November 13, 1995
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Financial Qualified Housing Tax Credits L.P. III
Report on Form 10-Q for Quarter Ended September 30, 1995
File No. 01-18462
Dear Sir/Madam:
Pursuant to the requirements of Section 15 (d) of the Securities
Exchange Act of 1934, there are filed herewith one manually signed copy
and seven conformed copies of subject report.
Please stamp and return the enclosed copy of this letter in the enclosed
stamped, self-addressed envelope to acknowledge receipt of this filing.
Very truly yours,
Marie D. Ricciardi
Assistant Controller
QH3-10Q2.DOC
11/13/95
<PAGE>
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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Quarter Ended September 30, 1995 Commission file number 01-18462
Boston Financial Qualified Housing Tax Credits L.P. III
(Exact name of registrant as specified in its charter)
Delaware 04-3032106
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED BALANCE SHEETS - September 30, 1995 and March 31, 1995
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 192,446 $ 155,456
Accounts receivable 188,137 160,409
Interest receivable 9,921 18,704
Notes receivable (Note 1) 1,462,693 -
Prepaid expenses 37,836 35,819
Tenant security deposits 86,012 66,473
Other current assets 78,852 78,059
Total current assets 2,055,897 514,920
Marketable securities, at fair value
(Note 2) 732,404 2,200,946
Investments in Local Limited Partnerships,
net of provision for valuation of
$1,635,000 in 1995 and 1994 (Note 3) 34,129,251 36,694,357
Replacement reserves 95,751 67,995
Rental property at cost, net of
accumulated depreciation 12,301,605 12,508,437
Deferred acquisition fees escrow 562,506 562,506
Deferred expenses, net of accumulated
amortization of $26,594 and $21,352 in
1995 and 1994, respectively 98,721 103,963
Total Assets $49,976,135 $ 52,653,124
Liabilities and Partners' Equity
Current Liabilities:
Accounts payable to affiliates $ 508,340 $ 356,743
Accounts payable and accrued expenses 387,873 343,277
Current portion of mortgage
notes payable 6,801,460 6,816,613
Interest payable 471,972 226,147
Notes payable (Note 1) 612,693 -
Security deposits payable 81,528 85,719
Total current liabilities 8,863,866 7,828,499
Payable to Developer 317,877 323,046
Deferred acquisition fees payable 562,506 562,506
General partner advances 611,909 611,909
Mortgage notes payable 2,754,684 2,764,484
Total Liabilities 13,110,842 12,090,444
Minority interest in
Local Limited Partnerships 598,188 602,393
Contingencies (Note 4)
Partners' Equity 36,267,105 39,960,287
Total Liabilities and Partners' Equity $49,976,135 $52,653,124
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Six Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Rental $ 491,357 $ 420,533 $ 955,559 $ 839,836
Investment 30,929 14,452 59,445 15,370
Other 21,593 21,742 39,040 48,934
Total Revenue 543,879 456,727 1,054,044 904,140
Expenses:
Asset management
fees related party 111,083 109,731 222,166 219,462
General and
administrative (includes
reimbursements to an
affiliate in the amounts
of $79,015 and $69,208
in 1995 and 1994,
respectively) 265,227 461,859 570,928 666,715
Property management fees,
related party (806) 37,017 21,813 82,276
Rental operations
exclusive of
depreciation 458,901 462,437 883,154 812,791
Interest expense 173,460 193,900 343,344 364,018
Depreciation 90,555 87,853 181,391 175,705
Amortization 42,887 51,489 90,933 101,407
Total Expenses 1,141,307 1,404,286 2,313,729 2,422,374
Loss before
equity in losses
of Local Limited
Partnerships (597,428) (947,559) (1,259,685) (1,518,234)
Minority interest
in losses of Local
Limited Partnerships 1,861 3,464 4,204 5,680
Equity in losses
of Local Limited
Partnerships (1,208,330) (1,187,990) (2,473,697) (2,472,956)
Net Loss $(1,803,897) $(2,132,085) $(3,729,178) $(3,985,510)
Net Loss allocated:
General Partners $ (18,039) $ (21,321) $ (37,292) $ (39,855)
To Limited
Partners (1,785,858) (2,110,764) (3,691,886) (3,945,655)
