February 12, 1997
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, 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/Veronica J. Curioso
Veronica J. Curioso
Assistant Controller
QH3-10Q3.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 December 31, 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 December 31, 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 - December 31, 1996 (Unaudited)
and March 31, 1996 1
Combined Statements of Operations (Unaudited) - For the Three
and Nine Months Ended December 31, 1996 and 1995 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 1996 3
Combined Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 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 - December 31, 1996 and March 31, 1996
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 505,588 $ 268,040
Accounts receivable, net 106,853 40,757
Interest receivable 30,296 740
Prepaid expenses 32,861 35,930
Tenant security deposits 61,995 67,011
Other current assets 139,419 53,656
-------------- ------------
Total current assets 877,012 466,134
Investments in Local Limited Partnerships, net of
reserve for valuation (Note 2) 27,051,237 30,216,554
Marketable securities, at fair value (Note 1) 173,713 158,967
Replacement reserves 168,005 168,335
Rental property at cost, net of accumulated
depreciation 12,498,452 12,818,153
Deferred acquisition fees escrow 337,500 450,000
Deferred expenses, net 85,618 93,479
-------------- ------------
Total Assets $ 41,191,537 $ 44,371,622
============== ============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 1,053,061 $ 755,244
Accounts payable and accrued expenses 544,573 471,328
Current portion of mortgage notes payable 4,143,837 4,261,276
Interest payable 367,972 186,550
Notes payable - affiliate 353,165 22,279
Security deposits payable 60,223 60,229
-------------- ------------
Total current liabilities 6,522,831 5,756,906
Due to affiliate 323,046 323,046
Deferred acquisition fees payable 337,500 450,000
Former general partner advances 200,000 200,000
Mortgage notes payable 2,745,086 2,744,825
-------------- ------------
Total Liabilities 10,128,463 9,474,777
-------------- ------------
Minority interest in Local Limited Partnerships 333,736 341,952
-------------- ------------
General, Initial and Investor Limited Partners' Equity 30,729,205 34,554,881
Net unrealized gains on marketable securities 133 12
-------------- ------------
Total Partners' Equity 30,729,338 34,554,893
-------------- ------------
Total Liabilities and Partners' Equity $ 41,191,537 $ 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 Nine Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
-------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 436,089 $ 430,097 $ 1,321,350 $ 1,385,656
Investment 4,401 14,406 71,763 73,851
Other 24,568 124,980 152,507 164,020
------------ ------------- ------------ ------------
Total Revenue 465,058 569,483 1,545,620 1,623,527
------------ ------------- ------------ ------------
Expenses:
Asset management fees, related party 113,861 111,083 341,583 333,249
General and administrative (includes
reimbursements to affiliates of $115,671
and $119,178 in 1996 and 1995, respectively) 122,737 125,988 319,052 696,916
Rental operations, exclusive of depreciation 255,111 379,283 859,606 1,262,437
Property management fees 33,524 9,543 102,545 31,356
Interest 122,584 196,180 571,293 539,524
Depreciation 125,083 189,672 375,255 371,063
Amortization 44,420 45,328 133,264 136,261
------------ ------------- ------------ ------------
Total Expenses 817,320 1,057,077 2,702,598 3,370,806
------------ ------------- ------------ ------------
Loss before equity in losses of Local Limited
Partnerships and extraordinary item (352,262) (487,594) (1,156,978) (1,747,279)
Equity in losses of Local Limited Partnerships (727,754) (806,356) (2,625,319) (3,280,053)
Minority interest in losses of
Local Limited Partnerships 2,532 4,932 8,216 9,136
------------ ------------- ------------ ------------
Net Loss before extraordinary item (1,077,484) (1,289,018) (3,774,081) (5,018,196)
Extraordinary loss on forgiveness
of indebtedness - - (51,595) -
------------ ------------- ------------ ------------
Net Loss $ (1,077,484) $ (1,289,018) $ (3,825,676) $ (5,018,196)
============ ============= ============ ============
Net Loss allocated:
To General Partners $ (10,775) $ (12,890) $ (38,257) $ (50,182)
To Limited Partners (1,066,709) (1,276,128) (3,787,419) (4,968,014)
