November 14, 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 for Quarter Ended September 30, 1997
File No. 01-18462
Gentlemen:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, filed herewith is one copy of subject report.
Very truly yours,
/s/Patricia Olsen-Goldberg
Patricia Olsen-Goldberg
Controller
QH3-Q2.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, 1997
--------------------
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, 1997 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, 1997 (Unaudited)
and March 31, 1997 1
Combined Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 1997 and 1996 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1997 3
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 30, 1997 and 1996 4
Notes to the Combined Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Items 1-6 14
SIGNATURE 15
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED BALANCE SHEETS - September 30, 1997 and March 31, 1997
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
(Unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 374,821 $ 379,614
Marketable securities, at fair value 403,848 331,319
Investments in Local Limited Partnerships, net (Note 1) 22,351,139 23,983,675
Accounts receivable, net 120,860 175,669
Interest receivable 7,285 17,607
Prepaid expenses 47,071 40,019
Tenant security deposits 76,084 66,439
Replacement reserves 219,946 210,045
Rental property at cost, net of accumulated
depreciation 17,253,110 17,884,234
Deferred acquisition fees escrow 337,500 337,500
Deferred expenses, net 222,234 235,339
Other assets 299,217 130,130
------------ ------------
Total Assets $ 41,713,115 $ 43,791,590
============ ============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,380,973 $ 1,193,182
Accounts payable and accrued expenses 842,213 611,515
Interest payable 424,995 377,295
Note payable, affiliate 514,968 514,968
Security deposits payable 84,484 82,054
Due to affiliate 323,046 323,046
Deferred acquisition fees payable 337,500 337,500
General Partner advances 200,000 200,000
Mortgage notes payable 11,404,111 11,754,415
------------ ------------
Total Liabilities 15,512,290 15,393,975
------------ ------------
Minority interest in Local Limited Partnerships 1,049,944 1,053,122
------------ ------------
General, Initial and Investor Limited Partners' Equity 25,149,510 27,346,440
Net unrealized losses on marketable securities 1,371 (1,947)
------------ ------------
Total Partners' Equity 25,150,881 27,344,493
------------ ------------
Total Liabilities and Partners' Equity $ 41,713,115 $ 43,791,590
============ ============
</TABLE>
The accompanying notes are an integral part of these 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, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
-------------- --------------- -------------- --------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 642,717 $ 434,105 $ 1,249,763 $ 885,261
Investment 11,546 7,843 21,275 67,362
Other 40,909 82,874 159,374 127,939
------------ ------------- ------------ ------------
Total Revenue 695,172 524,822 1,430,412 1,080,562
------------ ------------- ------------ ------------
Expenses:
Asset management fees, related party 109,095 113,861 218,190 227,722
General and administrative (includes
reimbursements to affiliates of $98,159
and $45,344 in 1997 and 1996, respectively) 118,805 115,933 241,634 196,315
Bad debt 52,331 - 64,167 -
Rental operations, exclusive of depreciation 394,505 327,373 854,409 604,495
Property management fees (Note 3) 45,965 46,888 88,190 69,021
Interest 216,925 221,306 464,701 448,709
Depreciation 203,985 136,955 395,097 250,172
Amortization 46,299 40,780 92,597 88,844
------------ ------------- ------------ ------------
Total Expenses 1,187,910 1,003,096 2,418,985 1,885,278
------------ ------------- ------------ ------------
Loss before equity in losses of Local Limited Partnerships, minority interest,
loss on liquidation of interests in Local Limited Partnerships and
extraordinary items (492,738) (478,274) (988,573) (804,716)
Equity in losses of Local Limited Partnerships (540,762) (1,157,767) (1,291,958) (1,897,565)
Minority interest in losses of
Local Limited Partnerships 7,967 3,448 10,851 5,684
Loss on liquidation of interests in Local Limited
Partnerships (Note 2) (5,416) - (5,416) -
------------ ------------- ------------ ------------
Net Loss before extraordinary items (1,030,949) (1,632,593) (2,275,096) (2,696,597)
Extraordinary gain on cancellation of
indebtedness (Note 2) 78,166 - 78,166 -
Extraordinary loss on forgiveness
of indebtedness - (51,595) - (51,595)
------------ ------------- ------------ ------------
Net Loss $ (952,783) $ (1,684,188) $ (2,196,930) $ (2,748,192)
============ ============= ============ ============
Net Loss allocated:
To General Partners $ (9,528) $ (16,842) $ (21,969) $ (27,482)
To Limited Partners (943,255) (1,667,346) (2,174,961) (2,720,710)
------------ ------------- ------------ ------------
$ (952,783) $ (1,684,188) $ (2,196,930) $ (2,748,192)
============ ============= ============ ============
Net Loss before extraordinary items per