$ (1,803,897) $(2,132,085) $ (3,729,178) $(3,985,510)
Net Loss per Limited
Partnership Unit
(100,000 Units) $ (17.86) $ (21.11) $ (36.92) $ (39.46)
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Six Months Ended September 30, 1995
<TABLE>
<CAPTION>
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1995 $ (475,891) $ 5,000 $40,466,323 $(35,145) $39,96
Net unrealized gains on
marketable securities
available for sale - - - 35,996 35,996
Net Loss (37,292) - (3,691,886) - (3,729,178)
Balance at
September 30, 1995 $ (513,183) $ 5,000 $36,774,437 $ 851 $36,267,105
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net cash used for operating activities $ (627,852) $ (1,134,120)
Cash flows from investing activities:
Purchases of marketable securities (1,409,525) (1,376,766)
Proceeds from sales and maturities
of marketable securities 2,918,867 2,002,399
Cash distributions received from Local
Limited Partnerships 53,505 124,861
Capital contributions paid to Local
Limited Partnerships (43,321) -
Repayment of Local Limited
Partnership's mortgage (850,000) -
Additions to fixed assets (8,378) (34,720)
Proceeds from insurance claim 33,819 -
Net cash provided by investing activities 694,967 715,774
Cash flows from financing activities:
Advance from (payments to) developer (5,172) 244,000
Repayment of mortgages payable (24,953) (24,059)
Net cash provided by (used for)
financing activities (30,125) 219,941
Net increase (decrease) in cash
and cash equivalents 36,990 (198,405)
Cash and cash equivalents, beginning 155,456 252,482
Cash and cash equivalents, ending $ 192,446 $ 54,077
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(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, 1995. In the opinion of
management, these financial statements include all adjustments,
consisting only of norma l 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 reclassifications have
been made to prior period financial statements to conform to current
period classifications.
1. Notes Receivable and Notes Payable
The Temple-Kyle Limited Partnership, a Local Limited Partnership in
which the Partnership has invested, experienced financial difficulties
which resulted in a default on its mortgage. In September 1995, as a
result of the Joint Disclosure Statement and Plan of Reorganization
agreed upon by affiliates of the Managing General Partner and the
lender, the Partnership purchased the mortgage from the current lender
for $850,000 plus a non-recourse note for $612,693. The non-recourse
note is collateralized by a letter of credit from the Partnership. The
Partnership will assume the terms of the original mortgage note and
payments will commence November 1, 1995.
2. Marketable Securities
A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Debt securities issued
by the US Treasury $ 567,031 $ 2,257 $ (5,303) $ 563,985
Mortgage backed securities 57,191 - (36) 57,155
Other debt securities 107,331 3,933 - 111,264
Marketable Securities
at September 30, 1995 $ 731,553 $ 6,190 $ (5,339) $ 732,404
Debt securities issued
by the US Treasury $1,540,330 $ - $ (13,264) $1,527,066
Mortgage backed securities 501,041 2,878 (22,027) 481,892
Other debt securities 194,720 - (2,732) 191,988
Marketable Securities
at March 31, 1995 $2,236,091 $ 2,878 $ (38,023) $2,200,946
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
2. Marketable Securities (continued)
The contractual maturities at September 30, 1995 are as follows:
Fair
Cost Value
Due in one to five years $ 674,362 $ 675,249
Mortgage backed securities 57,191 57,155
$ 731,553 $ 732,404
Actual maturities may differ from contractual maturities because some
borrowers have the right to call or prepay obligations. Proceeds from
the sales of fixed maturity securities were approximately $2,919,000 for
the six months ended September 30, 1995. Included in investment income
are gross gains of $19,800 and gross losses of $14,996 which were
realized on these sales.
