November 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 September 30, 1996
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,
/s/Marie D. Reynolds
Marie D. Reynolds
Assistant Controller
QH3-10Q2.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 September 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 September 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 - September 30, 1996 (Unaudited)
and March 31, 1996 1
Combined Statements of Operations (Unaudited) - For the Three
and Six Months Ended September 30, 1996 and 1995 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1996 3
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 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 14
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 - September 30, 1996 and March 31, 1996
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
(Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 257,152 $ 268,040
Accounts receivable, net 72,227 40,757
Interest receivable 1,323 740
Prepaid expenses 41,581 35,930
Tenant security deposits 63,223 67,011
Other current assets 97,075 53,656
-------------- ------------
Total current assets 532,581 466,134
Investments in Local Limited Partnerships, net of
reserve for valuation (Note 2) 27,924,994 30,216,554
Marketable securities, at fair value (Note 1) 168,917 158,967
Replacement reserves 154,349 168,335
Rental property at cost, net of accumulated
depreciation 12,611,729 12,818,153
Deferred acquisition fees escrow 450,000 450,000
Deferred expenses, net 88,237 93,479
-------------- ------------
Total Assets $ 41,930,807 $ 44,371,622
============== ============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 986,362 $ 755,244
Accounts payable and accrued expenses 451,808 471,328
Current portion of mortgage notes payable 4,196,171 4,261,276
Interest payable 356,847 186,550
Note payable - affiliate 22,279 22,279
Security deposits payable 62,412 60,229
-------------- ------------
Total current liabilities 6,075,879 5,756,906
Due to affiliate 323,046 323,046
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 9,789,007 9,474,777
-------------- ------------
Minority interest in Local Limited Partnerships 336,268 341,952
-------------- ------------
General, Initial and Investor Limited Partners' Equity 31,806,689 34,554,881
Net unrealized gains (losses) on marketable securities (1,157) 12
-------------- ------------
Total Partners' Equity 31,805,532 34,554,893
-------------- ------------
Total Liabilities and Partners' Equity $ 41,930,807 $ 44,371,622
============== ============
</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 Six Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
-------------- --------------- -------------- --------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 434,105 $ 491,357 $ 885,261 $ 955,559
Investment 7,843 30,929 67,362 59,445
Other 82,874 21,593 127,939 39,040
------------ ------------- ------------ ------------
Total Revenue 524,822 543,879 1,080,562 1,054,044
------------ ------------- ------------ ------------
Expenses:
Asset management fees, related party 113,861 111,083 227,722 222,166
General and administrative (includes
reimbursements to affiliates of $45,344
and $79,015 in 1996 and 1995, respectively) 115,933 265,227 196,315 570,928
Rental operations, exclusive of depreciation 327,373 458,901 604,495 883,154
Property management fees (Note 3) 46,888 (806) 69,021 21,813
Interest 221,306 173,460 448,709 343,344
Depreciation 136,955 90,555 250,172 181,391
Amortization 40,780 42,887 88,844 90,933
------------ ------------- ------------ ------------
Total Expenses 1,003,096 1,141,307 1,885,278 2,313,729
------------ ------------- ------------ ------------
Loss before equity in losses of Local Limited
Partnerships and extraordinary gain (478,274) (597,428) (804,716) (1,259,685)
Equity in losses of Local Limited Partnerships (1,157,767) (1,208,330) (1,897,565) (2,473,697)
Minority interest in losses of
Local Limited Partnerships 3,448 1,861 5,684 4,204
------------ ------------- ------------ ------------
Net Loss before extraordinary item (1,632,593) (1,803,897) (2,696,597) (3,729,178)
Extraordinary loss on forgiveness
of indebtedness (51,595) - (51,595) -
------------ ------------- ------------ ------------
Net Loss $ (1,684,188) $ (1,803,897) $ (2,748,192) $ (3,729,178)
============ ============= ============ ============
Net Loss allocated:
To General Partners $ (16,842) $ (18,039) $ (27,482) $ (37,292)
To Limited Partners (1,667,346) (1,785,858) (2,720,710) (3,691,886)
------------ ------------- ------------ ------------
$ (1,684,188) $ (1,803,897) $ (2,748,192) $ (3,729,178)
============ ============= ============ ============
Net Loss before extraordinary item per
Limited Partnership Unit (100,000 Units) $ (16.17) $ (17.86) $ (26.70) $ (36.92)
============ ============ ============ ===========
Extraordinary item per Limited Partnership
Unit (100,000 Units) $ (.51) $ - $ (.51) $ -
