securities
at March 31, 1996 $ 1,428,497 $ 6,459 $ (6,191) $ 1,428,765
=========== ======== ========= ===========
The contractual maturities at December 31, 1996 are as follows:
Fair
Cost Value
Due in one year or less $ 121,244 $ 124,009
Due in one to five years 645,670 643,406
Mortgage backed securities 310,265 312,063
----------- -----------
$ 1,077,179 $ 1,079,478
=========== ===========
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
1. Marketable Securities (continued)
Actual maturities may differ from contractual maturities because some borrowers
have the right to call or prepay obligations. Proceeds from the sale of fixed
maturity securities were approximately $898,000 and $1,996,000 for the nine
months ended December 31, 1996 and 1995, respectively. Included in investment
income are gross gains of $65,161 and $12,497 and gross losses of $5,590 and
$15,443 that were realized on these sales for the nine months ended December 31,
1996 and 1995, respectively.
2. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-seven Local Limited Partnerships (excluding the Combined
Entities) which own and operate multi-family housing complexes, most of which
are government-assisted. The Partnership, as Investor Limited Partner pursuant
to the various Local Limited Partnership Agreements which contain certain
operating and distribution restrictions, has generally acquired a 99% interest
in the profits, losses, tax credits and cash flows from operations of each of
the Local Limited Partnerships. Upon dissolution, proceeds will be distributed
according to each respective partnership agreement.
The following is a summary of investments in Local Limited Partnerships,
excluding the Combined Entities, at December 31, 1996:
Capital contributions paid to Local Limited Partnerships and purchase price paid
to withdrawing partners of Local
Limited Partnerships $ 43,420,777
Cumulative equity in losses of Local Limited
Partnerships (23,430,549)
Cash distributions received from Local
Limited Partnerships (1,362,707)
-----------
Investments in Local Limited Partnerships
before adjustment 18,627,521
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 3,912,561
Accumulated amortization of acquisition
fees and expenses (728,125)
---------
Investments in Local Limited Partnerships 21,811,957
Reserve for valuation of investments
in Local Limited Partnerships (949,906)
---------
$ 20,862,051
============
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
2. Investments in Local Limited Partnerships (continued)
Summarized financial information from the financial statements of all Local
Limited Partnerships, excluding the Combined Entities, in which the Partnership
has invested is as follows:
Summarized Balance Sheets - at September 30, 1996
Assets:
Rental property, net $ 121,691,813
Current assets 6,944,363
Other assets, net 11,578,464
---------------
Total Assets $ 140,214,640
===============
Liabilities and Partners' Equity:
Current liabilities $ 6,238,917
Mortgages payable, net of current portion 101,336,557
Other liabilities 8,095,693
---------------
Total Liabilities 115,671,167
Partners' Equity 24,543,473
---------------
Total Liabilities and Partners' Equity $ 140,214,640
===============
Summarized Income Statements - For the
nine months ended September 30, 1996
Rental and other income $ 14,831,932
---------------
Expenses:
Operating expenses 7,522,399
Interest expense 5,563,092
Depreciation and amortization 3,678,775
---------------
Total Expenses 16,764,266
Net Loss $ (1,932,334)
===============
Partnership's share of net loss $ (1,913,009)
===============
Other Partners' share of net loss $ (19,325)
===============
For the nine months ended December 31, 1996, the Partnership has not recognized
$306,336 of equity in losses relating to four Local Limited Partnerships where
cumulative equity in losses exceed its total investment in these Local Limited
Partnerships.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of five of the
Texas Partnerships, subject to their liabilities, to unaffiliated entities. The
transfers of Grandview Terrace Apartments, Pecan Hills Apartments, Seagraves
Garden Apartments, Hilltop Apartments and Bent Tree Housing were effective
February 21, 1996, February 29, 1996, March 8, 1996, June 6, 1996 and November
20, 1996, respectively. The transfers of Nocona Terrace Apartments and Royal
Creste Apartments are expected to take place in 1997. The Partnership has
retained its interest in Gateway Village.
