November 14, 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 for Quarter Ended September 30, 1997
File No. 0-19765
Gentlemen:
Pursuant to the requirements of section 15(d) of the Securities Exchange Act of
1934, there is filed herewith a copy of subject report.
Very truly yours,
/s/Patricia Olsen-Goldberg
Patricia Olsen-Goldberg
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 September 30, 1997
-------------------------------------------
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 September 30, 1997 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 - September 30, 1997 (Unaudited)
and March 31, 1997 1
Combined Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 1997 and 1996 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1997 4
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 30, 1997 and 1996 5
Notes to Combined Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
Items 1-6 15
SIGNATURE 16
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEETS - September 30, 1997 and March 31, 1997
September 30, March 31,
1997 1997
(Unaudited)
Assets
Cash and cash equivalents $ 334,278 $ 288,153
Marketable securities, at fair value 929,259 1,056,590
Accounts receivable, net of allowance for bad debt
of $325,132 and $337,793, respectively 20,565 23,778
Tenant security deposits 96,390 98,963
Investments in Local Limited Partnerships,
net of reserve for valuation of $844,000 and
$945,277, respectively (Note 1) 18,915,763 19,593,420
Rental property at cost, net of accumulated depreciation and
reserve for valuation of $5,561,288 and $5,670,590, respectively 14,401,767 15,217,196
Mortgagee escrow deposits 103,266 106,501
Deferred charges, net of $166,715 and $156,662 of
accumulated amortization, respectively 199,129 209,182
Other assets 57,938 38,270
------------- ------------
Total Assets $ 35,058,355 $ 36,632,053
============= ============
Liabilities and Partners' Equity
Mortgage notes payable $ 10,341,914 $11,111,888
Accounts payable to affiliates 453,018 390,926
Accounts payable and accrued expenses 357,099 366,076
Interest payable 637,270 507,457
Tenant security deposits payable 89,310 89,709
Payable to affiliated Developer 2,482,000 2,482,000
------------- ------------
Total Liabilities 14,360,611 14,948,056
------------- ------------
Minority interest in Local Limited Partnerships 382,911 421,489
------------- ------------
General, Initial and Investor Limited Partners' Equity 20,313,540 21,267,760
Net unrealized gains (losses) on marketable securities 1,293 (5,252)
------------- ------------
Total Partners' Equity 20,314,833 21,262,508
------------- ------------
Total Liabilities and Partners' Equity $ 35,058,355 $ 36,632,053
============= ============
The accompanying notes are an integral part of these combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Six Months Ended September 30, 1997 and 1996
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- ---------
Revenue:
Rental $ 454,767 $ 446,852 $ 907,649 $ 890,572
Investment 21,300 17,625 46,009 46,574
Other 14,803 67,321 89,291 81,022
------------- --------------- ------------- --------------
Total Revenue 490,870 531,798 1,042,949 1,018,168
------------- --------------- ------------- --------------
Expenses:
Asset management fee,
related party 57,480 64,343 114,960 128,686
General and administrative,
includes reimbursements to an
affiliate in the amounts of
$79,932 and $70,051 in 1997
and 1996, respectively 80,097 108,460 170,672 168,854
Bad debt expense 132,983 44,779 150,539 245,173
Rental operations, exclusive of
depreciation 256,447 260,084 513,403 534,619
Property management fee,
related party 32,475 46,561 65,027 65,300
Interest 256,635 269,574 514,474 539,952
Depreciation 186,691 201,330 373,381 379,195
Amortization 27,877 25,380 55,746 58,058
------------- --------------- ------------- --------------
Total Expenses 1,030,685 1,020,511 1,958,202 2,119,837
------------- --------------- ------------- --------------
Loss before equity in losses of Local Limited Partnerships, minority interest,
loss on liquidation of interests in Local Limited Partnerships and
extraordinary item (539,815) (488,713) (915,253) (1,101,669)
Equity in losses of Local
Limited Partnerships (159,532) (523,395) (528,884) (1,101,654)
Minority interest in losses of
Local Limited Partnerships 18,738 20,937 38,578 43,968
Loss on liquidation of interests in
Local Limited Partnerships (Note 2) (2,538) - (2,538) -
------------- --------------- ------------- --------------
Net Loss before extraordinary item (683,147) (991,171) (1,408,097) (2,159,355)
Extraordinary gain on cancellation
of indebtedness (Note 2) 453,877 - 453,877 -
------------- --------------- ------------- --------------
Net Loss $ (229,270) $ (991,171) $ (954,220) $ (2,159,355)
============= =============== ============= ==============
Net Loss allocated:
To General Partners $ (2,293) $ (9,912) $ (9,542) $ (21,594)
To Limited Partners (226,977) (981,259) (944,678) (2,137,761)