============ ============= ============ ============
Net Loss per Limited Partnership Unit
(100,000 Units) $ (16.68) $ (17.86) $ (27.21) $ (36.92)
============ ============ ============ ===========
</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 Six Months Ended September 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 - - - (1,169) (1,169)
Net Loss (27,482) - (2,720,710) - (2,748,192)
----------- --------- ------------- ---------- --------------
Balance at September 30, 1996 $ (557,779) $ 5,000 $ 32,359,468 $ (1,157) $ 31,805,532
=========== ========= ============= ========== ==============
</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 Six Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ---------
<S> <C> <C>
Net cash used for operating activities $ (192,780) $ (627,852)
------------- ------------
Cash flows from investing activities:
Purchases of marketable securities (49,376) (1,409,525)
Proceeds from sales and maturities
of marketable securities 39,238 2,918,867
Cash distributions received from Local
Limited Partnerships 319,442 53,505
Capital contributions paid to Local Limited Partnerships - (43,321)
Repayment of Local Limited Partnership's mortgage - (850,000)
Additions to fixed assets (43,748) (8,378)
Proceeds from insurance claim - 33,819
------------- ------------
Net cash provided by investing activities 265,556 694,967
------------- ------------
Cash flows from financing activities:
Repayment of mortgage notes payable (87,662) (30,125)
Repayment of notes receivable, affiliate 17,814 -
Payments to affiliate (13,816) -
------------- ------------
Net cash used for financing activities (83,664) (30,125)
-------------- -------------
Net increase (decrease) in cash and cash equivalents (10,888) 36,990
Cash and cash equivalents, beginning 268,040 155,456
------------- ------------
Cash and cash equivalents, ending $ 257,152 $ 192,446
============= ============
</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, 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 year.
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 $ 64,361 $ - $ (645) $ 63,716
Mortgage backed securities 49,652 - (288) 49,364
Other debt securities 56,061 24 (248) 55,837
----------- ------------ --------- -----------
Marketable Securities
at September 30, 1996 $ 170,074 $ 24 $ (1,181) $ 168,917
=========== ============ ========= ===========
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 September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in less than one year $ 49,375 $ 49,386
Due in one to five years 71,047 70,167
Mortgage backed securities 49,652 49,364
----------- -----------
$ 170,074 $ 168,917
=========== ===========
</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 $39,000 and $2,919,000 for the six months
ended September 30, 1996 and 1995, respectively. Included in investment income
are gross gains of $1,590 and gross losses of $609 which were realized on these
sales in the six months ended September 30, 1996 and gross gains of $19,800 and
gross losses of $14,996 which were realized on these sales for the six months
ended September 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-three 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
September 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 $ 69,321,264
Cumulative equity in loss of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $19,738,918) (43,973,321)
Cumulative cash distributions received from
Local Limited Partnerships (1,647,913)
------------
Investments in Local Limited Partnerships
before adjustment 23,700,030
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 7,146,136
Accumulated amortization of acquisition
fees and expenses (1,286,172)
-------------
Investments in Local Limited Partnerships 29,559,994
Reserve for valuation of investments in
Local Limited Partnerships (1,635,000)
--------------
$ 27,924,994
==============
</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 September 30, 1996, is as
follows:
Summarized Balance Sheets - June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investment property, net $ 189,836,724
Other assets, net 12,660,205
Current assets 7,358,327
--------------
Total Assets $ 209,855,256
==============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 172,015,795
Other liabilities 18,009,731
Current liabilities 16,401,853
--------------
Total Liabilities 206,427,379
Partners' Equity 3,427,877
--------------
Total Liabilities and Partners' Equity $ 209,855,256
==============
Summarized Income Statements - for the
Six Months ended June 30, 1996 (Unaudited)
Rental and other income $ 16,011,215
-------------
Expenses:
Operating expenses 8,570,440
Interest expense 7,856,539
Depreciation and amortization 4,314,450
-------------
Total expenses 20,741,429
Net Loss $ (4,730,214)
=============
Partnership's share of net loss $ (4,580,975)
=============
Other partners' share of net loss $ (149,239)
=============
</TABLE>