------------- ------------- ------------ ------------
$ (1,077,484) $ (1,289,018) $ (3,825,676) $ (5,018,196)
============ ============= ============ ============
Net Loss before extraordinary item per
Limited Partnership Unit (100,000 Units) $ (10.66) $ (12.76) $ (37.36) $ (49.68)
============ ============ ============ ===========
Extraordinary item per Limited Partnership
Unit (100,000 Units) $ - $ - $ (0.51) $ -
============ ============= ============ ============
Net Loss per Limited Partnership Unit
(100,000 Units) $ (10.66) $ (12.76) $ (37.87) $ (49.68)
============ ============ ============ ===========
</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, 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
gains on marketable
securities available for sale - - - 121 121
Net Loss (38,257) - (3,787,419) - (3,825,676)
----------- --------- ------------- ---------- --------------
Balance at December 31, 1996 $ (568,554) $ 5,000 $ 31,292,759 $ 133 $ 30,729,338
=========== ========= ============= ========== ==============
</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, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ---------
<S> <C> <C>
Net cash provided by (used for) operating activities $ 51,774 $ (775,393)
------------- ------------
Cash flows from investing activities:
Purchases of marketable securities (74,188) (1,580,820)
Proceeds from sales and maturities
of marketable securities 62,513 3,093,575
Cash distributions received from Local
Limited Partnerships 423,644 284,846
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 (55,554) (36,527)
Proceeds from insurance claim - 33,819
------------- ------------
Net cash provided by investing activities 356,415 944,893
------------- ------------
Cash flows from financing activities:
Repayment of mortgage notes payable (117,178) (39,066)
Repayment of note payable - (10,211)
Advances from (payments to) affiliate (53,463) 22,279
------------- ------------
Net cash used for financing activities (170,641) (26,998)
------------- -------------
Net increase in cash and cash equivalents 237,548 142,502
Cash and cash equivalents, beginning 268,040 155,456
------------- ------------
Cash and cash equivalents, ending $ 505,588 $ 297,958
============= ============
</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 the 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. Certain reclassifications have been
made to prior period financial statements to conform to current period
classifications.
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 $ 89,173 $ 45 $ (226) $ 88,992
Mortgage backed securities 49,330 - (47) 49,283
Other debt securities 35,077 361 - 35,438
----------- ------------ --------- -----------
Marketable Securities
at December 31, 1996 $ 173,580 $ 406 $ (273) $ 173,713
=========== ============ ========= ===========
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 December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in less than one year $ 49,375 $ 49,778
Due in one to five years 74,875 74,652
Mortgage backed securities 49,330 49,283
----------- -----------
$ 173,580 $ 173,713
=========== ===========
</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 $63,000 and $3,094,000 for the nine
months ended December 31, 1996 and 1995, respectively. Included in investment
income are gross gains of $3,589 and gross losses of $639 which were realized on
these sales in the nine months ended December 31, 1996 and gross gains of
$22,943 and gross losses of $15,017 which were realized on these sales for the
nine months ended December 31, 1995.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the 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
December 31, 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 $20,810,307) (44,701,075)
Cumulative cash distributions received from
Local Limited Partnerships (1,752,115)
-----------
Investments in Local Limited Partnerships
before adjustment 22,868,074
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 7,146,136
Accumulated amortization of acquisition
fees and expenses (1,327,973)
Investments in Local Limited Partnerships 28,686,237
Reserve for valuation of investments in
Local Limited Partnerships (1,635,000)
-----------
$ 27,051,237
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the 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 December 31, 1996, is as
follows:
Summarized Balance Sheets - September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment property, net $ 189,051,659