The Managing General Partner of the Partnership is working to sell the general
partner interests in the four remaining Texas Partnerships (Justin Place
Apartments, Pine Manor Apartments, Pinewood Terrace Apartments and Valley View
Apartments) to an unaffiliated buyer. In the meantime, investors will continue
to receive tax credits for these properties.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
4. Supplemental Combining Schedules
Balance Sheets
Boston Financial
Qualified Housing
Tax Credits Combined
L.P. IV (A) Entities (B) Eliminations Combined
Assets
Current assets:
Cash and cash equivalents $ 308,195 $ 70,374 $ - $ 378,569
Accounts receivable, net 403,744 23,259 (403,744) 23,259
Tenant security deposits - 89,406 - 89,406
Mortgagee escrow deposits - 135,965 - 135,965
Other current assets 13,959 28,821 - 42,780
--------------- --------------- ------------- ------------
Total current assets 725,898 347,825 (403,744) 669,979
Investments in Local
Limited Partnerships, net 22,180,011 - (1,317,960) 20,862,051
Marketable securities, at fair value 1,079,478 - - 1,079,478
Rental property at cost, net of
accumulated depreciation - 16,201,490 - 16,201,490
Deferred charges, net - 209,832 - 209,832
--------------- --------------- ------------- ------------
Total Assets $ 23,985,387 $ 16,759,147 $ (1,721,704) $ 39,022,830
=============== =============== ============== ============
Liabilities and Partners' Equity (Deficiency)
Current liabilities:
Accounts payable to affiliates $ 257,372 $ 440,118 $ (403,744) $ 293,746
Accounts payable and accrued expenses 54,420 378,981 - 433,401
Current portion of mortgage notes payable - 3,591,709 - 3,591,709
Interest payable - 620,811 - 620,811
Tenant security deposits payable - 90,022 - 90,022
--------------- --------------- ------------- ------------
Total current liabilities 311,792 5,121,641 (403,744) 5,029,689
Mortgage notes payable - 7,483,918 - 7,483,918
Payable to affiliated Developer - 2,482,000 - 2,482,000
--------------- --------------- ------------- ------------
Total Liabilities 311,792 15,087,559 (403,744) 14,995,607
--------------- --------------- -------------- ------------
Minority interest in Local Limited
Partnerships - - 353,628 353,628
--------------- --------------- ------------- ------------
General, Initial and Investor
Limited Partners' Equity (Deficiency) 23,671,296 1,671,588 (1,671,588) 23,671,296
Net unrealized gains on
marketable securities 2,299 - - 2,299
--------------- --------------- ------------- ------------
Total Partners' Equity (Deficiency) 23,673,595 1,671,588 (1,671,588) 23,673,595
--------------- --------------- -------------- ------------
Total Liabilities and Partners'
Equity (Deficiency) $ 23,985,387 $ 16,759,147 $ (1,721,704) $ 39,022,830
=============== =============== ============== ============
(A) As of December 31, 1996. (B) As of September 30, 1996.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended December 31, 1996
Boston Financial
Qualified Housing
Tax Credits Combined
L.P. IV (A) Entities (B) Eliminations Combined
Revenue:
Rental $ - $ 444,241 $ - $ 444,241
Investment 22,251 3,111 - 25,362
Other 9,754 29,883 - 39,637
--------------- --------------- ------------- ------------
Total Revenue 32,005 477,235 - 509,240
--------------- --------------- ------------- ------------
Expenses:
Asset management fees, related party 64,343 - - 64,343
General and administrative 92,200 - - 92,200
Bad debt 9,158 - - 9,158
Rental operations, exclusive of depreciation - 289,167 - 289,167
Property management fee, related party - 31,769 - 31,769
Interest - 263,672 - 263,672
Depreciation - 189,595 - 189,595
Amortization 24,003 5,027 - 29,030
--------------- --------------- ------------- ------------
Total Expenses 189,704 779,230 - 968,934
--------------- --------------- ------------- ------------
Loss before equity in losses of Local
Limited Partnerships (157,699) (301,995) - (459,694)
Minority interest in losses of
Local Limited Partnerships - - 23,824 23,824
Equity in losses of Local Limited
Partnerships (783,190) - 278,171 (505,019)
--------------- --------------- ------------- ------------
Net Loss $ (940,889) $ (301,995) $ 301,995 $ (940,889)
=============== =============== ============= ============
(A) For the three months ended December 31, 1996. (B) For the three months ended
September 30, 1996.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Operations
For the Nine Months Ended December 31, 1996
Boston Financial
Qualified Housing
Tax Credits Combined
L.P. IV (A) Entities (B) Eliminations Combined
Revenue:
Rental $ - $ 1,334,813 $ - $ 1,334,813
Investment 62,650 9,286 - 71,936
Other 66,703 53,956 - 120,659
--------------- --------------- ------------- ------------
Total Revenue 129,353 1,398,055 - 1,527,408
--------------- --------------- ------------- ------------
Expenses:
Asset management fees, related party 193,029 - - 193,029
General and administrative 261,054 - - 261,054
Bad debt expense 254,331 - - 254,331
Rental operations, exclusive of depreciation - 823,786 - 823,786
Property management fee, related party - 97,069 - 97,069
Interest - 803,624 - 803,624
Depreciation - 568,790 - 568,790
Amortization 72,007 15,081 - 87,088
--------------- --------------- ------------- ------------
Total Expenses 780,421 2,308,350 - 3,088,771
--------------- --------------- ------------- ------------
Loss before equity in losses of Local
Limited Partnerships (651,068) (910,295) - (1,561,363)
Minority interest in losses of
Local Limited Partnerships - - 67,792 67,792
Equity in losses of Local Limited
Partnerships (2,449,176) - 842,503 (1,606,673)
--------------- --------------- ------------- ------------
Net Loss $ (3,100,244) $ (910,295) $ 910,295 $ (3,100,244)
=============== =============== ============= ============
(A) For the nine months ended December 31, 1996. (B) For the nine months ended
September 30, 1996.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Cash Flows
Boston Financial