Limited Partnership Unit (100,000 Units) $ (10.20) $ (16.17) $ (22.52) $ (26.70)
=========== ============ =========== ===========
Extraordinary items per Limited Partnership
Unit (100,000 Units) $ .77 $ (.51) $ .77 $ (.51)
============ ============ ============ ===========
Net Loss per Limited Partnership Unit
(100,000 Units) $ (9.43) $ (16.68) $ (21.75) $ (27.21)
=========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Six Months Ended September 30, 1997
<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, 1997 $ (602,381) $ 5,000 $ 27,943,821 $ (1,947) $ 27,344,493
Net change in net unrealized
losses on marketable
securities available for sale - - - 3,318 3,318
Net Loss (21,969) - (2,174,961) - (2,196,930)
---------- ------- ------------ --------- -------------
Balance at September 30, 1997 $ (624,350) $ 5,000 $ 25,768,860 $ 1,371 $ 25,150,881
========== ======= ============ ========= =============
</TABLE>
The accompanying notes are an integral part of these 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, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------
<S> <C> <C>
Net cash used for operating activities $ (129,377) $ (177,233)
------------ ------------
Cash flows from investing activities:
Advances to affiliates (52,009) (56,775)
Purchases of marketable securities (273,744) (49,376)
Proceeds from sales and maturities of
marketable securities 204,811 37,677
Cash distributions received from Local
Limited Partnerships 270,375 319,442
Purchase of rental property (72,981) (43,748)
Deposits to replacement reserves (10,046) (13,986)
------------ ------------
Net cash provided by investing activities 66,406 193,234
------------ ------------
Cash flows from financing activities:
Repayment of mortgage notes payable (61,707) (87,662)
Advances from affiliate 119,885 42,959
Repayment of notes receivable, affiliate - 17,814
------------ ------------
Net cash provided by (used for) financing activities 58,178 (26,889)
------------ ------------
Net decrease in cash and cash equivalents (4,793) (10,888)
Cash and cash equivalents, beginning 379,614 268,040
------------ ------------
Cash and cash equivalents, ending $ 374,821 $ 257,152
============ ============
</TABLE>
The accompanying notes are an integral part of these 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, 1997. 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 period may not be indicative of
the results to be expected for the year. Certain reclassifications have been
made to the prior year financial statements to conform to the current year
presentation.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partner
interests in fifty 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%, 49% and 48.96%, 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, 1997, excluding the Combined Entities:
<TABLE>
<S> <C>
Capital contributions to Local Limited Partnerships and purchase
price paid to withdrawing partners of Local Limited Partnerships $ 59,851,809
Cumulative equity in loss of Local Limited Partnerships (excluding
cumulative unrecognized losses of $22,939,667) (38,867,440)
Cumulative cash distributions received from Local Limited Partnerships (2,102,349)
-------------
Investments in Local Limited Partnerships before adjustment 18,882,020
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 6,447,955
Accumulated amortization of acquisition fees and expenses (1,343,836)
-------------
Investments in Local Limited Partnerships 23,986,139
Reserve for valuation of investments in Local Limited Partnerships (1,635,000)
-------------
$ 22,351,139
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
The Partnership's share of the net losses of the Local Limited Partnerships,
excluding the Combined Entities, for the six months ended September 30, 1997 is
$3,184,339. For the six months ended September 30, 1997, the Partnership has not
recognized $1,899,413 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.
2. Liquidation of Interests in Local Limited Partnerships
As previously reported, the Managing General Partner transferred all of the
assets of five of the Texas Partnerships subject to their liabilities, to
unaffiliated entities in 1996. Lone Oak Apartments and Hallet West Apartments
were transferred on August 6, 1997 and September 23, 1997, respectively.
Negotiations between the Managing General Partner, the Lender and prospective
buyers continued through the past quarter resulting in the disposition of 5 more
properties. If negotiations continue as expected, transfer of the remaining
property will occur during the fourth quarter of 1997. In the meantime,
operating deficits continue to be 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.
For financial reporting purposes, loss on liquidation of interests in Local
Limited Partnerships of $5,416 and extraordinary gain on cancellation of
indebtedness of $78,166 were recognized in the period ended September 30, 1997
as a result of the transfer of Hallet West Apartments. No loss was incurred on
the transfer of Lone Oak Apartments since it had previously been written to zero
because its equity in losses exceeded its capital contributions.