For the six months ended September 30, 1996, the Partnership has not recognized
$2,692,459 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 $24,567 of
fees earned by BFPM during the six months ended June 30, 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 Crestwood Place, Eagle Nest Apartments, One Main
Place, Pilot Point Apartments, Hallet West Apartments, Shady Shores Apartments
and Willowick Apartments. Included in the Combined Statements of Operations is
$61,821 of property management fees charged by BFPM and BF Lansing during the
six months ended June 30, 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,
Glenbrook Apartments and Quail Run Apartments' transfers were effective February
21, 1996, February 21, 1996, June 7, 1996 and July 3, 1996, respectively. Two of
the properties (Sherwood Arms and Lone Oak Apartments) are being transferred to
new owners effective after September 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 six 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
Assets
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 225,927 $ 31,225 $ - $ 257,152
Accounts receivable, net 609,343 19,416 (556,532) 72,227
Interest receivable 1,323 - - 1,323
Notes receivable 1,423,253 - (1,423,253) -
Prepaid expenses 11,324 30,257 - 41,581
Tenant security deposits - 63,223 - 63,223
Other current assets - 97,075 - 97,075
------------ ------------- ------------ ------------
Total current assets 2,271,170 241,196 (1,979,785) 532,581
Investments in Local Limited
Partnerships, net of reserve
for valuation 30,449,120 - (2,524,126) 27,924,994
Marketable securities, at fair value 168,917 - - 168,917
Replacement reserves - 154,349 - 154,349
Rental property at cost, net of
accumulated depreciation - 12,611,729 - 12,611,729
Deferred acquisition fees escrow 450,000 - - 450,000
Deferred expenses, net - 88,237 - 88,237
------------ ------------- ------------ ------------
Total Assets $ 33,339,207 $ 13,095,511 $ (4,503,911) $ 41,930,807
============ ============= ============ ============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 918,567 $ 624,327 $ (556,532) $ 986,362
Accounts payable and accrued
expenses 142,829 308,979 - 451,808
Current portion of mortgage
notes payable - 4,219,450 (23,279) 4,196,171
Interest payable - 356,847 - 356,847
Notes payable, affiliate 22,279 - - 22,279
Security deposits payable - 62,412 - 62,412
------------ ------------- ------------ ------------
Total current liabilities 1,083,675 5,572,015 (579,811) 6,075,879
Due to affiliate - 323,046 - 323,046
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 1,533,675 10,235,117 (1,979,785) 9,789,007
------------ ------------- ------------ ------------
</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)
Balance Sheets (continued)
<TABLE>
<CAPTION>
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 - - 336,268 336,268
------------ ------------- ------------ ------------
General, Initial and Investor Limited
Partners' Equity 31,806,689 2,860,394 (2,860,394) 31,806,689
Net unrealized losses on marketable
securities (1,157) - - (1,157)
------------ ------------- ------------ -------------
Total Partners' Equity 31,805,532 2,860,394 (2,860,394) 31,805,532
------------ ------------- ------------ ------------
Total Liabilities and
Partners' Equity $ 33,339,207 $ 13,095,511 $ (4,503,911) $ 41,930,807
============ ============= ============= ============
</TABLE>
(A) As of September 30, 1996.
(B) As of June 30, 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)
Statements of Operations
For the Three Months Ended September 30, 1996
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 434,105 $ - $ 434,105
Investment 7,269 574 - 7,843
Other 69,747 13,127 - 82,874
------------- ----------- ---------- -------------
Total Revenue 77,016 447,806 - 524,822
------------- ----------- ---------- -------------
Expenses:
Asset management fees, related party 113,861 - - 113,861
General and administrative 115,933 - - 115,933
Rental operations, exclusive
of depreciation - 327,373 - 327,373
Property management fees - 46,888 - 46,888
Interest 1,500 219,806 - 221,306
Depreciation - 136,955 - 136,955
Amortization 38,159 2,621 - 40,780
------------- ----------- ---------- -------------
Total Expenses 269,453 733,643 - 1,003,096
------------- ----------- ---------- -------------
Loss before equity in losses of Local
Limited Partnerships and
extraordinary item (192,437) (285,837) - (478,274)
Equity in losses of Local Limited
Partnerships (1,491,751) - 333,984 (1,157,767)
Minority interest in losses of Local
Limited Partnerships - - 3,448 3,448
------------- ----------- ---------- -------------
Net loss before extraordinary item (1,684,188) (285,837) 337,432 (1,632,593)
Extraordinary loss on forgiveness
of indebtedness - (51,595) - (51,595)
------------- ----------- ---------- -------------
Net Loss $ (1,684,188) $ (337,432) $ 337,432 $ (1,684,188)
============= =========== ========== =============
</TABLE>
(A) For the three months ended September 30, 1996.