3. Investment in Local Limited Partnerships
The Partnership uses the equity method to account for its limited
partner interests in fifty-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
at September 30, 1995, excluding the Combined Entities:
<TABLE>
<CAPTION>
<S> <C>
Capital contributions to Local Limited
Partnerships and purchase price
paid to withdrawing partners of
Local Limited Partnerships $ 70,694,231
Cumulative equity in loss of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $13,522,785) (39,939,156)
Cumulative cash distributions received from
Local Limited Partnerships (1,023,881)
Investments in Local Limited Partnerships
before adjustment 29,731,194
Excess of investment cost over the
underlying net assets acquired:
Acquisition fees and expenses 7,154,323
Accumulated amortization of acquisition
fees and expenses (1,121,266)
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Investment in Local Limited Partnerships (continued)
Investments in Local Limited Partnerships 35,764,251
Reserve for valuation of investments in
Local Limited Partnerships (1,635,000)
$ 34,129,251
</TABLE>
Summarized financial information from the financial statements of all
Local Limited Partnerships accounted for on the equity method (excluding
the Combined Entities on the date of combination) in which the
Partnership has invested is as follows:
Summarized Balance Sheets - June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment property, net $ 197,506,791
Other assets, net 13,344,836
Current assets 7,512,145
Total Assets $ 218,363,772
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 173,739,554
Other liabilities 17,260,472
Current liabilities 13,285,883
Total Liabilities 204,285,909
Partners' Equity 14,077,863
Total Liabilities and Partners' Equity $ 218,363,772
Summarized Income Statements - For the
Six Months Ended June 30, 1995
Rental and other income $ 16,037,443
Expenses:
Operating expenses 8,169,498
Interest expense 7,960,938
Depreciation and amortization 4,372,792
Total expenses 20,503,228
Net Loss $ (4,465,785)
Partnership's share of net loss $ (4,308,022)
Other partners' share of net loss $ (157,763)
</TABLE>
For the six months ended September 30, 1995, the Partnership has not
recognized $1,838,792, of equity in losses relating to certain Local
Limited Partnerships in which cumulative equity in losses and
distributions exceeded its total investments in these Local Limited
Partnerships.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
4. Other Matters and Contingencies
As previously reported, six local limited partnerships in which other
Boston Financial partnerships have invested filed lawsuits against HUD
challenging rent rollbacks that HUD was attempting to institute through
the relevant Public Housing Agencies ("PHAs"). All six of these
properties are subsidized under HUD's Section 8 Moderate Rehabilitation
Program ("Mod Rehab"). In all of the cases, the courts granted summary
judgments in favor of the local limited partnerships on the grounds that
the proposed roll backs were illegal. In all of those cases, HUD and
the relevant PHAs appealed, and the district court rulings were upheld
in two U.S. Courts of Appeals.
In the case of one of these six properties, HUD announced that it also
intended to partially terminate the Housing Assistance Payment contract
("HAP").
While none of the Partnership's properties were parties to the six cases
discussed above, approximately 21% of the gross proceeds of the offering
has been invested in properties which are subsidized under the Section 8
Mod Rehab. The Partnership is bearing a portion of the litigation and
related expenses because HUD and the Managing General Partner view the
current cases as "test" cases in that many of the issues are universal
to all Mod Rehab properties. In fact, most of the Partnership's Mod
Rehab prope rties have entered into a settlement agreement with HUD.
The settlement agreement provides that if certain criteria are met, the
mortgages on the Mod Rehab properties will then be refinanced; debt
service savings will then be passed along to HUD in the form of reduced
Section 8 payments. In return, HUD has agreed to release any and all
rent rollback or ineligible unit/relocation claims for Mod Rehab
properties which participate in the settlement. In addition, during the
quarter ended June 30, 1995, HUD has begun to pay certain rent
adjustments which it has prev iously withheld from certain Mod Rehab
Program Properties. The General Partner believes that the settlement is
favorable to the Partnership and its Properties.