Other assets, net 12,463,867
Current assets 7,583,451
--------------
Total Assets $ 209,098,977
==============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 173,668,843
Other liabilities 16,552,347
Current liabilities 16,843,277
--------------
Total Liabilities 207,064,467
Partners' Equity 2,034,510
--------------
Total Liabilities and Partners' Equity $ 209,098,977
==============
Summarized Income Statements - for the
Nine Months ended September 30, 1996 (Unaudited)
Rental and other income $ 24,250,255
-------------
Expenses:
Operating expenses 12,802,643
Interest expense 11,654,067
Depreciation and amortization 6,380,263
-------------
Total expenses 30,836,973
Net Loss $ (6,586,718)
=============
Partnership's share of net loss $ (6,380,118)
=============
Other partners' share of net loss $ (206,600)
=============
</TABLE>
For the nine months ended December 31, 1996, the Partnership has not recognized
$3,763,848 of equity in losses relating to certain Local Limited Partnerships in
which cumulative equity in losses and distributions exceeded its total
investments in these Local Limited Partnerships.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
3. Liquidation of Interests in Local Limited Partnerships
As previously reported, the Managing General Partner has transferred all of the
assets of five of the Texas Partnerships subject to their liabilities to
unaffiliated entities. The transfers of Crown Point, Godley Arms, Glenbrook
Apartments, Quail Run Apartments and Sherwood Arms Housing were effective
February 21, 1996, February 21, 1996, June 7, 1996, July 3, 1996 and November
26, 1996, respectively. One of the properties, Lone Oak Apartments, is being
transferred to a new owner effective after December 31, 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)
4. Supplemental Combining Schedules
<TABLE>
<CAPTION>
Balance Sheets
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 $ 463,217 $ 42,371 $ - $ 505,588
Accounts receivable, net 702,657 16,609 (612,413) 106,853
Interest receivable 48,814 - (18,518) 30,296
Notes receivable 1,423,253 - (1,423,253) -
Prepaid expenses 9,908 22,953 - 32,861
Tenant security deposits - 61,995 - 61,995
Other current assets - 139,419 - 139,419
------------ ------------- ------------ ------------
Total current assets 2,647,849 283,347 (2,054,184) 877,012
Investments in Local Limited
Partnerships, net of reserve
for valuation 29,436,776 - (2,385,539) 27,051,237
Marketable securities, at fair value 173,713 - - 173,713
Replacement reserves - 168,005 - 168,005
Rental property at cost, net of
accumulated depreciation - 12,498,452 - 12,498,452
Deferred acquisition fees escrow 337,500 - - 337,500
Deferred expenses, net - 85,618 - 85,618
------------ ------------- ------------ ------------
Total Assets $ 32,595,838 $ 13,035,422 $ (4,439,723) $ 41,191,537
============ ============= ============ ============
Liabilities and Partners' Equity
Current liabilities:
Accounts payable to affiliates $ 1,032,428 $ 633,046 $ (612,413) $ 1,053,061
Accounts payable and accrued
expenses 143,407 401,166 - 544,573
Current portion of mortgage
notes payable - 4,167,116 (23,279) 4,143,837
Interest payable - 386,490 (18,518) 367,972
Notes payable, affiliate 353,165 - - 353,165
Security deposits payable - 60,223 - 60,223
------------ ------------- ------------ ------------
Total current liabilities 1,529,000 5,648,041 (654,210) 6,522,831
Due to affiliate - 323,046 - 323,046
Deferred acquisition fees payable 353,165 - - 337,500
Former general partner advances - 200,000 - 200,000
Mortgage notes payable - 4,145,060 (1,399,974) 2,745,086
------------ ------------- ------------ ------------
Total Liabilities 1,866,500 10,316,147 (2,054,184) 10,128,463
------------ ------------- ------------ ------------
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
4. 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 - - 333,736 333,736
------------ ------------- ------------ ------------
General, Initial and Investor Limited
Partners' Equity 30,729,205 2,719,275 (2,719,275) 30,729,205
Net unrealized gains on marketable
securities 133 - - 133
------------ ------------- ------------ ------------
Total Partners' Equity 30,729,338 2,719,275 (2,719,275) 30,729,338
------------ ------------- ------------ ------------
Total Liabilities and
Partners' Equity $ 32,595,838 $ 13,035,422 $ (4,439,723) $ 41,191,537
============ ============= ============= ============
</TABLE>
(A) As of December 31, 1996.
