10QSB 1 tcpqsb04.txt TCPQ2QSB04 August 13, 2004 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Re: Boston Financial Tax Credit Fund Plus, A Limited Partnership Report on Form 10-QSB for the Quarter Ended June 30, 2004 File Number 0-22104 Dear Sir/Madam: Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, filed herewith is one copy of subject report. Very truly yours, /s/Stephen Guilmette Stephen Guilmette Assistant Controller TCP-10Q1.DOC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 ---------------------------------------- OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-22104 Boston Financial Tax Credit Fund Plus, A Limited Partnership ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-3105699 ----------------------------------------- -------------------------- (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 PLUS, (A Limited Partnership) TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No. ------------------------------ -------- Item 1. Financial Statements Balance Sheet (Unaudited) - June 30, 2004 1 Statements of Operations (Unaudited) - For the Three Months Ended June 30, 2004 and 2003 2 Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Three Months Ended June 30, 2004 3 Statements of Cash Flows (Unaudited) - For the Three Months Ended June 30, 2004 and 2003 4 Notes to the Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Controls and Procedures 11 PART II - OTHER INFORMATION --------------------------- Items 1-6 12 SIGNATURE 13
BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) BALANCE SHEET June 30, 2004 (Unaudited)
Assets Cash and cash equivalents $ 833,941 Marketable securities, at fair value 1,337 Investments in Local Limited Partnerships (Note 1) 5,650,578 Other investments (Note 2) 2,324,248 Other assets 142 ------------- Total Assets $ 8,810,246 ============= Liabilities and Partners' Equity Due to affiliate $ 136,601 Accrued expenses 14,950 ------------- Total Liabilities 151,551 ------------- General, Initial and Investor Limited Partners' Equity 8,658,704 Net unrealized losses on marketable securities (9) ------------- Total Partners' Equity 8,658,695 ------------- Total Liabilities and Partners' Equity $ 8,810,246 =============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) STATEMENTS OF OPERATIONS For the Three Months Ended June 30, 2004 and 2003 (Unaudited)
2004 2003 ------------- ------------- Revenue: Investment $ 1,804 $ 3,309 Accretion of Original Issue Discount (Note 2) 44,430 41,112 Other 5,592 29,522 Total Revenue ------------- ------------ 51,826 73,943 --------- --------- Expenses: Asset management fees, affiliate 44,125 45,102 Provision for valuation of advances to Local Limited Partnerships - 29,688 General and administrative (includes reimbursements to an affiliate in the amount of $81,261 and $46,440 in 2004 and 2003, respectively) 103,557 68,951 Amortization 3,794 4,513 ------------- -------------- Total Expenses 151,476 148,254 ------------- ------------- Loss before equity in losses of Local Limited Partnerships (99,650) (74,311) Equity in losses of Local Limited Partnerships (Note 1) (93,136) (101,761) ------------- ------------- Net Loss $ (192,786) $ (176,072) ============= ============= Net Loss allocated: General Partners $ (2,372) $ (2,172) Class A Limited Partners (219,814) (201,251) Class B Limited Partners 29,400 27,351 ------------- ------------- $ (192,786) $ (176,072) ============= ============= Net Income (Loss) per Limited Partner Unit: Class A Unit (34,643 Units) $ (6.35) $ (5.81) ============= ============== Class B Unit (3,290 Units) $ 8.94 $ 8.31 ============= =============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY) For the Three Months Ended June 30, 2004 (Unaudited)
Investor Investor Net Initial Limited Limited Unrealized General Limited Partners, Partners, Gains Partners Partner Class A Class B (Losses) Totals ------------- -------- --------- ---------- ------------ ----------------- Balance at March 31, 2004 $ (251,179) $ 5,000 $ 6,382,546 $ 2,715,123 $ 11 $ 8,851,501 ----------- --------- ------------ ------------ ----------- --------------= Comprehensive Income (Loss): Change in net unrealized gains on marketable securities available for sale - - - - (20) (20) Net Income (Loss) (2,372) - (219,814) 29,400 - (192,786) ----------- --------- ------------ ------------ ----------- -------------- Comprehensive Income (Loss) (2,372) - (219,814) 29,400 (20) (192,806) ----------- --------- ------------ ------------ ----------- -------------- Balance at June 30, 2004 $ (253,551) $ 5,000 $ 6,162,732 $ 2,744,523 $ (9) $ 8,658,695 =========== ========= ============ ============ =========== ==============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) STATEMENTS OF CASH FLOWS For the Three Months Ended June 30, 2004 and 2003 (Unaudited)