------------- --------------- ------------- --------------
$ (229,270) $ (991,171) $ (954,220) $ (2,159,355)
============= =============== ============= ==============
The accompanying notes are an integral part of these combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Six Months Ended September 30, 1997 and 1996
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- ---------
Net Loss before extraordinary
item per Limited
Partnership Unit (68,043 Units) $ (9.94) $ (14.42) $ (20.48) $ (31.42)
============ ============== ============ ============
Extraordinary item
per Limited Partnership
Unit (68,043 Units) $ 6.60 $ - $ 6.60 $ -
============= =============== ============ =============
Net Loss per Limited
Partnership Unit
(68,043 Units) $ (3.34) $ (14.42) $ (13.88) $ (31.42)
============ ============== ============ =============
The accompanying notes are an integral part of these 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 Six Months Ended September 30, 1997
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
Balance at March 31, 1997 $ (378,408) $ 5,000 $ 21,641,168 $ (5,252) $ 21,262,508
Net change in net unrealized
losses on marketable securities
available for sale - - - 6,545 6,545
Net Loss (9,542) - (944,678) - (954,220)
---------- ------- ------------ --------- -------------
Balance at September 30, 1997 $ (387,950) $ 5,000 $ 20,696,490 $ 1,293 $ 20,314,833
========== ======= ============ ========= =============
The accompanying notes are an integral part of these combined
financial statements.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended September 30, 1997 and 1996
1997 1996
------------ -------
Net cash used for operating activities $ (111,535) $ (30,449)
----------- -----------
Cash flows from investing activities:
Investments in Local Limited Partnerships - 3,331
Purchases of marketable securities (198,988) (437,069)
Proceeds from sales and maturities of
marketable securities 332,353 681,156
Cash distributions received from Local
Limited Partnerships 164,576 67,145
Advances to Local Limited Partnerships (49,061) (385,352)
Purchase of rental property and equipment (39,561) (89,412)
----------- -----------
Net cash provided by (used for) investing activities 209,319 (160,201)
----------- -----------
Cash flows from financing activities:
Payment of mortgage principal (68,780) (117,020)
Advances from affiliate 17,121 37,493
----------- -----------
Net cash used for financing activities (51,659) (79,527)
----------- -----------
Net increase (decrease) in cash and cash equivalents 46,125 (270,177)
Cash and cash equivalents, beginning 288,153 414,451
----------- -----------
Cash and cash equivalents, ending $ 334,278 $ 144,274
=========== ===========
Supplemental disclosure:
Cash paid for interest $ 357,828 $ 225,631
=========== ===========
The accompanying notes are an integral part of these 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, 1997. 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 periods may not be indicative of
the results to be expected for the year. Certain amounts in the prior year
financial statements have been restated herein to conform to the current year
presentation.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-four 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 September 30, 1997:
Capital contributions paid to Local Limited Partnerships and purchase price paid
to withdrawing partners of Local
Limited Partnerships $ 43,001,951
Cumulative equity in losses of Local Limited
Partnerships (includes cumulative unrecognized
losses of $1,590,448) (24,696,948)
Cash distributions received from Local
Limited Partnerships (1,654,855)
Investments in Local Limited Partnerships
before adjustment 16,650,148
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 3,901,255
Accumulated amortization of acquisition
fees and expenses (791,640)
Investments in Local Limited Partnerships 19,759,763
Reserve for valuation of investments
in Local Limited Partnerships (844,000)
$ 18,915,763
The Partnership's share of the net losses of the Local Limited Partnerships,
excluding the Combined Entities, for the six months ended September 30, 1997 is
$1,159,425. For the six months ended September 30, 1997, the Partnership has not
recognized $694,575 of equity in losses relating to eight Local Limited
Partnerships where cumulative equity in losses and cumulative distributions
exceeded its total investments in these Local Limited Partnerships.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
2. Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of ten 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. Justin Place Apartments and Valley View Apartments were
transferred July 9, 1997, Nacona Terrace Apartments and Royal Creste Apartments
were transferred August 6, 1997, and Pine Manor Apartments was transferred on
October 28, 1997. Transfer of one of the remaining two Texas Partnerships is
expected to take place in the fourth quarter of 1997. The Partnership will
retain its interest in Gateway Village.