(B) As of September 30, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended December 31, 1996
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 436,089 $ - $ 436,089
Investment 3,475 926 - 4,401
Other 65,281 15,191 (55,904) 24,568
------------- ----------- ---------- -------------
Total Revenue 68,756 452,206 (55,904) 465,058
------------- ----------- ---------- -------------
Expenses:
Asset management fees, related party 113,861 - - 113,861
General and administrative 122,737 - - 122,737
Rental operations, exclusive
of depreciation - 255,111 - 255,111
Property management fees - 33,524 - 33,524
Interest 1,500 176,988 (55,904) 122,584
Depreciation - 125,083 - 125,083
Amortization 41,801 2,619 - 44,420
------------- ----------- ---------- -------------
Total Expenses 279,899 593,325 (55,904) 817,320
------------- ----------- ---------- -------------
Loss before equity in losses of Local
Limited Partnerships and
extraordinary item (211,143) (141,119) - (352,262)
Equity in losses of Local Limited
Partnerships (866,341) - 138,587 (727,754)
Minority interest in losses of Local
Limited Partnerships - - 2,532 2,532
------------- ----------- ---------- -------------
Net loss before extraordinary item (1,077,484) (141,119) 141,119 (1,077,484)
Extraordinary loss on forgiveness
of indebtedness - - - -
------------- ----------- ---------- -------------
Net Loss $ (1,077,484) $ (141,119) $ 141,119 $ (1,077,484)
============= =========== ========== =============
</TABLE>
(A) For the three months ended December 31, 1996.
(B) For the three months ended September 30, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
Statements of Operations
For the Nine Months Ended December 31, 1996
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Eliminations
L.P. III (A) Entities (B) (A) Combined
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 1,321,350 $ - $ 1,321,350
Investment 68,817 2,946 - 71,763
Other 164,961 43,450 (55,904) 152,507
------------- ------------ ---------- ------------
Total Revenue 233,778 1,367,746 (55,904) 1,545,620
------------- ------------ ---------- ------------
Expenses:
Asset management fees, related party 341,583 - - 341,583
General and administrative 319,052 - - 319,052
Rental operations, exclusive
of depreciation - 859,606 - 859,606
Property management fees - 102,545 - 102,545
Interest 3,500 623,697 (55,904) 571,293
Depreciation - 375,255 - 375,255
Amortization 125,403 7,861 - 133,264
------------- ------------ ---------- ------------
Total Expenses 789,538 1,968,964 (55,904) 2,702,598
------------- ------------ ---------- ------------
Loss before equity in losses of Local
Limited Partnerships and
extraordinary item (555,760) (601,218) - (1,156,978)
Equity in losses of Local Limited
Partnerships (3,269,916) - 644,597 (2,625,319)
Minority interest in losses of Local
Limited Partnerships - - 8,216 8,216
------------- ------------ ---------- ------------
Net loss before extraordinary item (3,825,676) (601,218) 652,813 (3,774,081)
Extraordinary loss on forgiveness
of indebtedness - (51,595) - (51,595)
------------- ------------ ---------- ------------
Net loss $ (3,825,676) $ (652,813) $ 652,813 $ (3,825,676)
============= ============ ========== ============
</TABLE>
(A) For the nine months ended December 31, 1996.
(B) For the nine months ended September 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 provided by (used for)
operating activities $ 132,896 $ (81,122) $ - $ 51,774
--------------- ------------- ----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (74,188) - - (74,188)
Proceeds from sales and maturities
of marketable securities 62,513 - - 62,513
Cash distributions received from
Local Limited Partnerships 423,644 - - 423,644
Decrease in deferred acquisition
fee escrow 112,500 - - 112,500
Payment of deferred acquisition fee (112,500) - - (112,500)
Additions to fixed assets - (55,554) - (55,554)
--------------- ------------- ----------- -----------
Net cash provided by (used for)
investing activities 411,969 (55,554) - 356,415
--------------- ------------- ----------- -----------
Cash flows from financing activities:
Repayment of mortgage notes payable - (134,992) 17,814 (117,178)
Repayment of notes receivable, affiliate 17,814 - (17,814) -
Advances from (payments to) affiliate (194,094) 140,631 - (53,463)
--------------- ------------- ----------- -----------
Net cash provided by (used for)
financing activities (176,280) 5,639 - (170,641)
--------------- ------------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 368,585 (131,037) - 237,548
Cash and cash equivalents, beginning 94,632 173,408 - 268,040
--------------- ------------- ----------- -----------
Cash and cash equivalents, ending $ 463,217 $ 42,371 $ - $ 505,588
=============== ============= =========== ===========
</TABLE>
(A) For the nine months ended December 31, 1996.