As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were transferred to the lender on May 2, 1997 after prolonged operating
difficulties resulting from low occupancy, capital rehabilitation needs and a
depressed local economy. The Local General Partner and Managing General Partner
were involved in lengthy workout negotiations with HUD, but ultimately the
mortgages for these properties were sold to a lender in HUD's August 1996
non-performing loan auction. Although negotiations continued with the lender in
an attempt to prevent foreclosure, a workout was not achieved, and the
foreclosures occurred. This transfer of title will result in a recapture tax in
1997 and the allocation of taxable income which will be reported on the
investors' 1997 tax return (filed in 1998). The Partnership's carrying value of
this investment for financial reporting purposes is zero.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules
Balance Sheets
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. III (A) Entities (B) Eliminations (A)
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 241,927 $ 132,894 $ - $ 374,821
Marketable securities, at fair value 403,848 - - 403,848
Investments in Local Limited
Partnerships, net 24,297,243 - (1,946,104) 22,351,139
Accounts receivable, net 826,545 120,860 (826,545) 120,860
Interest receivable 8,271 - (986) 7,285
Notes receivable 1,423,253 - (1,423,253) -
Prepaid expenses 5,662 41,409 - 47,071
Tenant security deposits - 76,084 - 76,084
Replacement reserves - 219,946 - 219,946
Rental property at cost, net of
accumulated depreciation - 17,253,110 - 17,253,110
Deferred acquisition fees escrow 337,500 - - 337,500
Deferred expenses, net - 222,234 - 222,234
Other assets - 299,217 - 299,217
------------ ------------- ------------ ------------
Total Assets $ 27,544,249 $ 18,365,754 $ (4,196,888) $ 41,713,115
============ ============= ============ ============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,359,713 $ 847,805 $ (826,545) $ 1,380,973
Accounts payable and accrued
expenses 181,187 661,026 - 842,213
Interest payable - 425,981 (986) 424,995
Notes payable, affiliate 514,968 - - 514,968
Security deposits payable - 84,484 - 84,484
Due to affiliate - 323,046 - 323,046
Deferred acquisition fees payable 337,500 - - 337,500
General partner advances - 200,000 - 200,000
Mortgage notes payable - 12,827,364 (1,423,253) 11,404,111
------------ ------------- ------------ ------------
Total Liabilities 2,393,368 15,369,706 (2,250,784) 15,512,290
------------ ------------- ------------ ------------
Minority interest in Local
Limited Partnerships - - 1,049,944 1,049,944
------------ ------------- ------------ ------------
General, Initial and Investor Limited
Partners' Equity 25,149,510 2,996,048 (2,996,048) 25,149,510
Net unrealized losses on marketable
securities 1,371 - - 1,371
------------ ------------- ------------ ------------
Total Partners' Equity 25,150,881 2,996,048 (2,996,048) 25,150,881
------------ ------------- ------------ ------------
Total Liabilities and
Partners' Equity $ 27,544,249 $ 18,365,754 $ (4,196,888) $ 41,713,115
============ ============= ============ ============
</TABLE>
(A) As of September 30, 1997.
(B) As of June 30, 1997.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
Statements of Operations
For the Three Months Ended September 30, 1997
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. III (A) Entities (B) Eliminations (A)
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 642,717 $ - $ 642,717
Investment 9,417 2,129 - 11,546
Other 32,435 35,477 - 67,912
------------ ----------- ---------- ------------
Total Revenue 41,852 680,323 - 722,175
------------ ----------- ---------- ------------
Expenses:
Asset management fees, related party 109,095 - - 109,095
General and administrative 118,805 - - 118,805
Bad debt 52,331 - - 52,331
Rental operations, exclusive
of depreciation - 394,505 - 394,505
Property management fees - 45,965 - 45,965
Interest 1,500 242,428 - 243,928
Depreciation - 203,985 - 203,985
Amortization 39,747 6,552 - 46,299
------------ ----------- ---------- ------------
Total Expenses 321,478 893,435 - 1,214,913
------------ ----------- ---------- ------------
Loss before equity in losses of Local
Limited Partnerships, minority interest,
loss on liquidation of interests in
Local Limited Partnerships and
extraordinary item (279,626) (213,112) - (492,738)
Equity in losses of Local Limited
Partnerships (667,741) - 126,979 (540,762)
Minority interest in losses of Local
Limited Partnerships - - 7,967 7,967
Loss on liquidation of interests
in Local Limited Partnerships (5,416) - - (5,416)
------------ ----------- ---------- ------------
Net Loss before extraordinary item (952,783) (213,112) 134,946 (1,030,949)
Extraordinary gain on cancellation
of indebtedness - 78,166 - 78,166
------------ ----------- ---------- ------------
Net Loss $ (952,783) $ (134,946) $ 134,946 $ (952,783)
============ =========== ========== ============
</TABLE>
(A) For the three months ended September 30, 1997.
