November 12, 1999
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Tax Credit Fund VII, A Limited Partnership
Report on Form 10-Q for Quarter Ended September 30, 1999
File Number 0-24584
Gentlemen:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, there is filed herewith one copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
TC7-Q2.DOC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1999
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, 1999 Commission file number 0-24584
------------------
Boston Financial Tax Credit Fund VII, A Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-3166203
(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 TAX CREDIT FUND VII
(A Limited Partnership)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Balance Sheets - September 30, 1999 (Unaudited) and March 31, 1999 1
Statements of Operations (Unaudited) -
For the Three and Six Months Ended September 30, 1999 and 1998 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1999 3
Statements of Cash Flows (Unaudited) -
For the Six Months Ended September 30, 1999 and 1998 4
Notes to 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 10
SIGNATURE 11
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
BALANCE SHEETS
September 30, March 31,
1999 1999
(Unaudited)
Assets
Cash and cash equivalents $ 296,996 $ 114,347
Marketable securities, at fair value 2,726,015 3,020,272
Restricted cash 272,555 266,031
Investments in Local Limited Partnerships (Note 1) 24,192,589 25,341,905
Other assets 35,575 37,349
------------- -------------
Total Assets $ 27,523,730 $ 28,779,904
============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 54,063 $ 72,014
Accounts payable and accrued expenses 37,697 68,778
------------- -------------
Total Liabilities 91,760 140,792
------------- -------------
Commitments (Note 2)
General, Initial and Investor Limited Partners' Equity 27,457,611 28,628,826
Net unrealized gains (losses) on marketable securities (25,641) 10,286
------------- -------------
Total Partners' Equity 27,431,970 28,639,112
------------- -------------
Total Liabilities and Partners' Equity $ 27,523,730 $ 28,779,904
============= =============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Six Months Ended September 30, 1999 and 1998
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
Revenue:
Investment $ 42,222 $ 51,814 $ 86,217 $ 101,167
Other 14,047 13,110 64,683 20,993
------------ ------------ ------------- -------------
Total Revenue 56,269 64,924 150,900 122,160
------------ ------------ ------------- -------------
Expenses:
Asset management fee,
related party 73,888 72,753 147,776 145,506
General and administrative
(includes reimbursements
to an affiliate in the amounts
of $43,791 and $42,885 in
1999 and 1998, respectively) 35,741 47,342 87,401 107,245
Amortization 8,046 8,045 16,092 16,091
------------ ------------ ------------- -------------
Total Expenses 117,675 128,140 251,269 268,842
------------ ------------ ------------- -------------
Loss before equity in losses
of Local Limited Partnerships (61,406) (63,216) (100,369) (146,682)
Equity in losses of
Local Limited Partnerships
(Note 1) (554,742) (791,375) (1,070,846) (1,668,302)
------------ ------------ ------------- -------------
Net Loss $ (616,148) $ (854,591) $ (1,171,215) $ (1,814,984)
============ ============ ============= =============
Net Loss allocated:
To General Partners $ (6,161) $ (8,546) $ (11,712) $ (18,150)
To Limited Partners (609,987) (846,045) (1,159,503) (1,796,834)
------------ ------------ ------------- -------------
$ (616,148) $ (854,591) $ (1,171,215) $ (1,814,984)
============ ============ ============= =============
Net Loss per Limited
Partnership Unit
(50,930 Units) $ (11.98) $ (16.61) $ (22.77) $ (35.28)
============ ============ ============= ============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Six Months Ended September 30, 1999
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partner Partners (Losses) Total
Balance at March 31, 1999 $ (158,033) $ 5,000 $ 28,781,859 $ 10,286 $ 28,639,112
------------ -------- ------------- ----------- --------------
Comprehensive Loss:
Net change in net unrealized
gains on marketable securities
available for sale - - - (35,927) (35,927)
Net Loss (11,712) - (1,159,503) - (1,171,215)
------------ ------- ------------- ----------- --------------
Comprehensive Loss (11,712) - (1,159,503) (35,927) (1,207,142)
------------ ------- ------------- ----------- --------------
Balance at September 30, 1999 $ (169,745) $ 5,000 $ 27,622,356 $ (25,641) $ 27,431,970
============ ======= ============= =========== ============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended September 30, 1999 and 1998
1999 1998
------------- -------------