Qualified Housing
Tax Credits Combined
L.P. IV (A) Entities (B) Eliminations Combined
Net cash provided by (used for)
operating activities $ (617,798) $ 257,774 $ - $ (360,024)
----------- ------------ ------------ ------------
Cash flows from investing activities:
Investment in Local Limited Partnership 3,331 - - 3,331
Purchases of marketable securities (487,098) - - (487,098)
Proceeds from sales and maturities
of marketable securities 897,987 - - 897,987
Cash distributions received from
Local Limited Partnerships 204,867 - - 204,867
Purchase of rental property and equipment - (141,708) - (141,708)
----------- ------------ ------------ ------------
Net cash provided by (used for)
investing activities 619,087 (141,708) - 477,379
----------- ------------ ------------ ------------
Cash flows from financing activities:
Payment of mortgage principal - (153,237) - (153,237)
----------- ------------- ------------ -------------
Net cash used for financing activities - (153,237) - (153,237)
----------- ------------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents 1,289 (37,171) - (35,882)
Cash and cash equivalents, beginning 306,906 107,545 - 414,451
----------- ------------ ------------ ------------
Cash and cash equivalents, ending $ 308,195 $ 70,374 $ - $ 378,569
=========== ============ ============ ============
(A) For the nine months ended December 31, 1996. (B) For the nine months ended
September 30, 1996.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership, including the Combined Entities, had a decrease in cash and
cash equivalents of $35,882 from $414,451 at March 31, 1996 to $378,569 at
December 31, 1996. The decrease is attributable to cash used for operations,
repayment of mortgage principal and purchase of rental property by the Combined
Entities. These decreases were offset by proceeds from sales and maturities of
marketable securities in excess of purchases of marketable securities and cash
distributions received from Local Limited Partnerships in which the Partnership
invested.
The Managing General Partner initially designated 4% of the Gross Proceeds as
Reserves. The Reserves were established to be used for working capital of the
Partnership and contingencies related to the ownership of Local Limited
Partnership interests. Funds totaling approximately $988,000 have been withdrawn
from the Reserve account to pay legal fees and other expenses relating to
various property issues. This amount includes approximately $933,000 for the
Texas Partnerships. To date, Reserve funds in the amount of approximately
$304,000 have been used to make additional capital contributions to a Local
Limited Partnership. To date, the Partnership has used approximately $889,000 of
operating funds to replenish Reserves. At December 31, 1996, approximately
$1,361,000 of cash, cash equivalents and marketable securities has been
designated as Reserves. Management believes that the investment income earned on
the Reserves, along with cash distributions received from Local Limited
Partnerships, to the extent available, will be sufficient to fund the
Partnership's ongoing operations. Reserves may be used to fund Partnership
operating deficits, if the Managing General Partner deems funding appropriate.
If Reserves are not adequate to cover the Partnership's operations, the
Partnership will seek other financing sources including, but not limited to, the
deferral of Asset Management Fees to an affiliate of the Managing General
Partner or working with Local Limited Partnerships to increase cash
distributions.
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, 1996, the Partnership had
no contractual or other obligation to any Local Limited Partnership which had
not been paid or provided for.
In the event a Local Limited Partnership encounters operating difficulties
requiring additional funds, the Partnership's management might deem it in its
best interest to voluntarily provide such funds in order to protect its
investment. To date, in addition to the $933,000 noted above, the Partnership
has also advanced approximately $613,000 to the Texas Partnerships to fund
operating deficits. Approximately $345,000 has also been advanced to two other
Local Limited Partnerships.
Cash Distributions
No cash distributions were made during the nine months ended December 31, 1996.
Results of Operations
The Partnership's results of operations for the three and nine months ended
December 31, 1996 resulted in a net loss of $940,889 and $3,100,244,
respectively, as compared to a net loss of $1,215,705 and $3,835,994,
respectively, for the same periods in 1995. The decreases in net loss are
primarily attributable to decreases in equity in losses of Local Limited
Partnerships and decreases in general and administrative, rental operations and
interest expense items. These decreases are offset by a decrease in rental
revenue and an increase in bad debt expense for the nine month period. The
decrease in equity in losses of Local Limited Partnerships is caused by more
efficient property operations during the first nine months of 1996 as compared
to the corresponding 1995 period and the elimination of losses incurred by the
four Texas Partnerships which were disposed of. The decrease in general and
administrative expenses is the result of a decrease in the expenses paid on
behalf of the Texas Partnerships by the Partnership. The decreases in rental
revenue and rental operation and interest expenses are due to the exclusion of
seven of the Texas Partnerships' operations which were previously combined. Four
of these Texas Partnerships were disposed of and three are now being accounted
for under the equity method of accounting. Please refer to the section entitled
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations (continued)
"Property Discussions" for additional information. The increase in bad debt
expense is the result of a reserve for advances made to one Local Limited
Partnership.