(B) For the three months ended June 30, 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)
Statements of Operations
For the Six Months Ended September 30, 1996
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 885,261 $ - $ 885,261
Investment 65,342 2,020 - 67,362
Other 99,680 28,259 - 127,939
------------- ---------- ---------- ------------
Total Revenue 165,022 915,540 - 1,080,562
------------- ---------- ---------- ------------
Expenses:
Asset management fees 227,722 - - 227,722
General and administrative 196,315 - - 196,315
Rental operations, exclusive
of depreciation - 604,495 - 604,495
Property management fees - 69,021 - 69,021
Interest 2,000 446,709 - 448,709
Depreciation - 250,172 - 250,172
Amortization 83,602 5,242 - 88,844
------------- ---------- ---------- ------------
Total Expenses 509,639 1,375,639 - 1,885,278
------------- ---------- ---------- ------------
Loss before equity in losses of Local
Limited Partnerships and
extraordinary item (344,617) (460,099) - (804,716)
Equity in losses of Local Limited
Partnerships (2,403,575) - 506,010 (1,897,565)
Minority interest in losses of Local
Limited Partnerships - - 5,684 5,684
------------- ---------- ---------- ------------
Net loss before extraordinary item (2,748,192) (460,099) 511,694 (2,696,597)
Extraordinary loss on forgiveness
of indebtedness - (51,595) - (51,595)
------------- ---------- ---------- ------------
Net loss $ (2,748,192) $ (511,694) $ 511,694 $ (2,748,192)
============= ========== ========== ============
</TABLE>
(A) For the six months ended September 30, 1996.
(B) For the six months ended June 30, 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)
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 $ (108,064) $ (84,716) $ - $ (192,780)
--------------- ------------- ----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (49,376) - - (49,376)
Proceeds from sales and maturities
of marketable securities 39,238 - - 39,238
Cash distributions received from
Local Limited Partnerships 319,442 - - 319,442
Additions to fixed assets - (43,748) - (43,748)
--------------- ------------- ----------- -----------
Net cash provided by (used for)
investing activities 309,304 (43,748) - 265,556
--------------- ------------- ----------- -----------
Cash flows from financing activities:
Repayment of mortgage notes payable - (87,662) - (87,662)
Repayment of notes receivable, affiliate 17,814 - - 17,814
Advances from (payments to) affiliate (87,759) 73,943 - (13,816)
---------------- ------------- ----------- -----------
Net cash used for financing activities (69,945) (13,719) - (83,664)
---------------- -------------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 131,295 (142,183) - (10,888)
Cash and cash equivalents, beginning 94,632 173,408 - 268,040
--------------- ------------- ----------- -----------
Cash and cash equivalents, ending $ 225,927 $ 31,225 $ - $ 257,152
=============== ============= =========== ===========
</TABLE>
(A) For the six months ended September 30, 1996.
(B) For the six months ended 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
Liquidity and Capital Resources
The Partnership (including the Combined Entities) had a decrease in cash and
cash equivalents of $10,888 from $268,040 at March 31, 1996 to $257,152 at
September 30, 1996. This slight decrease is attributable to cash used for
operations and payment of mortgage notes, offset by cash distributions received
from Local Limited Partnerships.
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 $1,376,000 have been paid from Reserves.
This amount includes approximately $1,124,000 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 $1,362,000 (net of paydowns) to purchase
the mortgage of a Local Limited Partnership. To date, the Partnership has used
approximately $648,000 of operating funds to replenish Reserves. At September
30, 1996, approximately $379,000 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 $1,124,000 noted above, the Partnership has also advanced
approximately $553,000 to the Texas Partnerships and $184,000 to two other Local
Limited Partnerships 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 September 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 six months ended September 30, 1996.
Results of Operations
For the three and six months ended September 30, 1996, Partnership operations
resulted in a net loss of $1,684,188 and $2,748,192, respectively, as compared
to net losses of $1,803,897 and $3,729,178 for the respective 1995 periods. 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 more 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 the exclusion of six of the Texas Partnerships'
operations which were previously combined. Four of these Texas Partnerships were
disposed of and the remaining two are now being accounted for on the equity
method of accounting. Please refer to the section entitled "Property
Discussions" for more information.