Net cash used for operating activities $ (139,724) $ (246,331)
------------- -------------
Cash flows from investing activities:
Purchases of marketable securities (399,725) (1,048,095)
Proceeds from sales and maturities of
marketable securities 659,720 1,272,115
Investments in Local Limited Partnerships (25,000) -
Cash distributions received from Local
Limited Partnerships 87,378 146,909
------------- -------------
Net cash provided by investing activities 322,373 370,929
------------- -------------
Net increase in cash and cash equivalents 182,649 124,598
Cash and cash equivalents, beginning 114,347 375,168
------------- -------------
Cash and cash equivalents, ending $ 296,996 $ 499,766
============= =============
The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-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 Fund's Form Form 10-K for the
year ended March 31, 1999. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Fund's financial position and
results of operations. The results of operations for the period may not be
indicative of the results to be expected for the year.
The Managing General Partner has elected to report results of the Local Limited
Partnerships 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 June 30, 1999 and 1998.
1. Investments in Local Limited Partnerships
The Fund has acquired interests in nineteen Local Limited Partnerships which own
and operate multi-family housing complexes. The Fund, as Investor Limited
Partner, pursuant to the various Local Limited Partnership Agreements, has
acquired a 99% interest, with the exception of Springwood, which is a 19.80%
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 at
September 30, 1999:
Capital Contributions paid to Local Limited Partnerships and purchase
price paid to withdrawing partners of Local Limited Partnerships $ 39,334,152
Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
unrecognized losses of $908,149) (15,514,685)
Cash distributions received from Local Limited Partnerships (707,661)
-------------
Investments in Local Limited Partnerships before adjustments 23,111,806
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 1,252,338
Accumulated amortization of acquisition fees and expenses (171,555)
-------------
Investments in Local Limited Partnerships $ 24,192,589
=============
The Fund's share of the net losses of the Local Limited Partnerships for the six
months ended September 30, 1999 totaled $1,315,213. For the six months ended
September 30, 1999, the Fund has not recognized $244,367 of equity in losses
relating to one Local Limited Partnership where cumulative equity in losses
exceeded its total investment in the Local Limited Partnership.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Commitments
At September 30, 1999, the Fund has committed to make future capital
contributions and pay future purchase price installments on its investments in
Local Limited Partnerships. These future payments are contingent upon the
achievement of certain criteria set forth in the Local Limited Partnership
Agreements and total approximately $613,000. In addition, the Fund has set aside
$217,000 for future capital contributions to one Local Limited Partnership.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The Fund
intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements and is including this statement for
purposes of complying with these safe harbor provisions. Although the Fund
believes the forward-looking statements are based on reasonable assumptions, the
Fund can give no assurance that their 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, interest rates and unanticipated delays or expenses on the part of
the Fund and its suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
At September 30, 1999, the Fund had cash and cash equivalents of $296,996,
compared with $114,347 at March 31, 1999. The increase is primarily attributable
to proceeds from sales and maturities of marketable securities in excess of
purchases of marketable securities. This increase is partially offset by cash
used for operating activities.
As of September 30, 1999, approximately $2,366,000 of marketable securities has
been designated as Reserves by the Managing General Partner. The Reserves, as
defined in the Partnership Agreement, were established to be used for working
capital of the Fund and contingencies related to the ownership of Local Limited
Partnership interests. Management believes that the interest income earned on
Reserves, along with cash distributions received from Local Limited
Partnerships, to the extent available, will be sufficient to fund the Fund's
ongoing operations. Reserves may be used to fund operating deficits if the
Managing General Partner deems such funding appropriate.