2004 2003 ------------- ------------- Net cash used for operating activities $ (101,790) $ (48,482) Net cash provided by investing activities 166,772 218,007 ------------- -------------- Net increase in cash and cash equivalents 64,982 169,525 Cash and cash equivalents, beginning 768,959 173,210 ------------- ------------- Cash and cash equivalents, ending $ 833,941 $ 342,735 ============= =============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included with the Fund's Form 10-KSB for the year ended March 31, 2004. In the opinion of the Managing General Partner, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Fund's financial position and results of operations. The results of operations for the periods may not be indicative of the results to be expected for the year. The Managing General Partner 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 March 31, 2004 and 2003. 1. Investments in Local Limited Partnerships The Fund has limited partnership interests in twenty-four Local Limited Partnerships which were organized for the purpose of owning and operating multi-family housing complexes, all of which are government-assisted. The Fund's ownership interest in each Local Limited Partnership is 99%, except for Livingston Arms, Phoenix Housing, Metropolitan, New Garden Place and Findley Place, where the Fund's ownership interests are 82%, 0.2%, 98.75%, 97.9% and 98%, respectively, and Primrose and Sycamore, where the Fund's ownership is 49.5%. The Fund may have negotiated or may negotiate options with the local general partners to purchase or sell the Fund's interests in the Properties at the end of the tax credit compliance period at nominal prices. In the event that Properties are sold to third parties, proceeds will be distributed according to the terms of each Local Limited Partnership agreement. The following is a summary of investments in Local Limited Partnerships at June 30, 2004:
Capital contributions and advances paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 26,345,310 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $2,535,200) (15,088,767) Cumulative cash distributions received from Local Limited Partnerships (3,513,672) ------------- Investments in Local Limited Partnerships before adjustments 7,742,871 Excess investment cost over the underlying assets acquired: Acquisition fees and expenses 1,097,216 Cumulative amortization of acquisition fees and expenses (286,665) ------------- Investments in Local Limited Partnerships before impairment allowance 8,553,422 Impairment allowance on investments in Local Limited Partnerships (2,902,844) ------------- Investments in Local Limited Partnerships $ 5,650,578 =============
The Fund has recorded an impairment allowance for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) (Unaudited) 1. Investments in Local Limited Partnerships (continued) The Fund's share of the net losses of the Local Limited Partnerships for the three months ended June 30, 2004 is $276,164. For the three months ended June 30, 2004, the Fund has not recognized $190,948 of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and cumulative distributions exceeded its total investment in these Local Limited Partnerships. The Fund recognized $7,920 of previously unrecognized losses in the three months ended June 30, 2004. 2. Other Investments Other investments consists of the aggregate cost of the Treasury STRIPS purchased by the Fund for the benefit of the Class B Limited Partners. The amortized cost at June 30, 2004 is composed of the following: Aggregate cost of Treasury STRIPS $ 918,397 Accumulated accretion of Original Issue Discount 1,405,851 ------------- $ 2,324,248 The fair value of these securities at June 30, 2004 is $2,773,943. Maturity dates for the STRIPS range from February 15, 2007 to May 15, 2010 with a final maturity value of $3,290,000. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Fund intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and is including this statement for purposes of complying with these safe harbor provisions. Although the Fund believes the forward-looking statements are based on reasonable assumptions, the Fund can give no assurance that its expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, general economic and real estate conditions and interest rates. Accounting Policies The Fund's accounting policies include those that relate to its recognition of investments in Local Limited Partnerships using the equity method of accounting. The Fund's policy is as follows: The Fund accounts for its investments in Local Limited Partnerships using the equity method of accounting because the Fund does not have control over the major operating and financial policies of the Local Limited Partnerships in which it invests. Under the equity method, the investment is carried at cost, adjusted for the Fund's share