For financial reporting purposes, loss on liquidation of interests in Local
Limited Partnerships of $2,538 and extraordinary gain on cancellation of
indebtedness of $453,877 were recognized in the period ended September 30, 1997
as a result of the transfer of Justin Place Apartments and Valley View
Apartments. The loss on the transfers of Nacona Terrace Apartments and Royal
Creste Apartments had previously been reserved for in the provision for
valuation of investment in Local Limited Partnerships.
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)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules
Balance Sheets
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Assets
Cash and cash equivalents $ 251,952 $ 82,326 $ - $ 334,278
Marketable securities, at fair value 929,259 - - 929,259
Accounts receivable, net 397,543 20,565 (397,543) 20,565
Tenant security deposits - 96,390 - 96,390
Investments in Local
Limited Partnerships, net 19,219,988 - (304,225) 18,915,763
Rental property at cost, net - 14,401,767 - 14,401,767
Mortgagee escrow deposits - 103,266 - 103,266
Deferred charges, net - 199,129 - 199,129
Other assets 21,995 35,943 - 57,938
--------------- --------------- ------------- ------------
Total Assets $ 20,820,737 $ 14,939,386 $ (701,768) $ 35,058,355
=============== =============== ============= ============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 10,341,914 $ - $ 10,341,914
Accounts payable to affiliates 440,161 410,400 (397,543) 453,018
Accounts payable and accrued expenses 65,743 291,356 - 357,099
Interest payable - 637,270 - 637,270
Tenant security deposits payable - 89,310 - 89,310
Payable to affiliated Developer - 2,482,000 - 2,482,000
--------------- --------------- ------------- ------------
Total Liabilities 505,904 14,252,250 (397,543) 14,360,611
--------------- --------------- ------------- ------------
Minority interest in Local Limited
Partnerships - - 382,911 382,911
--------------- --------------- ------------- ------------
General, Initial and Investor
Limited Partners' Equity 20,313,540 687,136 (687,136) 20,313,540
Net unrealized losses on
marketable securities 1,293 - - 1,293
--------------- --------------- ------------- ------------
Total Partners' Equity 20,314,833 687,136 (687,136) 20,314,833
--------------- --------------- ------------- ------------
Total Liabilities and Partners' Equity $ 20,820,737 $ 14,939,386 $ (701,768) $ 35,058,355
=============== =============== ============= ============
(A) As of September 30, 1997. (B) As of June 30, 1997.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended September 30, 1997
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Revenue:
Rental $ - $ 454,767 $ - $ 454,767
Investment 17,756 3,544 - 21,300
Other 1,880 12,923 - 14,803
--------------- --------------- ------------- ------------
Total Revenue 19,636 471,234 - 490,870
--------------- --------------- ------------- ------------
Expenses:
Asset management fees, related party 57,480 - - 57,480
General and administrative 80,097 - - 80,097
Bad debt expense 132,983 - - 132,983
Rental operations, exclusive of depreciation - 256,447 - 256,447
Property management fee, related party - 32,475 - 32,475
Interest - 256,635 - 256,635
Depreciation - 186,691 - 186,691
Amortization 22,850 5,027 - 27,877
--------------- --------------- ------------- ------------
Total Expenses 293,410 737,275 - 1,030,685
--------------- --------------- ------------- ------------
Loss before equity in losses of Local Limited Partnerships, minority interest,
loss on liquidation of interests in Local Limited Partnerships and
extraordinary
item (273,774) (266,041) - (539,815)
Equity in losses of Local Limited
Partnerships 47,042 - (206,574) (159,532)
Minority interest in losses of
Local Limited Partnerships - - 18,738 18,738
Loss on liquidation of interests in Local
Limited Partnerships (2,538) - - (2,538)
--------------- --------------- ------------- ------------
Net Loss before extraordinary item (229,270) (266,041) (187,836) (683,147)
Extraordinary gain on cancellation
of indebtedness - 453,877 - 453,877
--------------- --------------- ------------- ------------
Net Income (Loss) $ (229,270) $ 187,836 $ (187,836) $ (229,270)
=============== =============== ============= ============
(A) For the three months ended September 30, 1997. (B) For the three months
ended June 30, 1997.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
Statements of Operations
For the Six Months Ended September 30, 1997
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Revenue:
Rental $ - $ 907,649 $ - $ 907,649
Investment 39,558 6,451 - 46,009
Other 67,539 21,752 - 89,291
--------------- --------------- ------------- ------------
Total Revenue 107,097 935,852 - 1,042,949
