February 13, 1996
Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Re: Boston Financial Qualified Housing Tax Credits L.P. III
Report on Form 10-Q Edgar for Quarter Ended December 31, 1995
File No. 01-18462
Dear Sir/Madam:
Pursuant to the requirements of Rule 901(d) of Regulation S-T, enclosed is one
copy 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
<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 December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
For Quarter Ended December 31, 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)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- - ------------------------------ --------
Item 1. Combined Financial Statements
Combined Balance Sheets - December 31, 1995 (Unaudited)
and March 31, 1995 1
Combined Statements of Operations (Unaudited) - For the Three
and Nine Months Ended December 31, 1995 and 1994 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 1995 3
Combined Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 1995 and 1994 4
Notes to Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Items 1-6 17
SIGNATURE 18
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED BALANCE SHEETS - December 31, 1995 and March 31, 1995
<TABLE>
<CAPTION>
December 31, March 31,
1995 1995
(Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 297,958 $ 155,456
Accounts receivable, net 284,439 160,409
Interest receivable 8,924 18,704
Notes receivable (Note 1) 1,462,693 -
Prepaid expenses 59,438 35,819
Tenant security deposits 93,673 66,473
Other current assets 93,511 78,059
------------- ------------
Total current assets 2,300,636 514,920
Marketable securities, at fair value (Note 2) 733,166 2,200,946
Investments in Local Limited Partnerships, net
of provision for valuation of $1,635,000 in
1995 and 1994 (Note 3) 33,001,059 36,694,357
Replacement reserves 169,913 67,995
Rental property at cost, net of accumulated
depreciation 12,140,082 12,508,437
Deferred acquisition fees escrow 450,000 562,506
Deferred expenses, net of accumulated
amortization of $29,215 and $21,352 in
1995 and 1994, respectively 96,100 103,963
------------- ------------
Total Assets $48,890,956 $52,653,124
============= =========
Liabilities and Partners' Equity
Current Liabilities:
Accounts payable to affiliates $ 622,294 $ 356,743
Accounts payable and accrued expenses 458,639 343,277
Current portion of mortgage notes payable 6,797,419 6,816,613
Interest payable 598,517 226,147
Notes payable (Note 1) 624,761 -
Security deposits payable 87,362 85,719
------------- ------------
Total current liabilities 9,188,992 7,828,499
Payable to Developer 317,874 323,046
Deferred acquisition fees payable 450,000 562,506
General partner advances 611,909 611,909
Mortgage notes payable 2,749,784 2,764,484
------------- ------------
Total Liabilities 13,318,559 12,090,444
Minority interest in Local Limited Partnerships 593,257 602,393
Commitments and contingencies (Notes 4 and 5)
Partners' Equity 34,979,140 39,960,287
------------- ------------
Total Liabilities and Partners' Equity $ 48,890,956 $52,653,124
============= ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Nine Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1995 1994 1995 1994
------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 430,097 $ 431,296 $ 1,385,656 $ 1,271,132
Investment 14,406 8,254 73,851 23,624
Other 124,980 76,634 164,020 125,568
-------------- ------------- ------------- --------------
Total Revenue 569,483 516,184 1,623,527 1,420,324
-------------- ------------- ------------- --------------
Expenses:
Asset management fees,
related party 111,083 105,027 333,249 324,489
General and administrative
(includes reimbursements
to an affiliate in the amounts
of $119,178 and $88,834
in 1995 and 1994,
respectively) 118,292 134,211 689,220 800,926
Bad debt expense 7,696 - 7,696 -
Property management fees,
related party 9,543 48,705 31,356 130,981
Rental operations, exclusive
of depreciation 379,283 349,985 1,262,437 1,162,776
Interest 196,180 176,000 539,524 540,018
Depreciation 189,672 87,853 371,063 263,558
Amortization 45,328 50,688 136,261 152,095
-------------- ------------- ------------- --------------
Total Expenses 1,057,077 952,469 3,370,806 3,374,843
-------------- ------------- ------------- --------------
Loss before equity in losses of
Local Limited Partnerships (487,594) (436,285) (1,747,279) (1,954,519)
Minority interest in losses of
Local Limited Partnerships 4,932 2,188 9,136 7,868
Equity in losses of Local
Limited Partnerships (806,356) (1,081,124) (3,280,053) (3,554,080)
-------------- ------------- ------------- --------------
Net Loss $ (1,289,018) $ (1,515,221) $ (5,018,196) $ (5,500,731)
============== ============= ============= ==============
Net Loss allocated:
To General Partners $ (12,890) $ (15,152) $ (50,182) $ (55,007)
To Limited Partners (1,276,128) (1,500,069) (4,968,014) (5,445,724)
-------------- ------------- ------------- --------------
$ (1,289,018) $ (1,515,221) $ (5,018,196) $ (5,500,731)
============== ============= ============= ==============
Net Loss per Limited
Partnership Unit
(100,000 Units) $( 12.76) $ (15.00) $ (49.68) $ (54.46)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Nine Months Ended December 31, 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) $ 39,960,287
Net unrealized gains on
marketable securities
available for sale - - - 37,049 37,049
Net Loss (50,182) - (4,968,014) - (5,018,196)
----------- --------- ------------- ---------- --------------
Balance at December 31, 1995 $ (526,073) $ 5,000 $ 35,498,309 $ 1,904 $ 34,979,140
=========== ========= ============= ========== ==============
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- ---------
<S> <C> <C>
Net cash used for operating activities $ (775,393) $ (1,362,958)
------------- ------------
Cash flows from investing activities:
Purchases of marketable securities (1,580,820) (1,376,765)
Proceeds from sales and maturities
of marketable securities 3,093,575 2,929,542
Cash distributions received from Local
Limited Partnerships 284,846 363,422
Decrease in deferred acquisition fee escrow 112,500 112,500
Payment of deferred acquisition fee (112,500) (112,500)
Repayment of Local Limited Partnership's mortgage (850,000) -
Additions to fixed assets (36,527) (42,418)
Proceeds from insurance claim 33,819 -
------------- ------------
Net cash provided by investing activities 944,893 1,873,781
------------- ------------
Cash flows from financing activities:
Advances from (payments to) developer (5,172) 244,000
Repayment of mortgages payable (33,894) (24,059)
Additions to mortgage notes payable - 6,195
Repayment of note payable (10,211) -
Advances from affiliate 22,279 -
------------- ------------
Net cash provided by (used for) financing activities (26,998) 226,136
-------------- ------------
Net increase in cash and cash equivalents 142,502 736,959
Cash and cash equivalents, beginning 155,456 252,482
------------- ------------
Cash and cash equivalents, ending $ 297,958 $ 989,441
============= ============
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
<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 normal recurring adjustments,
necessary to present fairly the Partnership's financial position and results of
operations. The results of operations for the periods may not be indicative of
the results to be expected for the year. Certain 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 assumed the terms of the original mortgage note and payments
commenced 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 $ 591,367 $ 4,519 $ (2,517) $ 593,369
Mortgage backed securities 56,957 537 - 57,494
Other debt securities 82,938 - (635) 82,303
----------- --------- --------- -----------
Marketable Securities
at December 31, 1995 $ 731,262 $ 5,056 $ (3,152) $ 733,166
=========== ========= ========= ===========
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 December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in one to five years $ 674,305 $ 675,672
Mortgage backed securities 56,957 57,494
----------- -----------
$ 731,262 $ 733,166
=========== ===========
</TABLE>
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 $3,094,000 for the nine months ended
December 31, 1995. Included in investment income are gross gains of $22,943 and
gross losses of $15,017 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
December 31, 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 $ 70,650,910
Cumulative equity in losses of Local Limited Partnerships
(excluding cumulative unrecognized
losses of $15,009,990) (40,745,511)
Cumulative cash distributions received from Local Limited Partnerships (1,259,690)
-------------
Investments in Local Limited Partnerships before adjustment 28,645,709
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 7,154,323
Accumulated amortization of acquisition
fees and expenses (1,163,973)
Investments in Local Limited Partnerships 34,636,059
Reserve for valuation of investments in Local Limited Partnerships (1,635,000)
-------------
$ 33,001,059
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
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 - September 30, 1995 - Unaudited
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment property, net $ 195,200,473
Other assets, net 13,449,721
Current assets 7,648,843
-------------
Total Assets $ 216,299,037
=============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 177,044,283
Other liabilities 10,953,177
Current liabilities 16,618,908
-------------
Total Liabilities 204,616,368
Partners' Equity 11,682,669
-------------
Total Liabilities and Partners' Equity $ 216,299,037
=============
Summarized Income Statements - For the Nine
Months Ended September 30, 1995 - Unaudited
Rental and other income $ 23,735,193
-------------
Expenses:
Operating expenses 12,548,873
Interest expense 11,616,129
Depreciation and amortization 6,554,209
-------------
Total expenses 30,719,211
Net Loss $ (6,984,018)
=============
Partnership's share of net loss $ (6,597,050)
=============
Other partners' share of net loss $ (386,968)
=============
</TABLE>
For the nine months ended December 31, 1995, the Partnership has not recognized
$3,316,997, 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.
4. Other Matters
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 rollbacks 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.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
4. Other Matters (continued)
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 bore a portion of the litigation and related expenses because
HUD and the Managing General Partner viewed the six 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 properties have entered into a settlement
agreement with HUD.
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.
5. Commitments
As previously reported, a $100,000 promissory note was executed as part of the
settlement agreement with the former management agent of Willow Lake. If in the
event of a default, the Partnership has guaranteed payment of the interest
obligation and any costs of collection incurred by the lender with respect to
the guaranty. The note calculates interest at a rate of 6% with a maturity date
of January 1, 2005.
6. Subsequent Event
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 additional loans and rental
assistance, a debt service moratorium, through July 1995, and additional equity
from the Partnership.
Completion of the workout agreements proved to be a very difficult undertaking.
As a result, the Managing General Partner has entered into agreements to sell or
transfer substantially all of the Indeco properties. The sales or transfers
should be completed within the next thirty days.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
7. 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 $ 174,725 $ 123,233 $ - $ 297,958
Accounts receivable, net 652,945 110,939 (479,445) 284,439
Interest receivable 8,924 - - 8,924
Notes receivable 1,462,693 - - 1,462,693
Prepaid expenses 15,570 43,868 - 59,438
Tenant security deposits - 93,673 - 93,673
Other current assets - 93,511 - 93,511
------------ ------------ ------------ ------------
Total current assets 2,341,857 465,224 (479,445) 2,300,636
Marketable securities, at fair value 733,166 - - 733,166
Investments in Local Limited
Partnerships, net of provision
for valuation 33,255,170 - (254,111) 33,001,059
Replacement reserves - 169,913 - 169,913
Rental property at cost, net of
accumulated depreciation - 12,140,082 - 12,140,082
Deferred acquisition fees escrow 450,000 - - 450,000
Deferred expenses, net - 96,100 - 96,100
------------ ------------ ------------ ------------
Total Assets $ 36,753,193 $ 12,871,319 $ (733,556) $ 48,890,956
============ ============ ============ ============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 595,640 $ 506,099 $ (479,445) $ 622,294
Accounts payable and accrued
expenses 103,652 354,987 - 458,639
Current portion of mortgage
notes payable - 6,797,419 - 6,797,419
Interest payable - 598,517 - 598,517
Notes payable 624,761 - - 624,761
Security deposits payable - 87,362 - 87,362
------------ ------------ ------------ ------------
Total current liabilities 1,324,053 8,344,384 (479,445) 9,188,992
Payable to developer - 317,874 - 317,874
Deferred acquisition fees payable 450,000 - - 450,000
General partner advances - 611,909 - 611,909
Mortgage notes payable - 2,749,784 - 2,749,784
------------ ------------ ------------ ------------
Total Liabilities 1,774,053 12,023,951 (479,445) 13,318,559
Minority interest in Local
Limited Partnerships - - 593,257 593,257
Partners' Equity 34,979,140 847,368 (847,368) 34,979,140
------------ ------------ ------------ ------------
Total Liabilities and
Partners' Equity $ 36,753,193 $ 12,871,319 $ (733,556) $ 48,890,956
============ ============ ============ ============
</TABLE>
(A) As of December 31, 1995.
(B) As of September 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
7. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended December 31, 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 $ - $ 430,097 $ - $ 430,097
Investment 14,406 - - 14,406
Other 41,955 83,025 - 124,980
------------ ----------- ---------- ------------
Total Revenue 56,362 513,122 - 569,484
------------ ----------- ---------- ------------
Expenses:
Asset management fees,
related party 111,083 - - 111,083
General and administrative 118,292 - - 118,292
Bad debt expense 7,696 - - 7,696
Property management fees,
related party - 9,543 - 9,543
Rental operations, exclusive
of depreciation - 379,283 - 379,283
Interest expense 9,381 186,799 - 196,180
Depreciation - 189,672 - 189,672
Amortization 42,707 2,621 - 45,328
------------ ----------- ---------- ------------
Total Expenses 289,159 767,918 - 1,057,077
------------ ----------- ---------- ------------
Loss before equity in losses of
Local Limited Partnerships (232,798) (254,796) - (487,594)
Minority interest in losses of Local
Limited Partnerships - - 4,932 4,932
Equity in losses of Local Limited
Partnerships (1,056,220) - 249,864 (806,356)
------------ ----------- ---------- ------------
Net Loss $ (1,289,018) $ (254,796) $ 254,796 $ (1,289,018)
============ =========== ========== ============
</TABLE>
(A) For the three months ended December 31, 1995.
(B) For the three months ended September 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
7. Supplemental Combining Schedules (continued)
Statements of Operations
For the Nine Months Ended December 31, 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 $ - $ 1,385,656 $ - $ 1,385,656
Investment 73,851 - - 73,851
Other 52,153 111,867 - 164,020
------------ ----------- ---------- ------------
Total Revenue 126,004 1,497,523 - 1,623,527
------------ ----------- ---------- ------------
Expenses:
Asset management fees,
related party 333,249 - - 333,249
General and administrative 689,220 - - 689,220
Bad debt expense 7,696 - - 7,696
Property management fees,
related party - 31,356 - 31,356
Rental operations, exclusive
of depreciation - 1,262,437 - 1,262,437
Interest 9,381 530,143 - 539,524
Depreciation - 371,063 - 371,063
Amortization 128,398 7,863 - 136,261
------------ ----------- ---------- ------------
Total Expenses 1,167,944 2,202,862 - 3,370,806
------------ ----------- ---------- ------------
Loss before equity in losses of
Local Limited Partnerships (1,041,940) (705,339) - (1,747,279)
Minority interest in losses of Local
Limited Partnerships - - 9,136 9,136
Equity in losses of Local Limited
Partnerships (3,976,256) - 696,203 (3,280,053)
------------ ----------- ---------- ------------
Net Loss $ (5,018,196) $ (705,339) $ 705,339 $ (5,018,196)
============ =========== ========== ============
</TABLE>
(A) For the nine months ended December 31, 1995.
(B) For the nine months ended September 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
7. 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 $ (832,733) $ 57,340 $ - $ (775,393)
------------- ------------- ------------ ------------
Cash flows from investing activities:
Purchases of marketable securities (1,580,820) - - (1,580,820)
Proceeds from sales and maturities
of marketable securities 3,093,575 - - 3,093,575
Cash distributions received from
Local Limited Partnerships 284,846 - - 284,846
Capital contributions paid
to Local Limited Partnerships (27,576) - 27,576 -
Capital contributions received - 27,576 (27,576) -
Decrease in deferred acquisition
fee escrow 112,500 - - 112,500
Payment of deferred acquisition fee (112,500) - - (112,500)
Repayment of Local Limited
Partnership's mortgage (850,000) - - (850,000)
Additions to fixed assets - (36,527) - (36,527)
Proceeds from insurance claim - 33,819 - 33,819
------------- ------------- ------------ ------------
Net cash provided by
investing activities 920,025 24,868 - 944,893
------------- ------------- ------------ ------------
Cash flows from financing activities:
Payments to developer - (5,172) - (5,172)
Repayment of mortgages
payable - (33,894) - (33,894)
Repayment of note payable (10,211) - - (10,211)
Advances from affiliate 22,279 - - 22,279
------------- ------------- ------------ ------------
Net cash used for financing activities 12,068 (39,066) - (26,998)
------------- ------------- ------------ ------------
Net increase in cash
and cash equivalents 99,360 43,142 - 142,502
Cash and cash equivalents,
beginning 75,365 80,091 - 155,456
------------- ------------- ------------ ------------
Cash and cash equivalents,
ending $ 174,725 $ 123,233 $ - $ 297,958
============= ============= ============ ============
</TABLE>
(A) For the nine months ended December 31, 1995.
(B) For the nine months ended September 30, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership (including the Combined Entities) had an increase in cash and
cash equivalents of $142,502 from $155,456 at March 31, 1995 to $297,958 at
December 31, 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.
Approximately $194,000 has 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 $1,282,000 have been paid from reserves.
This amount includes approximately $1,044,000 for the Texas Partnerships. To
date, reserve funds in the amount of $349,299 have been used to make additional
capital contributions to two Local Limited Partnerships and the Partnership has
paid $850,000 to purchase the mortgage of a Local Limited Partnership. At
December 31, 1995, the reserve balance of approximately $959,000 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 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.