of net income or loss and for cash distributions from the Local Limited Partnerships; equity in income or loss of the Local Limited Partnerships is included currently in the Fund's operations. Under the equity method, a Local Limited Partnership investment will not be carried below zero. To the extent that equity in losses are incurred when the Fund's carrying value of the respective Local Limited Partnership has been reduced to a zero balance, the losses will be suspended and offset against future income. Income from Local Limited Partnerships, where cumulative equity in losses plus cumulative distributions have exceeded the total investment in Local Limited Partnerships, will not be recorded until all of the related unrecorded losses have been offset. To the extent that a Local Limited Partnership with a carrying value of zero distributes cash to the Fund, that distribution is recorded as income on the books of the Fund and is included in "Other Revenue" in the accompanying financial statements. The Fund has implemented policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. Real estate experts analyze the investments to determine if impairment indicators exist. If so, the investment is analyzed to consider the Fund's ability to recover its carrying value. If an other than temporary impairment in carrying value exists, a provision to write down the asset to fair value will be recorded in the Fund's financial statements. Liquidity and Capital Resources At June 30, 2004, the Fund had cash and cash equivalents of $833,941 as compared with $768,959 at March 31, 2004. The increase is primarily attributable to cash distributions received from Local Limited Partnerships, partially offset by cash used for operating activities. The Managing General Partner initially designated 4% of the Adjusted Gross Proceeds (which generally means Gross Proceeds minus the amounts committed to the acquisition of Treasury STRIPS) as Reserves as defined in the Partnership Agreement. The Reserves were established to be used for working capital of the Fund and contingencies related to the ownership of Local Limited Partnership interests. The Managing General Partner may increase or decrease such Reserves from time to time, as it deems appropriate. At June 30, 2004, $835,278 of cash, cash equivalents and marketable securities has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $441,000 have been paid from Reserves. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Fund's management might deem it in its best interest to voluntarily provide such funds in order to protect its investment. As of June 30, 2004, the Fund has advanced approximately $261,000 to Local Limited Partnerships to fund operating deficits. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources (continued) The Managing General Partner believes that the investment income earned on the Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Fund's on-going operations. Reserves may be used to fund operating deficits, if the Managing General Partner deems funding appropriate. If Reserves are not adequate to cover the Fund's operations, the Fund will seek other financing sources including, but not limited to, the deferral of Asset Management Fees paid to an affiliate of the Managing General Partner or working with Local Limited Partnerships to increase cash distributions. To date, the Fund has used approximately $57,000 of operating funds to replenish Reserves. 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 June 30, 2004, the Fund had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for. Cash Distributions No cash distributions were made during the three months ended June 30, 2004. Results of Operations For the three months ended June 30, 2004, the Fund's operations resulted in a net loss of $192,786 as compared to a net loss of $176,072 for the same period in 2003. The increase in net loss in primary attributable to an increase in general and administrative expenses, as well as a decrease in other revenue. These effects were partially offset by a decrease in provision for valuation of advances to Local Limited Partnerships and a decrease in equity in losses of Local Limited Partnerships between the two periods. The increase in general and administrative expense is primarily due to increased charges from an affiliate of the Managing General Partner for operational and administrative expenses necessary for the operation of the Fund. The decrease in other revenue relates to the timing of distributions from Local Limited Partnerships received by the Fund. The decrease in provision for valuation of advances to Local Limited Partnerships is the result of a reserve for advances made to one Local Limited Partnership in the prior year. The decrease in equity in losses of Local Limited Partnerships is primarily due to an increase