As previously reported, there have been investigations and prosecutions
involving certain developers and other persons related to the Mod Rehab
Program. It appears that such investigations and prosecutions are
winding down, and it is not currently expected that these matters will
have any material adverse impact on the Partnership and its Properties.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules
Balance Sheets
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations Combined
L.P. III (A) Entities (B) (A) (A)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 88,400 $ 104,046 $ - $ 192,446
Accounts receivable 544,094 90,816 (446,773) 188,137
Interest receivable 9,921 - - 9,921
Notes receivable 1,462,693 - - 1,462,693
Prepaid expenses - 37,836 - 37,836
Tenant security deposits - 86,012 - 86,012
Other current assets - 78,852 - 78,852
Total current assets 2,105,108 397,562 (446,773) 2,055,897
Marketable securities, at 732,404 - - 732,404
fair value Investments in
Local Limited Partnerships,
net of provision for valuation 34,605,651 - (476,400) 34,129,251
Replacement reserves - 95,751 - 95,751
Rental property at cost, net of
accumulated depreciation - 12,301,605 - 12,301,605
Deferred acquisition fees escrow 562,506 - - 562,506
Deferred expenses, net - 98,721 - 98,721
Total Assets $38,005,669 $12,893,639 $ (923,173) $49,976,135
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to
affiliates $ 481,690 $ 473,423 $ (446,773) $ 508,340
Accounts payable and accrued
expenses 81,675 306,198 - 387,873
Current portion of mortgage
notes payable - 6,801,460 - 6,801,460
Interest payable - 471,972 - 471,972
Notes payable 612,693 - - 612,693
Security deposits payable - 81,528 - 81,528
Total current liabilities 1,176,058 8,134,581 (446,773) 8,863,866
Payable to developer - 317,877 - 317,877
Deferred acquisition fees payable 562,506 - - 562,506
General partner advances - 611,909 - 611,909
Mortgage notes payable - 2,754,684 - 2,754,684
Total Liabilities 1,738,564 11,819,051 (446,773) 13,110,842
Minority interest in Local
Limited Partnerships - - 598,188 598,188
Partners' Equity 36,267,105 1,074,588 (1,074,588) 36,267,105
Total Liabilities and
Partners' Equity $38,005,669 $12,893,639 $ (923,173) $49,976,135
</TABLE>
(A) As of September 30, 1995.
(B) As of June 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended September 30, 1995
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Elimination Combined
L.P. III Entities (B) (A) (A)
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 491,357 $ - $ 491,357
Investment, net 30,929 - - 30,929
Other 4,453 17,140 - 21,593
Total Revenue 35,382 508,497 - 543,879
Expenses:
Asset management fees,
related party 111,083 - - 111,083
General and administrative 265,227 - - 265,227
Property management fees,
related party - (806) - (806)
Rental operations, exclusive
of depreciation - 458,901 - 458,901
Interest expense - 173,460 - 173,460
Depreciation - 90,555 - 90,555
Amortization 40,266 2,621 - 42,887
Total Expenses 416,576 724,731 - 1,141,307
Loss before equity in
losses of Local Limited
Partnerships (381,194) (216,234) - (597,428)
Minority interest in
losses of Local
Limited Partnerships - - 1,861 1,861
Equity in losses of
Local Limited
Partnerships (1,422,703) - 214,373 (1,208,330)
Net Loss $(1,803,897) $(216,234) $ 216,234 $(1,803,897)
</TABLE>
(A) For the three months ended September 30, 1995.