--------------- --------------- ------------- ------------
Expenses:
Asset management fees, related party 114,960 - - 114,960
General and administrative 170,672 - - 170,672
Bad debt expense 150,539 - - 150,539
Rental operations, exclusive of depreciation - 513,403 - 513,403
Property management fee, related party - 65,027 - 65,027
Interest - 514,474 - 514,474
Depreciation - 373,381 - 373,381
Amortization 45,693 10,053 - 55,746
--------------- --------------- ------------- ------------
Total Expenses 481,864 1,476,338 - 1,958,202
--------------- --------------- ------------- ------------
Loss before equity in losses of Local Limited Partnerships, minority interest,
loss on liquidation of interests in Local Limited Partnerships and
extraordinary
item (374,767) (540,486) - (915,253)
Equity in losses of Local Limited
Partnerships (576,915) - 48,031 (528,884)
Minority interest in losses of
Local Limited Partnerships - - 38,578 38,578
Loss on liquidation of interests
in Local Limited Partnerships (2,538) - - (2,538)
--------------- --------------- ------------- ------------
Net Loss before extraordinary item (954,220) (540,486) 86,609 (1,408,097)
Extraordinary gain on cancellation
of indebtedness - 453,877 - 453,877
--------------- --------------- ------------- ------------
Net Loss $ (954,220) $ (86,609) $ 86,609 $ (954,220)
=============== =============== ============= ============
(A) For the six months ended September 30, 1997. (B) For the six months ended
June 30, 1997.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
Statements of Cash Flows
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Net cash provided by (used for)
operating activities $ (154,975) $ 43,440 $ - $ (111,535)
----------- ------------ ------------ ------------
Cash flows from investing activities:
Purchases of marketable securities (198,988) - - (198,988)
Proceeds from sales and maturities
of marketable securities 332,353 - - 332,353
Cash distributions received from
Local Limited Partnerships 164,576 - - 164,576
Advances to Local Limited Partnerships (107,741) - 58,680 (49,061)
Purchase of rental property - (39,561) - (39,561)
----------- ------------ ------------ ------------
Net cash provided by (used for)
investing activities 190,200 (39,561) 58,680 209,319
----------- ------------ ------------ ------------
Cash flows from financing activities:
Payment of mortgage principal - (68,780) - (68,780)
Advances from affiliate - 75,801 (58,680) 17,121
----------- ------------ ------------ ------------
Net cash provided by (used for)
financing activities - 7,021 (58,680) (51,659)
----------- ------------ ------------ ------------
Net increase in cash
and cash equivalents 35,225 10,900 - 46,125
Cash and cash equivalents, beginning 216,727 71,426 - 288,153
----------- ------------ ------------ ------------
Cash and cash equivalents, ending $ 251,952 $ 82,326 $ - $ 334,278
=========== ============ ============ ============
(A) For the six months ended September 30, 1997. (B) For the six months ended
June 30, 1997.
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 an increase in cash and
cash equivalents of $46,125 from $288,153 at March 31, 1997 to $334,278 at
September 30, 1997. The increase is mainly attributable to proceeds from sales
and maturities of marketable securities in excess of purchases of marketable
securities and cash distributions received from Local Limited Partnerships.
These increases were offset by cash used for operations, repayment of mortgage
principal and purchase of rental property by the Combined Entities.
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 $1,115,000 have been
withdrawn from the reserve account to pay legal fees relating to various
property issues. This amount includes approximately $1,060,000 for the Texas
Partnerships. To date, Reserve funds in the amount of $304,000 have been used to
make additional capital contributions to a Local Limited Partnership. To date,
the Partnership has used approximately $974,000 of operating funds to replenish
reserves. At September 30, 1997, approximately $1,153,000 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. In the event a Local Limited
Partnership encounters operating difficulties requiring additional funds, the
Partnership's management might deem it in its best interests to voluntarily
provide such funds in order to protect its investment. To date, in addition to
the $1,115,000 noted above, the Partnership has also advanced approximately
$762,000 to the Texas Partnerships to fund operating deficits. Approximately
$360,000 has also been advanced to two other Local Limited Partnerships.
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 September 30, 1997, 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 during the six months ended September 30, 1997.