(B) For the nine months ended September 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 an increase in cash and
cash equivalents of $237,548 from $268,040 at March 31, 1996 to $505,588 at
December 31, 1996. This increase is attributable to cash distributions received
from Local Limited Partnerships and cash provided by operations, offset by the
repayment of mortgage notes payable.
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 $1,417,000 have been paid from Reserves.
This amount includes approximately $1,143,000 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 $1,010,000 of operating funds to replenish Reserves. At December
31, 1996, approximately $593,000 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 $1,143,000 noted above, the Partnership has also advanced
approximately $589,000 to the Texas Partnerships and $255,000 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 December 31, 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 nine months ended December 31, 1996.
Results of Operations
For the three and nine months ended December 31, 1996, Partnership operations
resulted in a net loss of $1,077,484 and $3,825,676, respectively, as compared
to net losses of $1,289,018 and $5,018,196 for the respective 1995 periods. The
decrease in net loss is primarily attributable to decreases in general and
administrative and rental operations expenses.
The decrease in general and administrative expenses is due to a decrease in
expenses paid on behalf of the Texas Partnerships. The decline in rental
operations expense 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.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Property Discussions
Prior to the transfer of the Texas Partnerships, Limited Partnership interests
had been acquired in sixty-nine Local Limited Partnerships which own and operate
rental properties 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 lease-up. Many of the remaining sixty-four Local
Limited Partnerships in which the Partnership has invested have stable
operations and are operating satisfactorily.
Several properties are experiencing operating difficulties and generating cash
flow deficits due to a variety of reasons. In most cases, the Local General
Partners of these properties are funding the deficits through project expense
loans and subordinated loans or payments from escrows. In instances where the
Local General Partners' obligations to fund deficits have 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.
Operations are improving at Pleasant Plaza, located in Malden, Massachusetts, as
a result of the 1995 SHARP subsidy restructuring. However, as we previously
reported, the Local General Partner is seeking bankruptcy protection. His
reorganization plan is expected to be approved early in 1997. If approved, the
plan is not likely to materially affect property operations or the local General
Partner's interest in the Partnership.
As previously reported, Harbour View, located in Staten Island, New York, had
defaulted on its HUD-insured loan. Subsequently, the lender assigned the loan to
HUD. In December 1996, the property's mortgage was sold at auction to an
unaffiliated institutional buyer. The Local General Partner participated in the
loan auction but was an unsuccessful bidder. The Managing General Partner and
Local General Partner have initiated discussions with the new lender. The
Partnership's ability to retain its interest in the property will depend on the
ability of the Local General Partner or Partnership affiliates to purchase the
mortgage or negotiate a satisfactory workout agreement with the new lender.
As previously reported, the Managing General Partner has transferred all of the
assets of five of the Texas partnerships subject to their liabilities to
unaffiliated entities. The transfers of Crown Point, Godley Arms, Glenbrook
Apartments, Quail Run and Sherwood Arms Housing were effective February 21,
1996, February 2, 1996, June 7, 1996, July 3, 1996 and November 26, 1996,
respectively. One of the properties, Lone Oak, is expected to be transferred to
a new owner in 1997.
The Managing General Partner is working 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. In the meantime,
investors will continue to receive tax credits for these properties. Operating
deficits are currently being funded from Partnership reserves. 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.
A more targeted leasing and marketing strategy and recent rent increase has
helped reduce operating deficits at Columbia Town Houses, a property located in
Burlington, Iowa. As previously reported, the property has been generating
significant, increasing deficits for the last four years as a result of
declining market conditions and pre-1990 rent restrictions. The Local General
Partner is working to resolve these issues by replacing the site personnel and
pursuing a mortgage refinancing. The Local General Partner is currently funding
the deficits.