At September 30, 1999, the Fund has committed to make future capital
contributions and pay future purchase price installments on its investments in
Local Limited Partnerships. These future payments are contingent upon the
achievement of certain criteria set forth in the Local Limited Partnership
Agreements and total approximately $613,000. In addition, the Fund has set aside
$217,000 for future capital contributions to one Local Limited Partnership.
Since the Fund invests as a limited partner, the Fund has no contractual duty to
provide additional funds to Local Limited Partnerships beyond its specified
investment. Thus, as of September 30, 1999, the Fund had no contractual or other
obligation to any Local Limited Partnership which had not been paid or provided
for, except as described above.
In the event a Local Limited Partnership encounters operating difficulties
requiring additional funds, the Fund might deem it in its best interest to
voluntarily provide such funds in order to protect its investment. No such event
has occurred to date.
Cash Distributions
No cash distributions were made during the six months ended September 30, 1999.
Results of Operations
The Fund's results of operations for the three and six months ended September
30, 1999 resulted in a net loss of $616,148 and $1,171,215, respectively, as
compared to a net loss of $854,591 and $1,814,984 for the same periods in 1998.
The decrease in net loss is primary attributable to a decrease in equity in
losses of Local Limited Partnerships, a decrease in general and administrative
expenses and an increase in other revenue. The decrease in net loss is partially
offset by a decrease in investment revenue.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Property Discussions
The Fund is invested in nineteen Local Limited Partnerships which own nineteen
properties located in twelve states and Puerto Rico. Fifteen of the properties,
consisting of 1,574 units, were new construction, and four of the properties,
consisting of 564 units, were rehabilitated. All properties have completed
construction or rehabilitation and initial lease-up. Most of the 19 Local
Limited Partnerships have stabilized operations. The majority of these
stabilized properties is operating at break-even or is generating positive
operating cash flow.
As previously reported, Grand Boulevard Renaissance, located in Chicago,
Illinois, has been experiencing operating difficulties and is unable to achieve
debt service coverage. These difficulties are mainly due to poor collections
from tenants. On April 1, 1998, a new management agent was brought in to monitor
property operations and increase tenant collections. Occupancy as of June 30,
1999 declined to 89%. The Managing General Partner will be working closely with
the Local General Partner and new management agent to monitor operations.
As previously reported, Los Claveles II, located in Trujillio Alto, Puerto Rico,
continues to experience operating difficulties due to ongoing capital repair
needs and management issues. In 1996, an affiliate of the Managing General
Partner of the Partnership successfully negotiated with the Local General
Partners, the lender and the local housing authority to replace the management
agent for Los Claveles II as well as its neighboring property, Los Claveles I.
The new management agent assumed responsibility for the property in December
1996. In addition, the Managing General Partner was successful in completing the
negotiations with the lender, resulting in a loan modification for Los Claveles
II and the approval for the Local General Partners to step down voluntarily and
be replaced by an unaffiliated general partner effective upon close of the
transaction. However, efforts to close this transaction have been delayed by
regulatory issues, title defects and various other problems. Subsequently, the
proposed replacement local general partner informed the lender and the Managing
General Partner that is will not close the workout agreement. The proposed
incoming local general partner cited their concern that the risks were
significantly higher than expected due to the continued delays, unresolved
transactional issues and the continued crime and drug issues at the property
which have resulted in higher vacancy losses.
Considering this new information, the Managing General Partner and the lender
have resumed negotiations and are currently reviewing other possible replacement
local general partners and management agents. However, given the severity of the
operating deficits, it is possible that the Fund will not be able to retain its
interest in the property. A foreclosure would result in recapture of credits for
investors, the allocation of taxable income to the Fund and loss of future
benefits associated with this property.