(B) For the three months ended June 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
Statements of Operations
For the Six Months Ended September 30, 1995
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations Combined
L.P. III (A) Entities (B) (A) (A)
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 955,559 $ - $ 955,559
Investment, net 59,445 - - 59,445
Other 10,198 28,842 - 39,040
Total Revenue 69,643 984,401 - 1,054,044
Expenses:
Asset management fees,
related party 222,166 - - 222,166
General and administrative 570,928 - - 570,928
Property management fees,
related party - 21,813 - 21,813
Rental operations, exclusive
of depreciation - 883,154 - 883,154
Interest expense - 343,344 - 343,344
Depreciation - 181,391 - 181,391
Amortization 85,691 5,242 - 90,933
Total Expenses 878,785 1,434,944 - 2,313,729
Loss before equity in
losses of Local Limited
Partnerships (809,142) (450,543) - (1,259,685)
Minority interest in
losses of Local
Limited Partnerships - - 4,204 4,204
Equity in losses of
Local Limited
Partnerships (2,920,036) - 446,339 (2,473,697)
Net Loss $(3,729,178) $ (450,543) $ 450,543 $(3,729,178)
</TABLE>
(A) For the six months ended September 30, 1995.
(B) For the six months ended June 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
5.Supplemental Combining Schedules (continued)
Statements of Cash Flows
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations Combined
L.P. III (A) Entities (B) (A) (A)
<S> <C> <C> <C> <C>
Net cash provided by
(used for) operating
activities $ (656,491) $ 28,639 $ - $ (627,852)
Cash flows from
investing activities:
Purchases of
marketable securities (1,409,525) - - (1,409,525)
Proceeds from sales
and maturities of
marketable securities 2,918,867 - - 2,918,867
Cash distributions received
from Local Limited
Partnerships 53,505 - - 53,505
Capital contributions paid
to Local Limited Partnerships(43,321) - - (43,321)
Repayment of Local Limited
Partnership's mortgage (850,000) - - (850,000)
Additions to fixed assets - (8,378) - (8,378)
Proceeds from insurance claim - 33,819 - 33,819
Net cash provided by
investing activities 669,526 25,441 - 694,967
Cash flows from financing
activities:
Payments to developer - (5,172) - (5,172)
Repayment of mortgage
notes payable - (24,953) - (24,953)
Net cash used for
financing activities - (30,125) - (30,125)
Net increase in cash
and cash equivalents 13,035 23,955 - 36,990
Cash and cash equivalents,
beginning 75,365 80,091 - 155,456
Cash and cash equivalents,
ending $ 88,400 $ 104,046 $ - $ 192,446
</TABLE>
(A) For the six months ended September 30, 1995.
(B) For the six months ended June 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENTS 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 $36,990 for the six months ended September
30, 1995. This increase is primarily attributable to net proceeds
received from sales and maturities of marketable securities and cash
received from Local Limited Partnerships, partially offset by purchases
of marketable securities, cash used for operating activities, principal
payments on mortgages and capital contributions to Local Limited
Partnerships.
The Managing General Partner initially allocated 3% of the Gross
Proceeds to 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. The Managing General
Partner may increase or decrease such reserves from time to time, as it
deems appropriate. During the year ended March 31, 1993, the Managing
General Partner decided to increase the reserve level to 3.75% and it
transferred the additional funds to the reserve account. Funds
approximating $194,000 have been withdrawn from the reserves to pay
legal and other costs related to the Mod Rehab Issue discussed in Note
4 to the Combined Financial Statements. Additionally, professional
fees relating to various property issues totaling approximately
$1,307,000 have been paid from reserves. To date, reserve funds in the
amount of $349,299 have been used to make additional capital
contributions to two Local Limited Partners hips and the Partnership ha
s paid $850,000 to purchase the mortgage of a Local Limited
Partnership. At September 30, 1995, the reserve balance of
approximately $257,000 is invested in various securities. 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 lim ited to, the deferral of Asset
Management Fees paid to an affiliate of t he 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 duty to provide additional funds to Local Limited
Partnerships beyond its specified investment. Thus, at September 30,
1995, 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 might deem it
in its best interests to provide such funds, voluntarily, in order to
protect its investment.