Property Discussions
Prior to the transfer of five of the Texas Partnerships, Limited Partnership
interests had been acquired in thirty-seven Local Limited Partnerships which are
located in thirteen states, Washington, D.C. and Puerto Rico. Fifteen of the
properties with 1,440 apartments were newly constructed, and twenty-two of the
properties with 2,061 apartments were rehabilitated. Most of the Local Limited
Partnerships have stable operations, operating at break-even or generating
operating cash flow.
A few properties are experiencing operating difficulties and cash flow deficits
due to a variety of reasons. The Local General Partners of those properties have
funded operating deficits through project expense loans, subordinated loans or
payments from operating escrows. In instances where the Local General Partners
have stopped funding deficits because their obligation to do so has expired or
otherwise, the Managing General Partner is working with the Local General
Partners to increase operating income, reduce expenses or refinance the debt at
lower interest rates in order to improve cash flow.
Audobon Apartments, located in Massachusetts, is operating below break-even
primarily due to decreased rental subsidy assistance, increased operating
expenses and adverse market conditions. The Managing General Partner has reached
a tentative agreement with the Local General Partner and the local housing
authority to replace the management agent with an unaffiliated firm. The Local
General Partner has also obtained preliminary approval for additional operating
subsidies from the state. It is likely that this transaction will require an
advance from Partnership reserves.
Despite improving occupancy at BK Apartments, located in Jamestown, North
Dakota, the property continues to generate operating deficits. The lender
recently issued a default notice and is threatening to foreclose. Affiliates of
the Managing General Partner are negotiating with the Local General Partner and
lender to cure the mortgage default and complete required capital repairs. These
actions may require the use of Partnership reserves.
Bentley Court, located in Columbia, South Carolina, continues to generate
significant deficits despite the July 1996 debt refinancing. As we previously
reported, the workout agreement with the lender resulted in the admission of a
Managing General Partner affiliate as an additional General Partner and as a
substitute management agent, subject to lender approval, with the right to take
control of the property under certain circumstances. In addition, the agreement
stipulates that if the Local Limited Partnership defaults on the agreement the
lender has the right to remove the management company. The Managing General
Partner is continue to monitor property operations closely. Operating deficits
are currently being funded by the Local General Partner.
At Findlay Market (Cincinnati, Ohio), reconstruction of the property units
damaged by fire was completed in December 1996, and lease-up is currently
underway. As previously reported, in order to reconstruct the units, the
Partnership advanced $345,000 to help cover the funding shortfall between the
insurance proceeds, lender funding and a City grant. However, the property
continues to generate operating deficits and faces adverse market conditions
which may threaten its viability over the long-term. The Managing General
Partner is actively monitoring this situation and is working closely with the
Local General Partner to address these difficulties.
The Managing General Partner has transferred all of the assets of five of the
Texas Partnerships, subject to their liabilities, to unaffiliated entities. The
transfers of Grandview Terrace Apartments, Pecan Hills Apartments, Seagraves
Garden Apartments, Hilltop Apartments and Bent Tree Housing were effective
February 21, 1996, February 29, 1996, March 8, 1996, June 6, 1996 and November
20, 1996, respectively. The transfers of Nocona
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
Terrace Apartments and Royal Creste Apartments are expected to take place in
1997. The Partnership has retained its interest in Gateway Village.
The Managing General Partner of the Partnership is working to sell the general
partner interests in the four remaining Texas Partnerships (Justin Place
Apartments, Pine Manor Apartments, Pinewood Terrace Apartments and Valley View
Apartments) to an unaffiliated buyer. In the meantime, investors will continue
to receive tax credits for these properties. Operating deficits are currently
being funded from Partnership reserves.
For tax purposes, these events will result in both Section 1231 Gain and
cancellation of indebtedness income. In addition, the transfer of ownership will
result in a nominal amount of recapture of tax credits, since the Texas
Partnerships represent only 3% of the Partnership's tax credits.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(a)Exhibits - None
(b)Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended December 31, 1996.
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: Febuary 12, 1997 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. IV
By: Arch Street IV, Inc.,
its Managing General Partner
/s/Georgia Murray
Georgia Murray
A Managing Director, Treasurer
and Chief Financial Officer