in unrecognized losses by the Fund of Local Limited Partnerships with carrying values of zero. Portfolio Update The Fund's investment portfolio consists of limited partnership interests in twenty-four Local Limited Partnerships, each of which owns and operates a multi-family apartment complex and each of which has generated Tax Credits. Since inception, the Fund has generated Tax Credits, net of recapture, of approximately $1,443 per Class A Unit, with approximately $27 of Tax Credits expected to be generated during 2004, with immaterial amounts expected from 2005 through 2010. Class B Unit investors have received Tax Credits, net of recapture, of approximately $1,038 per Limited Partner Unit, with approximately $19 of Tax Credits expected to be generated during 2004, with immaterial amounts expected from 2005 through 2010. Properties that receive low income housing Tax Credits must remain in compliance with rent restriction and set-aside requirements for at least 15 years from the date the property is completed. Failure to do so would result in the recapture of a portion of the property's Tax Credits. Between 2006 and continuing through 2010, the Compliance Period of the twenty-four Properties in which the Fund has an interest will expire. The Managing General Partner has negotiated agreements that will ultimately dispose of the Fund's interest in five Local Limited Partnerships. It is unlikely that the disposition of any of these Local Limited Partnership interests will generate any material cash distributions to the Fund. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Portfolio Update (continued) The Managing General Partner will continue to closely monitor the operations of the Properties during the Compliance Period and will formulate disposition strategies with respect to the Fund's remaining Local Limited Partnership interests. It is unlikely that the Managing General Partner's efforts will result in the Fund disposing of all of its remaining Local Limited Partnership interests concurrently with the expiration of each Property's Compliance Period. The Fund shall dissolve and its affairs shall be wound up upon the disposition of the final Local Limited Partnership interest and other assets of the Fund. Investors will continue to be Limited Partners, receiving K-1s and quarterly and annual reports, until the Fund is dissolved. Property Discussions A majority of the Properties in which the Fund has an interest have stabilized operations and operate above breakeven. A few Properties generate cash flow deficits that the Local General Partners of those Properties fund through project expense loans, subordinated loans or operating escrows. However, some Properties have had persistent operating difficulties that could either: i) have an adverse impact on the Fund's liquidity; ii) result in their foreclosure; or iii) result in the Managing General Partner deeming it appropriate for the Fund to dispose of its interest in the Local Limited Partnership prior to the expiration of the Compliance Period. Also, the Managing General Partner, in the normal course of the Fund's business, may arrange for the future disposition of its interest in certain Local Limited Partnerships. The following Property discussions focus only on such Properties. As previously reported, although the neighborhood in which 45th & Vincennes (Chicago, Illinois) is located has improved in the last few years, potential tenants are reluctant to occupy the Property due to its location and curb appeal. As a result, maintaining occupancy, and therefore revenues, continues to be an issue and debt service coverage and working capital are below appropriate levels. A site visit by the Managing General Partner found the Property in need of some minor improvements but in overall fair condition. Even though advances from the Local General Partner have enabled the Property to remain current on its loan obligations, the Managing General Partner believes that the Local General Partner and its affiliated management company are not adequately performing their responsibilities with respect to the Property. The Managing General Partner has expressed these concerns to the Local General Partner and will continue to closely monitor the Property's operations. As previously reported, due to concerns over the long-term financial health of Primrose, Phoenix Housing and Sycamore, located in Grand Forks, North Dakota, Moorhead, Minnesota and Sioux Falls, South Dakota, respectively, the Managing General Partner developed a plan that will ultimately result in the transfer of the Fund's interest in each Local Limited Partnership. All three Local Limited Partnerships have the same Local General Partner. In 1997, in an effort to reduce possible future risk, the Managing General Partner consummated the transfer of 50% of the Fund's