Cash Distributions
No cash distributions were made in the quarter ended September 30, 1995.
As of September 30, 1995, all required capital contributions have been
made to Local Limited Partnerships. The interest that is earned on the
funds held in reserves, as well as any cash distributions received from
Local Limited Partnerships will first be used to fund operations of the
Partnership. Based on the results of 1995 operations, the Local Limited
Partnerships are not expected to distribute significant amounts of cash
to the Partnership because such amounts will be needed to fund Property
operating costs. In addition, many of the Properties benefit from some
type of federal or state subsidy, and as a consequence, are subject to
restrictions on cash distributions. Therefore, it is expected that only
a limited amount of cash will be distributed to investors from this
source in the future.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the three and six months ended September 30, 1995, Partnership
operations resulted in a net loss of $1,803,897 and $3,729,178,
respectively, compared to net losses of $2,132,085 and $3,985,510 for
the respective 1994 periods. The decrease in net loss for the 1995
periods is primarily attributable to a decrease in general and
administrative expenses partially offset by a slight increase in net
rental revenue.
General and administrative expenses for the three and six months ended
September 30, 1995 totaled $265,227 and $570,928, respectively, as
compared to $461,859 and $666,715 for the respective 1994 periods. The
decrease is primarily attributable to a decline in the expenses paid on
behalf of the Combined Entities partially offset by an increase in legal
fees.
Property Discussions
Limited Partnership interests have been acquired in sixty-nine Local
Limited Partnerships which own and operate rental properties located in
twenty-four states. Forty-two of the properties, totaling 3,935 units,
were rehabilitated and twenty-seven properties, consisting of 1,614
units, were newly constructed. All of the properties have completed
construction or rehabilitation and initial rent-up. Most of the
sixty-nine Local Limited Partnerships in which the Partnership has
invested have stable operations. The majority of these properties are
operating at break-even or above.
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 Partner
to increase operating income, reduce expenses or refinance the debt at
lower interest rates in order to improve cash flow.
Willow Lake, located in Kansas City, Missouri, continues to improve
operations. The new Local General Partner completed workout
negotiations with the mortgage lender and execution of final workout
documents occurred in February 1994. Both the former Local General
Partner and management agent brought claims against the new Local
General Partner and the Local Limited Partnership relating primarily to
a return of certain advances that they made to Willow Lake prior to
their removal. A settlement agreement w as recently entered into which
called for a partial cash payment to the former management agent, a
cash flow note, an interest bearing note, and the repurchase of the
former Local General Partner's Special Limited Partner interest. The
cash payment was made from the Partnership's reserves.
The Temple-Kyle Limited Partnership located in Temple, Texas,
experienced financial difficulties which resulted in a default on its
mortgage. The lender placed the property into involuntary bankruptcy in
May 1993, as a protective measure. In January 1994, a bankruptcy
trustee was appointed to oversee the Local Limited Partnership's affairs
during the bankruptcy proceedings. Affiliates of the Managing General
Partner reached an agreement with the lender on a Joint Disclosure
Statement and Plan of Reorga nization. The plan called for the
Partnership to purchase the mortgage from the current lender for
$850,000 plus a non-recourse note for approximately $612,000,
collateralized by a letter of credit from the Partnership.
Additionally, an affiliate of the Managing General Partner would replace
the Local General Partner and the management agent. The Bankruptcy
Court approved the Joint Disclosure Statement on July 12, 1995 and
confirmed the Plan of Reorganization on September 13, 1995. The loan
closing was held on September 29.
In June 1993, the Local General Partner of Temple-Kyle and certain
affiliates (collectively, "Indeco") of thirteen Local Limited
Partnerships in which the Partnership invested, advised the Managing
General Partner of increasing
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
personal and business financial difficulties and requested assistance in
resolving the problems related to these Local Limited Partnerships.