Oak Ridge, located in Macon, Georgia, had been experiencing operating
difficulties due to low occupancy. Occupancy as of June 30, 1999 improved
slightly from the last quarter to 79%. In September, a new on-site manager was
hired to enhance tenant screening and marketing efforts. The Managing General
Partner will be working closely with the management agent and Local General
Partner to monitor property operations and marketing efforts.
Woods Lane, located in Rogers, Arkansas, had been suffering from poor occupancy
due to local competition. However, occupancy as of June 30, 1999 improved 99%.
In September 1998, a new management team was hired to step-up the marketing
efforts, review rent concessions, install a resident referral plan and monitor
competing rent levels. In addition, capital improvements have recently been
completed which include exterior painting, carpet replacement and landscaping
and grounds improvement. The Managing General Partner will closely monitor the
new management agent and also review possible debt restructuring. The Managing
General Partner is currently funding operating deficits.
BOSTON FINANCIAL TAX CREDIT FUND VII
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Impact of Year 2000
The Managing General Partner's plan to resolve year 2000 issues involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Managing General Partner has fully completed an assessment of all
information systems that may not be operative subsequent to 1999 and has begun
the remediation, testing and implementation phase on both hardware and software
systems. Because the hardware and software systems of both the Fund and Local
Limited Partnerships are generally the responsibility of obligated third
parties, the plan primarily involves ongoing discussions with and obtaining
written assurances from these third parties that pertinent systems will be 2000
compliant. In addition, neither the Fund nor the Local Limited Partnerships are
incurring significant additional costs since such expenses are principally
covered under service contracts with vendors. As of November 1999, the General
Partner is in the final stages of its Year 2000 remediation plan and believes
all major systems are compliant; any systems still being updated are not
considered significant to the Fund's operations. However, despite the likelihood
that all significant year 2000 issues are expected to be resolved in a timely
manner, the Managing General Partner has no means of ensuring that all systems
of outside vendors or other entities that impact operations will be 2000
compliant. The Managing General Partner does not believe that the inability of
third parties to address their year 2000 issues in a timely manner will have a
material impact on the Fund. However, the effect of non-compliance by third
parties is not readily determinable.
Management has also evaluated a worst case scenario projection with respect to
the year 2000 and expects any resulting disruption of either the Managing
General Partner's activities or any Local Limited Partnership's operations to be
short-term inconveniences. Such problems, however, are not likely to fully
impede the ability to carry out necessary duties of the Fund. Moreover, because
expected problems under a worst case scenario are not extensively detrimental,
and because the likelihood that all systems affecting the Fund will be compliant
before 2000, the Managing General Partner has determined that a formal
contingency plan that responds to material system failures is not necessary.
Other Development
Lend Lease Real Estate Investments, Inc., ("Lend Lease") the U.S. subsidiary of
Lend Lease Corporation and the leading U.S. institutional real estate advisor,
as ranked by assets under management, announced on July 29, 1999 it had reached
a memorandum of understanding to acquire The Boston Financial Group Limited
Partnership ("Boston Financial"). Lend Lease closed the acquisition of Boston
Financial on November 3, 1999.
Headquartered in New York and Atlanta, Lend Lease Corporation has regional
offices in 12 cities nationwide. The company ranks as the leading U.S. manager
of tax-exempt assets invested in real estate. Lend Lease is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. Worldwide, Lend Lease Corporation
operates from more than 30 cities on five continents: North America, Europe,
Asia, Australia and South America. In addition to real estate investments, the
Lend Lease Group operates in the areas of property development, project
management and construction, and capital services (infrastructure). Financial
services activities include funds management, life insurance, and wealth
protection.
BOSTON FINANCIAL TAX CREDIT FUND VII
(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, 1999.
BOSTON FINANCIAL TAX CREDIT FUND VII
(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 12, 1999 BOSTON FINANCIAL TAX CREDIT FUND VII,
A LIMITED PARTNERSHIP
By: Arch Street VII, Inc.,
its Managing General Partner
/s/Randolph G. Hawthorne
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer