August 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 for Quarter Ended June 30, 1996
File No. 01-18462
Gentlemen:
Pursuant to the requirements of Rule 901(d) of Regulation S-T, enclosed is one
copy of subject report.
Very truly yours,
/s/ Marie D. Reynolds
Marie D. Reynolds
Assistant Controller
QH3-Q1.DOC
<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 June 30, 1996
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 June 30, 1996 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 - June 30, 1996 (Unaudited)
and March 31, 1996 1
Combined Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 1996 and 1995 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 1996 3
Combined Statements of Cash Flows (Unaudited) - For the
Three Months Ended June 30, 1996 and 1995 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 16
SIGNATURE 17
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS - June 30, 1996 And March 31, 1996
June 30, March 31,
1996 1996
<S> <C> <C>
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 349,390 $ 268,040
Accounts receivable, net 15,656 40,757
Interest receivable 1,213 740
Prepaid expenses 17,396 35,930
Tenant security deposits 60,674 67,011
Other current assets 139,419 53,656
-------------- ------------
Total current assets 583,748 466,134
Investments in Local Limited Partnerships, net (Note 2) 29,215,187 30,216,554
Marketable securities, at fair value (Note 1) 130,649 158,967
Replacement reserves 197,708 168,335
Rental property at cost, net of accumulated
depreciation 12,705,606 12,818,153
Deferred acquisition fees escrow 450,000 450,000
Deferred expenses, net 90,858 93,479
-------------- ------------
Total Assets $ 43,373,756 $ 44,371,622
============== ============
Liabilities and Partners' Equity
Current Liabilities:
Accounts payable to affiliates $ 878,901 $ 755,244
Accounts payable and accrued expenses 315,256 471,328
Current portion of mortgage notes payable 4,207,901 4,261,276
Interest payable 351,924 186,550
Note payable - affiliate 22,279 22,279
Security deposits payable 60,260 60,229
-------------- ------------
Total current liabilities 5,836,521 5,756,906
Due to affiliate 317,874 323,046
Deferred acquisition fees payable 450,000 450,000
Former general partner advances 200,000 200,000
Mortgage notes payable 2,740,082 2,744,825
-------------- ------------
Total Liabilities 9,544,477 9,474,777
-------------- ------------
Minority interest in Local Limited Partnerships 339,716 341,952
-------------- ------------
General, Initial and Investor Limited Partners' Equity 33,490,877 34,554,881
Net unrealized gains (losses) on marketable securities (1,314) 12
--------------- ------------
Total Partners' Equity 33,489,563 34,554,893
-------------- ------------
Total Liabilities and Partners' Equity $ 43,373,756 $ 44,371,622
============== ============
The accompanying notes are an integral part of the combined financial statements
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- --------
<S> <C> <C>
Revenue:
Rental $ 451,156 $ 464,202
Investment 59,519 28,516
Other 45,065 17,447
------------- ------------
Total Revenue 555,740 510,165
------------- ------------
Expenses:
Asset management fees, related party 113,861 111,083
General and administrative 80,382 305,701
Rental operations, exclusive of depreciation 277,122 424,253
Property management fees (Note 3) 22,133 22,619
Interest 227,403 169,884
Depreciation 113,217 90,836
Amortization 48,064 48,046
------------- ------------
Total Expenses 882,182 1,172,422
------------- ------------
Loss before equity in losses of
Local Limited Partnerships (326,442) (662,257)
Minority interest in losses of
Local Limited Partnerships 2,236 2,343
Equity in losses of Local Limited Partnerships (Note 2) (739,798) (1,265,367)
------------- ------------
Net Loss $ (1,064,004) $ (1,925,281)
============== ============
Net Loss allocated:
To General Partners $ (10,640) $ (19,253)
To Limited Partners (1,053,364) (1,906,028)
------------- ------------
$ (1,064,004) $ (1,925,281)
============= ============
Net Loss per Limited Partnership Unit
(100,000 Units) $ (10.53) $ (19.06)
=========== ============
The accompanying notes are an integral part of the combined financial statements
</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 Three Months Ended June 30, 1996
<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, 1996 $ (530,297) $ 5,000 $ 35,080,178 $ 12 $ 34,554,893
Net change in unrealized
losses on marketable
securities available for sale - - - (1,326) (1,326)
Net Loss (10,640) - (1,053,364) - (1,064,004)
---------- ------- ------------ --------- -------------
Balance at June 30, 1996 $ (540,937) $ 5,000 $ 34,026,814 $ (1,314) $ 33,489,563
========== ======= ============ ========= =============
The accompanying notes are an integral part of the combined financial statements
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------
<S> <C> <C>
Net cash used for operating activities $ (110,380) $ (260,615)
------------ ------------
Cash flows from investing activities:
Purchases of marketable securities - (846,415)
Proceeds from sales and maturities of
marketable securities 26,411 1,904,915
Cash distributions received from Local
Limited Partnerships 216,126 53,504
Additions to fixed assets (670) (3,790)
Proceeds from insurance claim - 32,661
------------ ------------
Net cash provided by investing activities 241,867 1,140,875
------------ ------------
Cash flows from financing activities:
Payments to developer (5,172) (5,172)
Repayment of mortgage notes payable (71,435) (20,527)
Repayment of notes receivable, affiliate 13,317 -
Advances from affiliate 13,153 -
------------ ------------
Net cash used for financing activities (50,137) (25,699)
------------ ------------
Net increase in cash and cash equivalents 81,350 854,561
Cash and cash equivalents, beginning 268,040 155,456
------------ ------------
Cash and cash equivalents, ending $ 349,390 $ 1,010,017
============ ============
The accompanying notes are an integral part of the combined financial statements
</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 three
months ended March 31, 1996. 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 three months.
1. 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 $ 39,392 $ - $ (736) $ 38,656
Mortgage backed securities 47,199 - (212) 46,987
Other debt securities 45,372 - (366) 45,006
----------- ------------ ---------- -----------
Marketable Securities
at June 30, 1996 $ 131,963 $ - $ (1,314) $ 130,649
=========== ============ ========== ===========
Debt securities issued by
the US Treasury $ 39,392 $ - $ (167) $ 39,225
Mortgage backed securities 56,715 583 - 57,298
Other debt securities 62,848 - (404) 62,444
----------- ------------ --------- -----------
Marketable Securities
at March 31, 1996 $ 158,955 $ 583 $ (571) $ 158,967
=========== ============ ========= ===========
</TABLE>
The contractual maturities at June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in one to five years $ 84,764 $ 83,662
Mortgage backed securities 47,199 46,987
----------- -----------
$ 131,963 $ 130,649
=========== ===========
</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 $26,000 and $1,905,000 for the three
months ended June 30, 1996 and 1995. Included in investment income are gross
gains of $20 and gross losses of $601 which were realized on these sales in the
three months ended June 30, 1996 and gross gains of $10,646 and gross losses of
$10,036 which were realized on these sales for the three months ended June 30,
1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
2. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partner
interests in fifty-six 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, except for Granite Colony Apartments and Harbour
View, where the Partnership's ownership interest is 97% and 49%, respectively.
Upon dissolution, proceeds will be distributed according to each respective
partnership agreement.
The following is a summary of Investments in Local Limited Partnerships at June
30, 1996, 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 $ 69,417,303
Cumulative equity in loss of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $18,794,265) (42,876,919)
Cumulative cash distributions received from
Local Limited Partnerships (1,544,597)
Investments in Local Limited Partnerships
before adjustment 24,995,787
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 7,149,477
Accumulated amortization of acquisition
fees and expenses (1,248,631)
Investments in Local Limited Partnerships 30,896,633
Reserve for valuation of investments in
Local Limited Partnerships (1,681,446)
$ 29,215,187
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
2. Investments in Local Limited Partnerships (continued)
Summarized financial information from the financial statements of all Local
Limited Partnerships accounted for on the equity method (excluding the Combined
Entities) in which the Partnership has invested, as of June 30, 1996, is as
follows:
Summarized Balance Sheets - March 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment property, net $ 193,822,789
Other assets, net 14,604,056
Current assets 7,113,170
-------------
Total Assets $ 215,540,015
=============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 176,155,079
Other liabilities 19,473,699
Current liabilities 12,635,327
-------------
Total Liabilities 208,264,105
Partners' Equity 7,275,910
-------------
Total Liabilities and Partners' Equity $ 215,540,015
=============
Summarized Income Statements - for the
Three Months ended March 31, 1996
Rental and other income $ 7,869,672
-------------
Expenses:
Operating expenses 4,298,063
Interest expense 3,770,247
Depreciation and amortization 2,127,262
-------------
Total expenses 10,195,572
Net Loss $ (2,325,900)
=============
Partnership's share of net loss $ (2,243,569)
=============
Other partners' share of net loss $ (82,331)
=============
</TABLE>
For the three months ended June 30, 1996, the Partnership has not recognized
$1,503,771 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.
3. Transactions with Affiliates
Boston Financial Property Management ("BFPM"), an affiliate of the Managing
General Partner, currently manages Harbour View, a property in which the
Partnership has invested. Included in operating expenses in the summarized
income statements in Note 2 to the Combined Financial Statements is $12,951 of
fees earned by BFPM during the three months ended March 31, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Combined Financial Statements (continued)
(Unaudited)
3. Transactions with Affiliates (continued)
BFPM is also the management agent of Willow Lake and The Kyle. BF Lansing
Limited Partnership ("BF Lansing"), an affiliate of the Managing General Partner
currently manages Shady Shores. Included in the Combined Statements of
Operations is $18,533 of property management fees charged by BFPM and BF Lansing
during the three months ended March 31, 1996.
4. Liquidation of Interests in Local Limited Partnerships
As previously reported, the Managing General Partner has transferred or is in
the process of transferring all of the assets of six of the Texas Partnerships
subject to their liabilities to unaffiliated entities. Crown Point, Godley Arms
and Glenbrook Apartments' transfers were effective February 21, 1996, February
21, 1996 and June 7, 1996, respectively. Three of the properties (Sherwood Arms,
Quail Run Apartments, and Lone Oak Apartments) are being transferred to new
owners effective after June 30, 1996. Since the new general partners had assumed
the risks of ownership, including funding operating deficits prior to March 31,
1996, the Partnership's investment in these three partnerships has been changed
to the equity method, effective on the date that control of these partnerships
was assumed by the unaffiliated entities.
The Managing General Partner of the Partnership has executed an agreement to
sell the general partner interests in the seven remaining Texas Partnerships
(Crestwood Place, Eagle Nest Apartments, Hallet-West Apartments, One Main Place,
Pilot Point Apartments, Shady Shores Apartments and Willowick Apartments) to an
unaffiliated buyer. These properties will be restructured into a new partnership
in which the Partnership will retain a limited partner interest for a period of
time expected to be about twelve months. During this period, investors will
continue to receive tax credits from these 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
L.P. III (A) Entities (B) (A) Combined
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 304,062 $ 45,328 $ - $ 349,390
Accounts receivable, net 525,547 15,656 (525,547) 15,656
Interest receivable 1,213 - - 1,213
Notes receivable 1,427,750 - (1,427,750) -
Prepaid expenses 12,739 4,657 - 17,396
Tenant security deposits - 60,674 - 60,674
Other current assets - 139,419 - 139,419
------------ ------------- ------------ ------------
Total current assets 2,271,311 265,734 (1,953,297) 583,748
Investments in Local Limited
Partnerships, net of reserve
for valuation 32,073,297 - (2,858,110) 29,215,187
Marketable securities, at fair value 130,649 - - 130,649
Replacement reserves - 197,708 - 197,708
Rental property at cost, net of
accumulated depreciation - 12,705,606 - 12,705,606
Deferred acquisition fees escrow 450,000 - - 450,000
Deferred expenses, net - 90,858 - 90,858
------------ ------------- ------------ ------------
Total assets $ 34,925,257 $ 13,259,906 $ (4,811,407) $ 43,373,756
============ ============= ============ ============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 832,432 $ 572,016 $ (525,547) $ 878,901
Accounts payable and accrued
expenses 130,983 184,273 - 315,256
Current portion of mortgage
notes payable - 4,235,677 (27,776) 4,207,901
Interest payable - 351,924 - 351,924
Notes payable, affiliate 22,279 - - 22,279
Security deposits payable - 60,260 - 60,260
------------ ------------- ------------ ------------
Total current liabilities 985,694 5,404,150 (553,323) 5,836,521
Due to affiliate - 317,874 - 317,874
Deferred acquisition fees payable 450,000 - 450,000
General partner advances - 200,000 200,000
Mortgage notes payable - 4,140,056 (1,399,974) 2,740,082
------------ ------------- ------------- ------------
Total liabilities 1,435,694 10,062,080 (1,953,297) 9,544,477
------------ ------------- ------------ ------------
</TABLE>
<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)
<TABLE>
<CAPTION>
Balance Sheets (continued)
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
<S> <C> <C> <C> <C>
Minority interest in Local
Limited Partnerships - - 339,716 339,716
------------ ------------- ------------ ------------
General, Initial and Investor Limited
Partners' Equity 33,490,877 3,197,826 (3,197,826) 33,490,877
Net unrealized losses on marketable
securities (1,314) - - (1,314)
------------ ------------- ------------ -------------
Partners' Equity 33,489,563 3,197,826 (3,197,826) 33,489,563
------------ ------------- ------------ ------------
Total Liabilities and
Partners' Equity $ 34,925,257 $ 13,259,906 $ (4,811,407) $ 43,373,756
============ ============= ============= ============
</TABLE>
(A) As of June 30, 1996.
(B) As of March 31, 1996.
<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)
<TABLE>
<CAPTION>
Statements of Operations
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 451,156 $ - $ 451,156
Investment 58,073 1,446 - 59,519
Other 29,933 15,132 - 45,065
------------ ----------- ---------- ------------
Total Revenue 88,006 467,734 - 555,740
------------ ----------- ---------- ------------
Expenses:
Asset management fees 113,861 - - 113,861
General and administrative 80,382 - - 80,382
Rental operations, exclusive
of depreciation - 277,122 - 277,122
Property management fees - 22,133 - 22,133
Interest 500 226,903 - 227,403
Depreciation - 113,217 - 113,217
Amortization 45,443 2,621 - 48,064
------------ ----------- ---------- ------------
Total Expenses 240,186 641,996 - 882,182
------------ ----------- ---------- ------------
Loss before equity in losses of Local
Limited Partnerships and
extraordinary item (152,180) (174,262) - (326,442)
Equity in losses of Local Limited
Partnerships (911,824) - 172,026 (739,798)
Minority interest in losses of Local
Limited Partnerships - - 2,236 2,236
------------ ----------- ---------- ------------
Net loss $ (1,064,004) $ (174,262) $ 174,262 $ (1,064,004)
============ =========== ========== ============
(A) For the three months ended June 30, 1996.
(B) For the three months ended March 31, 1996.
</TABLE>
<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 Cash Flows
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (15,439) $ (94,941) $ - $ (110,380)
--------------- ------------- ----------- -----------
Cash flows from investing activities:
Proceeds from sales and maturities
of marketable securities 26,411 - - 26,411
Cash distributions received from
Local Limited Partnerships 216,126 - - 216,126
Additions to fixed assets - (670) - (670)
--------------- ------------- ----------- -----------
Net cash provided by (used for)
investing activities 242,537 (670) - 241,867
--------------- ------------- ----------- -----------
Cash flows from financing activities:
Payments to developer - (5,172) - (5,172)
Repayment of mortgage notes payable - (71,435) - (71,435)
Repayment of notes receivable, affiliate 13,317 - - 13,317
Advances from (payments to) affiliate (30,985) 44,138 - 13,153
--------------- ------------- ----------- -----------
Net cash used for financing activities (17,668) (32,469) - (50,137)
--------------- ------------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 209,430 (128,080) - 81,350
Cash and cash equivalents, beginning 94,632 173,408 - 268,040
--------------- ------------- ----------- -----------
Cash and cash equivalents, ending $ 304,062 $ 45,328 $ - $ 349,390
=============== ============= =========== ===========
(A) For the three months ended June 30, 1996.
(B) For the three months ended March 31, 1996.
</TABLE>
<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 $81,350 from $268,040 at March 31, 1996 to $349,390 at June
30, 1996. This increase is attributable to net proceeds received from sales and
maturities of marketable securities and cash distributions received from Local
Limited Partnerships. These are offset by the repayment of mortgage notes
payable and cash used for operations.
The Managing General Partner initially designated 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%. Funds approximating $195,000 have been withdrawn from the
reserves to pay legal and other costs related to the Mod Rehab Issue as
previously discussed. Additionally, professional fees relating to various
property issues totaling approximately $1,319,000 have been paid from reserves.
This amount includes approximately $1,078,000 for the Texas Partnerships. To
date, reserve funds in the amount of approximately $349,000 have also been used
to make additional capital contributions to two Local Limited Partnerships and
the Partnership has paid approximately $1,376,000 (net of paydowns) to purchase
the mortgage of a Local Limited Partnership. To date, the Partnership has used
approximately $495,000 of operating funds to replenish reserves. At June 30,
1996, approximately $276,000 of cash, cash equivalents and marketable securities
have been designated as reserves. 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.
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 $1,078,000 noted above, the Partnership has also advanced
approximately $557,000 to the Texas Partnerships and $174,000 to one Local
Limited Partnership to fund operating deficits.
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 June 30, 1996, the Partnership had no
contractual or other obligation to any Local Limited Partnership which had not
been paid or provided for.
Cash Distributions
No cash distributions were made in the three months ended June 30, 1996.
Results of Operations
For the three months ended June 30, 1996, Partnership operations resulted in a
net loss of $1,064,004 as compared to a net loss of $1,925,281 for the three
months ended June 30, 1995. The decrease in net loss is primarily attributable
to a decrease in equity in losses and lower general and administrative expenses
and rental operations.
The decrease in equity in losses of Local Limited Partnerships is a result of an
increase in unrecognized losses relating to certain Local Limited Partnerships
which cumulative equity in losses and distributions exceeded the Partnership's
total investments in these Local Limited Partnerships during the comparable
periods. The Partnership is also in the process of transferring its interests in
six Local Limited Partnerships, resulting in a decrease in equity in losses.
<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 (continued)
The decline in general and administrative expenses and rental operations is
primarily attributable to a significant decrease in legal and engineering
expenses relating to the liquidating Texas Partnerships.
Property Discussions
Prior to the transfer of six of the Texas Partnerships, Limited Partnership
interests had 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 remaining sixty-three 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.
The Temple-Kyle Limited Partnership located in Temple, Texas, after defaulting
on its mortgage entered into a Plan of Reorganization. The plan called for the
Partnership to purchase the mortgage from the current lender plus a non-recourse
note which was paid in full as of March 1996. Affiliates of the Managing General
Partner replaced the Local General Partner and the management agent. An
affiliate of the Managing General Partner is currently working to refinance the
property, subject to approval by the local housing authority. Two local lenders
have expressed a possible interest in providing financing for Temple-Kyle.
As previously reported, the Managing General Partner has transferred or is in
the process of transferring all of the assets of six of the Texas Partnerships
subject to their liabilities to unaffiliated entities. Crown Point, Godley Arms
and Glenbrook Apartments' transfers were effective February 21, 1996, February
21, 1996 and June 7, 1996. Three of the properties (Sherwood Arms, Quail Run
Apartments, and Lone Oak Apartments) are being transferred to new owners
effective after June 30, 1996.
<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)
The Managing General Partner of the Partnership has executed an agreement to
sell the general partner interests in the seven remaining Texas Partnerships
(Crestwood Place, Eagle Nest Apartments, Hallet-West Apartments, One Main Place,
Pilot Point Apartments, Shady Shores Apartments and Willowick Apartments) to an
unaffiliated buyer. These properties will be restructured into a new partnership
in which the Partnership will retain a limited partner interest for a period of
time expected to be about twelve months. During this period, investors will
continue to receive tax credits from these properties.
For tax purposes, these events will result in both Section 1231 Gain and
Cancellation of Indebtedness income. In addition, the transfer of ownership will
result in nominal recapture of tax credits, since the Texas Partnerships
represent only 2% of the Partnership's tax credits.
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. HUD has a program to sell all performing and non-performing
mortgages in a public auctions that are scheduled to take place on a
region-to-region basis over the next few years. Harbour View's mortgage was not
included in the auctions that occurred in for April, 1996, but 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.
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 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 on these properties which include the termination of any foreclosure
action in exchange for additional capital to fund capital improvements. The
workout terms were agreed upon in November 1995, however, the agreements were
not officially approved until late December 1995. The workout called for
construction rehabilitation work. Occupancy levels were expected to increase
significantly within six months. These results have not yet materialized and the
properties are part of HUD's non-performing loan auction scheduled for August 6,
1996. The Managing General Partner has submitted bids in an attempt to purchase
the mortgages on these properties.
Breckenridge Creste, located in Duluth, GA, has been experiencing financial
difficulties. Increased vacancies, a weak rental market and deferred maintenance
are major factors. An agreement was reached to allow admission of an affiliate
of the Partnership as General Partner under certain circumstances. The Managing
General Partner is actively working to replace the Local General Partner and the
management agent and to develop a plan to stabilize property operations. Any
change regarding the Local General Partner interest will be subject to the
lender's approval.
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, deferred maintenance and security issues. The Local General
Partner is increasing marketing efforts to stabilize occupancy and improve the
overall conditions of the property. However, such an effort will require an
influx of capital in order to fund significant operating deficits. The Managing
General Partner, together with the Local General Partner are currently
performing an analysis to determine such a strategy. Since the properties carry
cash flow mortgages from the State of New York, the probability of foreclosure
is very low.
<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 June 30, 1996.
<PAGE>
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, 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 349,390
<SECURITIES> 130,649
<RECEIVABLES> 16,869<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 217,489<F2>
<PP&E> 12,705,606
<DEPRECIATION> 000
<TOTAL-ASSETS> 43,373,756<F3>
<CURRENT-LIABILITIES> 5,836,521<F4>
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 33,489,463
<TOTAL-LIABILITY-AND-EQUITY> 43,373,756<F5>
<SALES> 000
<TOTAL-REVENUES> 555,740<F6>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 654,779<F7>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 227,403
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (1,064,004)<F8>
<EPS-PRIMARY> (10.53)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts receivable $15,656 and Interest receivable
$1,213
<F2>Included in current assets: Prepaid insurance $17,396, Tenant security
deposits $60,674 and Other current assets $139,419
<F3>Included in total assets:Investments in Local Limited Partnerships
$29,215,187, Replacement reserves $197,708, Deferred escrow $450,000 and
Deferred expenses, net $90,858
<F4>Included in current liabilities: Accounts payable to affiliates $878,901,
Accounts payable and accrued expenses $315,256, Current portion of mortgage
notes payable $4,207,901, Interest payable $351,924, Notes payable - affiliate
$22,279, Security deposits payable $60,260.
<F5>Included in Total Liabilities and Equity: Due to affiliate $317,874,
Deferred acquisition fees payable$450,000, Former general partner advances $200,000, $2,740,082 of long-term debt
and Minority interest in Local Limited Partnerships $339,716
<F6>Total revenue includes: Rental $451,156, Investment $59,519 and Other
$45,065
<F7>Included in Other Expenses: Asset management fees $113,861, General and Administrative
$80,382, Property management fees $22,133, Rental operations, exclusive of
depreciation $277,122, Depreciation $113,217 and Amortization $48,064
<F8>Net loss reflects: equity in losses of Local Limited Partnerships of
$739,798, and minority interest in loss of Local Limited Partnerships $2,236
</FN>
</TABLE>