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.
Many of the remaining sixty-three Local Limited Partnerships in which the
Partnership has invested have stable operations. The majority of these
properties are operating satisfactorily.
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,
Glenbrook Apartments and Quail Runs' transfers were effective February 21, 1996,
February 21, 1996, June 7, 1996, and July 3, 1996. Two of the properties
(Sherwood Arms and Lone Oak Apartments) are being transferred to new owners
effective after September 30, 1996.
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 at least 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 a nominal amount
of recapture of tax credits, because the Texas Partnerships represent only 2% of
the Partnership's tax credits.
<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)
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. The property has received notice
from HUD that the mortgage will be included in the upcoming auction that will be
held in December, 1996. If the mortgage is sold 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 mortgage 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 occupancy levels and rental rates due to the
deterioration of the local economy and the neighborhoods in which they are
located. The local general partner and Managing General Partner were involved in
prolonged workout negotiations with HUD, but ultimately the mortgages for these
properties were sold to a bank in a non-performing mortgage auction. The
Partnership made an unsuccessful auction bid to purchase these mortgages. The
Partnership and local general partner are negotiating with the new notes holder.
Should these efforts prove unsatisfactory, it is unlikely that the Partnership
will be able to retain its interests in both properties in the long-term.
Such losses would result in recapture of tax credits for the investors.
Breckenridge Creste, located in Duluth, GA, has been experiencing financial
difficulties, as a result of increased vacancies, a weak rental market and
deferred maintenance. In August 1996, an affiliate of the Managing General
Partner assumed property management responsibilities of the property and was
admitted as a General Partner. Efforts are now underway to develop a plan to
stabilize property operations.
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 physical conditions at the properties. However, it is likely that such
an effort will require a significant influx of additional capital in order to
address these problems. This may include advances from Partnership Reserves. The
Managing General Partner, together with the Local General Partner, are currently
devising a strategy to stabilize operations of both of these properties. Both
properties currently carry cash flow mortgages from the State of New York.
<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, 1996.
<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, 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 257,152
<SECURITIES> 168,917
<RECEIVABLES> 73,550 <F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 201,879 <F2>
<PP&E> 12,611,729
<DEPRECIATION> 000
<TOTAL-ASSETS> 41,930,807<F3>
<CURRENT-LIABILITIES> 6,075,879<F4>
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 31,805,532
<TOTAL-LIABILITY-AND-EQUITY> 41,930,807<F5>
<SALES> 000
<TOTAL-REVENUES> 1,080,562 <F6>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,436,569 <F7>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 448,709
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (2,748,192) <F8>
<EPS-PRIMARY> (27.21)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts receivable, net $72,227 and Interest
receivable $1,323.
<F2>Included in current assets: Prepaid expenses $41,581, Tenant security
deposits $63,223 and Other current assets $97,075.
<F3>Included in total assets:Investments in Local Limited Partnerships, net
$27,924,994, Replacement Reserves $154,349, Deferred acquisition fees
escrow $450,000 and Deferred expenses, net $88,237.
<F4>Included in current liabilities: Accounts payable to affiliates
$986,362, Accounts payable and accrued expenses $451,808, Current
portion of mortgage notes payable $4,196,171, Interest payable $356,847,
Notes payable - affiliate $22,279, Security deposits payable $62,412.
<F5>Included in Total Liabilities and Equity: Due to affiliate $323,046,
Deferred acquisition fees payable $450,000, Former general partner
advances $200,000, $2,740,082 of mortgage notes payable and Minority
interest in Local Limited Partnerships $336,268.
<F6>Total revenue includes: Rental $885,261, Investment $67,362 and
Other $127,939.
<F7>Included in Other Expenses: Asset management fees, related party $227,722,
General and Administrative $196,315, Property management fees $69,021,
Rental operations, exclusive of depreciation $604,495, Depreciation
$250,172 and Amortization $88,844.
<F8>Net loss reflects: equity in losses of Local Limited Partnerships of
$(1,897,565), minority interest in losses of Local Limited Partnerships
of $5,684, and extraordinary loss on forgiveness of indebtedness of
$51,595.
</FN>
</TABLE>