interest in capital and profits in the three Local Limited Partnerships to an affiliate of the Local General Partner. Effective June 17, 1999, the Local General Partner transferred both its general partner interest and 48.5% of its interest in capital and profits in the three Local Limited Partnerships to a non-affiliated, non-profit general partner. Effective August 31, 2000, the former Local General Partner withdrew its remaining interest in each of the Local Limited Partnerships. The Managing General Partner had the right to transfer the Fund's remaining interests after December 1, 2001. As previously reported, with regard to Sycamore and Primrose, the Fund will retain its full share of Tax Credits until such time as the remaining interest is put to the Local General Partner. In addition, the Local General Partner has the right to call the remaining interest subsequent to the Compliance Period, which expires on December 31, 2007. With regard to Phoenix Housing, the Fund approved the admission of an additional limited partner to the Local Limited Partnership effective February 1, 2000. As a result, the Fund's interest in the Local Limited Partnership was diluted to an immaterial amount. Because of its diluted interest in the Local Limited Partnership, the Fund will not receive a material amount of the Property's Tax Credits subsequent to February 1, 2000. Instead, the Fund will receive cash from the Local Limited Partnership in the approximate amount of the Property's Tax Credits that it would have received had its interest in the Property not been diluted. The compliance period expires on December 31, 2005 for Phoenix Housing. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) As previously reported, as a result of concerns regarding the then existing operating deficits and capital requirements of Findley Place, located in Minneapolis, Minnesota, the Managing General Partner developed a plan that will ultimately result in the transfer of the Fund's interest in the Local Limited Partnership. On March 1, 2000, the Managing General Partner consummated the transfer of 1% of the Fund's interest in losses, 48.5% of its interest in profits and 30% of its capital account to the Local General Partner. The Managing General Partner had the right to put the Fund's remaining interest to the Local General Partner any time after one year from the March 1, 2000 effective date. In addition, the Local General Partner has the right to call the remaining interest after the Compliance Period has expired, which will occur on December 31, 2008. Currently, the Property is experiencing stabilized operations. As previously reported, New Garden Place, located in Gilmer, North Carolina, has enjoyed strong operations for the past several years. In early 2004, the Local General Partner requested and the Fund provided its approval to a refinancing of the Property's first mortgage that lowered the interest rate and will increase the Property's cash flow. In connection with the Fund's approval of this refinancing, the Fund and the Local General Partner entered into a put agreement whereby the Fund can transfer its interest in the Local Partnership to the Local General Partner for a nominal amount any time after the Property's Compliance Period ends on December 31, 2008. Preston Place, located in Winchester, Virginia, has historically operated extremely well. The Property finished 2003 with 98% occupancy and with high levels of debt service coverage and working capital. In late 2003, the Local General Partner requested and the Managing General Partner approved a refinancing of the Property with net cash proceeds available for distribution to the Fund. On November 14, 2003, the Property closed on the refinancing, and the Fund received $750,000 of proceeds. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) CONTROLS AND PROCEDURES Controls and Procedures Based on the Fund's evaluation as of the end of the period covered by this report, the Fund's director has concluded that the Fund's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Fund files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. There have been no significant changes in the Fund's internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (A Limited Partnership) PART II OTHER INFORMATION Items 1-5 Not applicable Item 6 Exhibits and reports on Form 8-K (a) Exhibits 31.1 Certification of Jenny Netzer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Jenny Netzer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended June 30, 2004. BOSTON FINANCIAL TAX CREDIT FUND PLUS, (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: August 13, 2004 BOSTON FINANCIAL TAX CREDIT FUND PLUS, A LIMITED PARTNERSHIP By: Arch Street VIII, Inc., its Managing General Partner /s/Jenny Netzer Jenny Netzer Executive Vice President MMA Financial, LLC