(B) For the three months ended June 30, 1997.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
Statements of Operations
For the Six Months Ended September 30, 1997
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. III (A) Entities (B) Eliminations (A)
<S> <C> <C> <C> <C>
Revenue:
Rental $ - $ 1,249,763 $ - $ 1,249,763
Investment 17,442 3,833 - 21,275
Other 102,170 84,207 (27,003) 159,374
------------ ----------- ---------- ------------
Total Revenue 119,612 1,337,803 (27,003) 1,430,412
------------ ----------- ---------- ------------
Expenses:
Asset management fees, related party 218,190 - - 218,190
General and administrative 241,634 - - 241,634
Bad debt 64,167 - - 64,167
Rental operations, exclusive
of depreciation - 854,409 - 854,409
Property management fees - 88,190 - 88,190
Interest 3,000 488,704 (27,003) 464,701
Depreciation - 395,097 - 395,097
Amortization 79,492 13,105 - 92,597
------------ ----------- ---------- ------------
Total Expenses 606,483 1,839,505 (27,003) 2,418,985
------------ ----------- ---------- ------------
Loss before equity in losses of Local
Limited Partnerships, minority
interest, loss on liquidation of
interests in Local Limited Partnerships
and extraordinary item (486,871) (501,702) - (988,573)
Equity in losses of Local Limited
Partnerships (1,704,643) - 412,685 (1,291,958)
Minority interest in losses of Local
Limited Partnerships - - 10,851 10,851
Loss on liquidation of interests
in Local Limited Partnerships (5,416) - - (5,416)
------------ ----------- ---------- ------------
Net Loss before extraordinary item (2,196,930) (501,702) 423,536 (2,275,096)
Extraordinary gain on cancellation
of indebtedness - 78,166 - 78,166
------------ ----------- ---------- ------------
Net Loss $ (2,196,930) $ (423,536) $ 423,536 $ (2,196,930)
============ =========== ========== ============
</TABLE>
(A) For the six months ended September 30, 1997.
(B) For the six months ended June 30, 1997.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the Combined Financial Statements (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
Statements of Cash Flows
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. III (A) Entities (B) Eliminations (A)
<S> <C> <C> <C> <C>
Net cash used for
operating activities $ (63,017) $ (66,360) $ - $ (129,377)
-------------- ------------- ------------ -------------
Cash flows from investing activities:
Advances to affiliates (109,506) - 57,497 (52,009)
Purchases of marketable securities (273,744) - - (273,744)
Proceeds from sales and maturities
of marketable securities 204,811 - - 204,811
Cash distributions received from
Local Limited Partnerships 270,375 - - 270,375
Purchase of rental property - (72,981) - (72,981)
Deposits to replacement reserves - (10,046) - (10,046)
-------------- ------------- ------------ -------------
Net cash provided by (used for)
investing activities 91,936 (83,027) 57,497 66,406
-------------- ------------- ------------ -------------
Cash flows from financing activities:
Repayment of mortgage notes
payable - (61,707) - (61,707)
Advances from affiliate - 177,382 (57,497) 119,885
-------------- ------------- ------------ -------------
Net cash provided by
financing activities - 115,675 (57,497) 58,178
-------------- ------------- ------------ -------------
Net increase (decrease) in cash
and cash equivalents 28,919 (33,712) - (4,793)
Cash and cash equivalents,
beginning 213,008 166,606 - 379,614
-------------- ------------- ------------- --------------
Cash and cash equivalents,
ending $ 241,927 $ 132,894 $ - $ 374,821
============== ============= ============= ==============
</TABLE>
(A) For the six months ended September 30, 1997.
(B) For the six months ended June 30, 1997.
<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 $4,793 from $379,614 at March 31, 1997 to $374,821 at
September 30, 1997. This decrease is attributable to cash used for operating
activities and purchases of marketable securities in excess of proceeds from
sales and maturities of marketable securities. These decreases are 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 $1,557,000 have been paid from Reserves.
This amount includes approximately $1,264,000 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 $1,238,000 (net of paydowns) to purchase
the mortgage of a Local Limited Partnership. To date, the Partnership has used
approximately $1,243,000 of operating funds to replenish Reserves. At September
30, 1997, approximately $597,000 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 interest
to provide such funds, voluntarily, in order to protect its investment. To date,
in addition to the $1,264,000 noted above, the Partnership has also advanced
approximately $730,000 to the Texas Partnerships and $328,000 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, 1997, 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 during the six months ended September 30, 1997.