Indeco also served as the Local General Partner in fifteen other Local
Limited Partnerships in Texas (collectively, the "Texas Partnerships")
and in one other Local Limited Partnership in which other Boston
Financial partnerships have invested. As a result, an affiliate of the
Managing General Partner has become the controlling Local General
Partner and management a gent of the Texas Partnerships. As a result
of Indeco's actions and financial problems, the mortgages for the Texas
Partnerships went into default. Among other things, Indeco did not
maintain certain required reserves and escrows and the properties are in
need of physical repair and improvement.
Since June 1993, affiliates of the Managing General Partner have been
involved in intensive workout negotiations with the Federal governmental
lender to the Texas Partnerships, the Rural Economic and Community
Development Services (RECDS) (formerly called the Farmers Home
Administration of the U.S. Department of Agriculture, FmHA). Affiliates
of the Managing General Partner reached an agreement with RECDS for a
comprehensive workout of the twenty-eight Texas Partnerships. The
workout agreement included ad ditional loans and rental assistance, a
debt service moratorium, through July 1995, and additional equity from
the Partnership.
In August 1995, RECDS informed Boston Financial that it would extend the
workout agreement for those properties which have had rehabilitation
loans approved by RECDS. Twelve properties, including seven of the
Partnership's, were then under agreement.
Completion of the work-out agreement has proven to be a very difficult
undertaking, even with respect to the "funded" properties.
Consequently, the Managing General Partner has begun to explore other
options including the admission of a new local general partner to the
Texas Partnerships and the sale or transfer of many or all of the Indeco
properties. At the current time the Managing General Partner believes
that there is a reasonable chance that it will be able to preserve the
Partnership's position in at least some of the seven "funded" Indeco
properties. However, it can offer no assurance in this regard. The
prospects for salvaging the Partnership's position in the six "unfunded"
Indeco properties appear remote at this time. It is expected that the
Partnership will shortly transfer its interest in the "unfunded"
properties to RECDS or another party. Any termination of the
Partnership's position in the Texas Partnerships will have certain tax
consequences, including a recapt ure of tax credits. The M anaging
General Partner will provide limited partners with an estimate of such
tax consequences as soon as such information is available.
In May and August 1994, the primary principal of Indeco and certain of
its affiliates filed for bankruptcy. The Managing General Partner has
filed claims against these parties as part of the bankruptcy actions.
The Partnership is deemed to have control over the Texas Partnerships
and no longer accounts for its investments in the Texas Partnerships on
the equity method, but rather, beginning on November 1, 1993, combines
the balance sheets, results of operations and cash flows of the Texas
Partnerships into the financial statements of the Partnership.
It was previously reported that Harbour View Associates, located in
Staten Island, New York, had defaulted on its HUD-insured loan and the
lender assigned the loan to HUD. A workout proposal was submitted in
December 1992 and was initially approved by HUD in March 1995. The
Local General Partner is working with HUD on the final terms.
HUD has a new program to sell all performing and non-performing
mortgages in a public auction process that is scheduled to take place on
a region-by-region basis over the next few years. The mortgage of
Harbour View may be included in a future auction. If the property's
mortgage were assigned to a new lender, the property's continued
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
feasibility will depend on the ability of the Local General Partner or
the Partnership or their respective affiliates to purchase the mortgages
or to negotiate a satisfactory arrangement with the buyer.