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 December 31, 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. To date,
in addition to the $1,044,000 noted above, the Partnership has also advanced
$487,000 to the Texas Partnerships to fund operating deficits.
Cash Distributions
No cash distributions were made during the nine months ended December 31, 1995.
As of December 31, 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)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the three and nine months ended December 31, 1995, Partnership operations
resulted in a net loss of $1,289,018 and $5,018,196, respectively, compared to
net losses of $1,515,221 and $5,500,731 for the respective 1994 periods. The
decrease in net loss for the 1995 periods is primarily attributable to a
decrease in equity in losses of Local Limited Partnerships and general and
administrative expenses.
The decrease in equity in losses of Local Limited Partnerships is the result of
an increase in unrecognized losses relating to certain Local Limited
Partnerships in which cumulative equity in losses and distributions exceeded the
Partnerships' total investments in these Local Limited Partnerships during
the comparable periods.
The decline in general and administrative expenses for the three and nine months
ended December 31, 1995 as compared to the comparable 1994 periods is
attributable to a reclassification of legal expenses paid out of reserves on
behalf of the Combined Entity now deemed to be collectible.
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 was 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 Reorganization. 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. Effective September 30, 1995, an affiliate of
the Managing General Partner replaced 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, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
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
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 agent 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 additional 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 workout agreement proved to be a very difficult undertaking,
even with respect to the "funded" properties. Consequently, the Managing General
Partner has begun the process of selling or transferring substantially all of
the Indeco properties. At the current time the Managing General Partner believes
that it will not be able to preserve the Partnership's position in any of the
Indeco properties. It is expected that the Partnership will shortly transfer its
interest in the properties to RECDS or another party. Any termination of the
Partnership's position in the Texas Partnerships will have certain tax
consequences, including a recapture of tax credits. The Managing General Partner
will provide limited partners with an estimate of such tax consequences as soon
as such information is available. The impact to investors will be minimal as the
properties represent such a small portion of the overall portfolio.
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.
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 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.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
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 it is 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 written approval on three-year workout proposals for these
properties which include the termination of any foreclosure action in exchange
for additional capital to fund capital improvements. Although 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") executed a workout plan for
Pleasant Plaza located in Malden, MA, in December, 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,
at the maturity of the debt, 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 June, 1996.
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 refinanced the
property's mortgage which resulted in a lower debt service payment.
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 December 31, 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: February 13, 1996 BOSTON FINANCIAL QUALIFIED HOUSING TAX
CREDITS L.P. III
By: Arch Street III, Inc.,
its Managing General Partner
/s/Georgia Murray
Georgia Murray
A Managing Director, Treasurer
and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 297,958
<SECURITIES> 733,166
<RECEIVABLES> 1,756,056<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 246,622<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,890,956<F3>
<CURRENT-LIABILITIES> 9,188,992
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,979,140
<TOTAL-LIABILITY-AND-EQUITY> 48,890,956<F4>
<SALES> 0
<TOTAL-REVENUES> 1,623,527
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,831,282<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 539,524
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,018,196)<F6>
<EPS-PRIMARY> $(49.68)
<EPS-DILUTED> 0
<FN>
<F1>Included in receivables: Accounts receivable $284,439, Interest
receivable $8,924, Notes receivable $1,462,693
<F2>Included in current assets: Prepaid insurance $59,438, Tenant security
deposits $93,673, Other current assets $93,511
<F3>Included in total assets is $33,001,059 of Investments in Local Limited
Partnerships; Deferred Escrow of $450,000, Rental Property, net, of
$12,140,082, Deferred Expenses, net, of $96,100, and Replacement reserves of
$169,913.
<F4>Included in Total Liabilities and Equity are Advances from General
Partner $611,909, Acquisition Fees payable $450,000, Payables to a developer
$317,874, $2,749,784 of long-term debt and $593,217 minority interest in Local
Limited Partnerships.
<F5>Included in other expenses: Asset management fees, related party $333,249,
Bad debt expense $7,696, General and administrative $689,220, Property
management fees, related party $31,356, Rental operations, exclusive of
depreciation $1,262,437, Depreciation $371,063, and Amortization $136,261
<F6>Net loss reflects equity in losses of Local Limited Partnerships of
$3,280,053 and $9,136 of minority interest in losses of Local Limited
Partnerships.
</FN>
</TABLE>