South Holyoke, located in Holyoke, Massachusetts, continues to experience
occupancy problems resulting from increased market competition and local
economic conditions. The management agent, which is currently funding the
deficits, is addressing these problems through a combination of increased
advertising and community outreach, tighter expense monitoring and has requested
additional SHARP subsidy from the local housing authority.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Property Discussions (continued)
Waterfront and Shoreline, two Buffalo, New York properties, continue to
experience operating difficulties due to a soft rental market, deferred
maintenance and security issues. It is likely that any effort to stabilize
operations and improve property curb appeal and overall physical conditions will
require significant additional capital. This may include advances from
Partnership reserves. The Managing General Partner and Local General Partner are
currently negotiating with the local housing authority to obtain operating
assistance. They are also working to identify supplemental capital resources.
Deficits are currently being funded by the management agent. Both properties
currently carry cash flow mortgages with New York State.
Low occupancy, capital rehabilitation needs and a depressed Dayton, Ohio economy
continue to contribute to operating difficulties at Regency and Rolling Hills.
As previously reported, 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 HUD's August 1996
non-performing loan auction. The Partnership made an unsuccessful bid to
purchase the mortgages. The Managing General Partner and Local General Partner
continue to negotiate with the new lender. The continued feasibility of these
properties will depend on the ability of the Local General Partner or
Partnership affiliates to obtain a workout agreement with the new lender and to
complete the rehabilitation work mandated by the City. In the meantime, it is
likely that investors will incur a 1996 recapture tax as a result of certain
apartment units being unavailable for rent during part of 1996. Should the
negotiations with the lender prove unsatisfactory, investors will likely incur
additional recapture tax in 1997, which will be reported on their 1998 tax
return.
As previously reported, Breckenridge Creste, located in Duluth, Georgia,
continues to operate below breakeven as a result of high increased vacancy, a
weak rental market and deferred maintenance issues. In August 1996, an affiliate
of the Managing General Partner assumed property management responsibility and
was admitted as a General Partner. In keeping with the plan to stabilize
property operations, a capital improvements effort is now underway. The
Partnership has advanced funds from reserves towards this effort.
<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, 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: February 12, 1997 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-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 505,588
<SECURITIES> 173,713
<RECEIVABLES> 137,149<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 234,275<F2>
<PP&E> 12,498,452
<DEPRECIATION> 000
<TOTAL-ASSETS> 41,191,537<F3>
<CURRENT-LIABILITIES> 6,522,831<F4>
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 000
<TOTAL-LIABILITY-AND-EQUITY> 41,191,537<F5>
<SALES> 000
<TOTAL-REVENUES> 1,545,620<F6>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 2,131,305<F7>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 571,293
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (3,825,676)<F8>
<EPS-PRIMARY> (37.87)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts receivable, net $106,853 and Interest
receivable $30,296.
<F2>Included in current assets: Prepaid expenses $32,861, Tenant security
deposits $61,995 and Other current assets $139,419.
<F3>Included in total assets: Investments in Local Limited Partnerships,
net $27,051,237, Replacement Reserves $168,005, Deferred acquisition
fees escrow $337,500 and Deferred expenses, net $85,618.
<F4>Included in current liabilities: Accounts payable to affiliates
$1,053,061, Accounts payable and accrued expenses $544,573, Current
portion of mortgage notes payable $4,143,837, Interest payable
$367,972, Notes payable - affiliate $353,165, Security deposits payable $60,223.
<F5>Included in Total Liabilities and Equity: Due to affiliate $323,046,
Deferred acquisition fees payable $337,500, Former general partner
advances $200,000, $2,745,086 of mortgage notes payable and Minority
interest in Local Limited Partnerships $333,736.
<F6>Total revenue includes: Rental $1,321,350, Investment $71,763 and Other
$152,507.
<F7>Included in Other Expenses: Asset management fees, related party$341,583,
General and Administrative $319,052, Property management fees $102,545,
Rental operations, exclusive of depreciation $859,606, Depreciation
$375,255 and Amortization $133,264.
<F8>Net loss reflects: equity in losses of Local Limited Partnerships of
$2,625,319, minority interest in losses of Local Limited Partnerships of
$8,216, and extraordinary loss on forgiveness of indebtednessof $51,595.
</FN>
</TABLE>