Results of Operations
The Partnership's results of operations for the three and six months ended
September 30, 1997 resulted in net losses of $229,270 and $954,220 as compared
to net losses of $991,171 and $2,159,355 for the same periods in 1996. The
decrease in net loss is primarily attributable to a decrease in equity in losses
of Local Limited Partnerships, the recognition of extraordinary gain on
cancellation of indebtedness for two of the Texas Partnerships, and a decrease
in bad debt expense. The decrease in equity in losses of Local Limited
Partnerships is due to an increase in losses not recognized by the Partnership
for Local Limited Partnerships whose cumulative equity in losses and cumulative
distributions exceeded its total investment in those partnerships. The decrease
in bad debt expense is the result of advances made to one Local Limited
Partnership during the six months ended September 30, 1996 which were reserved
for, exceeding the direct write-off of advances made to four of the Texas
Partnerships that were transferred during the six months ended September 30,
1997. The decreases in Equity in Losses of Local Limited Partnerships and bad
debt expense are expected to continue. The transfer of Pine Manor Apartments on
October 28, 1997 and the expected transfer of Pinewood Terrace Apartments in the
fourth quarter of 1997 will result in extraordinary gain on cancellation of
indebtedness.
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
Prior to the transfer of ten 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, are operating at break-even or are
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 SHARP mortgage subsidy has been an
important part of the property's annual income. However, effective October 1,
1997, the Massachusetts Housing Finance Agency (MHFA) which provided the SHARP
subsidies, withdrew future SHARP mortgage subsidies from its portfolio of 77
SHARP subsidized properties. The Managing General Partner joined a group of
interested parties and is working with MHFA to find a solution to the problems
that will arise as a result of withdrawn subsidies. Given the dependence on the
mortgage subsidy, it is possible that the property will default on its mortgage
obligation by the end of the year. It is possible that Partnership Reserves will
be used to support the property until these issues can be resolved. The Local
General Partner has also obtained preliminary approval for releases from lender
escrows to fund certain cash deficits. In addition to the SHARP issues, the
Managing General Partner continues to work with the lender to develop a
satisfactory workout. It is likely that a workout would 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 continue to negotiate with the Local General
Partner and lender to cure the mortgage default, complete required capital
repairs and develop a plan that will ultimately transfer ownership of the
properties to the Local General Partner. The plan includes provisions to
maximize the Partnership's ability to retain tax credits going forward while
minimizing the risk of recapture in the future. If negotiations are not
successful, it is likely that a foreclosure will occur prior to the end of the
fourth quarter which will result in recapture and the allocation of taxable
income to the Partnership.
Bentley Court, located in Columbia, South Carolina, continues to generate
significant deficits despite the July 1996 debt refinancing. As we previously
reported, an agreement was reached with the lender which enabled an affiliate of
the Managing General Partner to become an additional General Partner and a
substitute management agent, subject to lender approval, with the right to take
control of the property, if it becomes necessary. 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 will continue to monitor property operations closely. Operating deficits
are currently being funded by the Local General Partner. In addition, the IRS is
conducting an administrative proceeding with respect to the Local Limited
Partnership. Although the findings are preliminary, it is possible that this
report will result in a material adverse effect on 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
Property Discussions (continued)
At Findlay Market (Cincinnati, Ohio), reconstruction of the property units
damaged by fire was completed in December 1996, and lease-up continues. As
previously reported, in order to reconstruct the units, the Partnership agreed
to advance up to $345,000 to help cover the funding shortfall between the
insurance proceeds, lender funding and a City grant. To date, the Partnership
has advanced approximately $294,000 of this amount. However, the property
continues to generate operating deficits which caused the default of the first
mortgage. At this juncture, the lender is not amenable to a cure of the mortgage
and is expected to exercise its rights to foreclose on the mortgage prior to the
end of the year. Despite these indications, the Managing and Local General
Partners continue to negotiate with the lender in hopes of averting the
foreclosure. A foreclosure of this property will result in recapture of tax
credits and the allocation of taxable income to the Partnership.
The Managing General Partner has transferred all of the assets of ten 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. Justin Place Apartments and Valley View Apartments were
transferred on July 9, 1997, Nacona Terrace Apartments and Royal Creste
Apartments were transferred August 6, 1997 and Pine Manor Apartments was
transferred on October 28, 1997. Transfer of one of the remaining two Texas
Partnerships is expected to take place in the fourth quarter of 1997. The
Partnership will retain its interest in Gateway Village.
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 September 30, 1997.
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: November 14, 1997 BOSTON FINANCIAL QUALIFIED HOUSING
TAX CREDITS L.P. IV
By: Arch Street IV, Inc.,
its Managing General Partner
/s/William E. Haynsworth
William E. Haynsworth
Managing Director, Vice President and
Chief Operating Officer