As previously reported, Regency Square and Rolling Hills, both located
in Dayton, Ohio, have experienced low levels of occupancy and rental
rates due to the deterioration of the local economy and the
neighborhoods in which they are located. The mortgages of both
properties have been assigned to HUD and workout plans were submitted
to the agency but were rejected. In 1993, the Local General Partner
engaged a new management company and occupancy has been improving,
although still below satisfactory levels. Operating deficits have been
funded by accruing interest expense. In February 1995, HUD notified
the Local General Partner of its intention to foreclose upon Rolling
Hills and Regency Square. An affiliate of the Managing General Partner
became actively involved in the discussions with HUD to achieve work
outs for these properties. Recently, HUD issued a verbal approval on
three-year workout proposals for these properties which include the
termination of any fore closure action in exchange for additional
capital to fund capital improvements. Although it is projected that
the workout arrangements will be in place for three years, HUD has the
right to cancel the agreements during a sixty day period following each
annual anniversary of the agreements, if HUD should sell the mortgage
notes to a different party. Such a sale could occur as a result of the
auctions discussed in the paragraph above. The additional capital will
be paid from property escrows.
The Massachusetts Housing Finance Agency ("MHFA") is expected to approve
a workout plan for Pleasant Plaza, located in Malden, Massachusetts,
by the fourth quarter of 1995. The workout includes increased subsidy,
the availability of $1.3 million from the Local General Partner's
letter of credit to fund operating deficits, and the option to commit
25% of the units towards low income use in perpetuity. The property
has been operating at a deficit due to its debt structure, however, the
deficits are covered by operating deficit escrows of the Local General
Partner and by the workout plan. As previously reported, affiliates
and a principal of the sole owner of the Local General Partner of
Pleasant Plaza filed for reorganization under Chapter 11 of the
Bankruptcy Code in 1992. A preliminary Plan of Reorganization is
expected to be submitted to the court by the end of 1995.
The original General Partner of Admiral Court, located in Philadelphia,
Pennsylvania, was recently replaced by a new Local General Partner,
Friends Rehabilitation Program, Inc., a leading non-profit manager and
developer of affordable housing in Philadelphia. The new Local General
Partner is refinancing the property's mortgage which will result in a
lower debt service payment. A loan closing is expected by the end of
November.
Shoreline and Waterfront, Buffalo, New York properties which share a
common Local General Partner, have been experiencing occupancy problems
due to the soft rental market. The Local General Partner is increasing
marketing efforts to improve occupancy. Both properties have received
approval for state grants to improve security systems. The properties
carry cash flow mortgages from the state.
Two other properties in which the Partnership has invested have been
experiencing negative cash flow due primarily to market conditions. The
Managing General Partner is currently working with local management to
ensure that the properties are maintained and that operations stabilize
as soon as possible.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(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, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(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 13, 1995
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
By: Arch Street III, Inc.,
its Managing General Partner
Georgia Murray
A Managing Director, Treasurer
and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 192,446
<SECURITIES> 732,404
<RECEIVABLES> 1,660,751<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 202,700<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,976,135<F3>
<CURRENT-LIABILITIES> 8,863,866
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 36,267,105
<TOTAL-LIABILITY-AND-EQUITY> 49,976,135<F4>
<SALES> 0
<TOTAL-REVENUES> 1,054,044
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,970,385<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 343,344
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,729,178)<F6>
<EPS-PRIMARY> $(36.92)
<EPS-DILUTED> 0
<FN> <F1>Included in receivables: Accounts receivable $188,137,
Interest receivable $9,921, Notes receivable $1,462,693.
<F2>Included in current assets: Prepaid insurance $37,836,
Tenant security deposits $86,012, Other current assets $78,852.
<F3>Included in total assets is $34,129,251 of investments
in Local Limited Partnerships.
<F4>Included in total liabilities is $4,246,976 of long-term
debt and $598,188 minority interest in Local Limited Partnerships.
<F5>Included in other expenses: Asset management fees,
related party $222,166, General and Administrative $570,928,
Property management fees, related party $21,813, Rental operations,
exclusive of depreciation $883,154, Depreciation $181,391,
Amortization $90,933.
<F6>Net loss reflects equity in losses of Local Limited Partnerships
of $2,473,697 and $4,204 of minority interest in losses of Local
Limited Partnerships.
</TABLE>