Results of Operations
For the three and six months ended September 30, 1997, Partnership operations
resulted in net losses of $952,783 and $2,196,930, respectively, as compared to
net losses of $1,684,188 and $2,748,192 for the respective 1996 periods. The
decrease in net loss is primarily attributable to a decrease in equity in losses
of Local Limited Partnerships and extraordinary gain on cancellation of
indebtedness for Hallet West Apartments. These decreases are offset by an
increase in rental revenue and rental operations expense because Breckenridge
Creste's operations were combined with the Partnership's effective September 1,
1996. 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 whose cumulative equity in losses and cumulative distributions
exceeded its total investment in those partnerships. The decrease in equity in
losses of Local Limited Partnerships are expected to continue. Five Texas
Partnerships transferred during October, 1997, and the remaining one is also
expected to transfer in the fourth quarter of 1997. Extraordinary gain on
cancellation of indebtedness will be recognized for these transfers.
<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
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 had been improving at Pleasant Plaza, located in Malden,
Massachusetts, as a result of the 1995 SHARP subsidy restructuring. The SHARP
mortgage subsidy has been an important part of the property's annual income.
However, effective October 1, 1997, the Massachusetts Housing Finance Agency
(MHFA), which provided the SHARP subsidies, withdrew future SHARP mortgage
subsidies from its portfolio of 77 SHARP subsidized properties. The Managing
General Partner joined a group of interested parties and is working with MHFA to
find a solution to the problems that will result as a result of withdrawn
subsidies. Given the dependence on the mortgage subsidy, it is possible that the
property will default on its mortgage obligation by the end of the year. It is
possible that fund reserves will be used to support the property until these
issues can be resolved. As we previously reported, the Local General Partner is
seeking bankruptcy protection. His reorganization plan is expected to be
approved in 1997. If approved, the plan is not likely to materially affect
property operations or the Local General Partner's interest in the Partnership.
Another property affected by the withdrawal of the SHARP subsidies is South
Holyoke, located in Holyoke, Massachusetts. As previously reported, this
property 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, community outreach and tighter expense
monitoring.
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 Managing General Partner and Local General
Partner continue to participate in 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. The
Partnership's carrying value of this investment for financial reporting purposes
is zero.
As previously reported, the Managing General Partner transferred all of the
assets of five of the Texas Partnerships, subject to their liabilities, to
unaffiliated entities in 1996. Negotiations between the Managing General
Partner, the Lender and prospective buyers have continued through the past
quarter resulting in the disposition of seven more properties. If negotiations
continue as expected, the transfer of the remaining property will occur during
the fourth quarter of 1997. In the meantime, operating deficits continue to be
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.
<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)
Operating deficits on Waterfront and Shoreline, two Buffalo, New York
properties, continue as a result of a soft rental market, deferred maintenance
and security issues. As previously reported, the Managing General Partner and
Local General Partner have successfully negotiated a grant from the New York
Mortgage Loan Corporation. The grant should be funded during 1998 and will be
used to upgrade the curb appeal and overall physical condition of the properties
as well as stabilize operations. Deficits continue to be funded by the
management agent. As noted previously, the viability of the properties depends
upon funding deficits until receipt of the grant. Both properties currently
carry cash flow mortgages with New York State.
As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were transferred to the lender on May 2, 1997 after prolonged operating
difficulties resulting from low occupancy, capital rehabilitation needs and a
depressed local economy. The Local General Partner and Managing General Partner
were involved in lengthy 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. Although negotiations continued with the lender in
an attempt to prevent foreclosure, a workout was not achieved, and the
foreclosures occurred. This transfer of title will result in a recapture tax in
1997 and the allocation of taxable income which will be reported on the
investors' 1997 tax return (filed in 1998). The Partnership's carrying value of
this investment for financial reporting purposes is zero.
As previously reported, Breckenridge Creste, located in Duluth, Georgia,
continues to operate below breakeven as a result of increased vacancy, a weak
rental market and deferred maintenance issues. The capital improvement plan has
been implemented and should improve the curb appeal of the property. A special
reserve account was set up at the property level to hold funds for capital
improvements and operating deficits. Expenditures from these funds are carefully
monitored by property management and the Managing General Partner.
<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, 1997.
<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 14, 1997 BOSTON FINANCIAL QUALIFIED HOUSING TAX
CREDITS L.P. III
By: Arch Street III, Inc.,
its Managing General Partner
/s/William E. Haynsworth
William E. Haynsworth
Managing Director, Vice President and
Chief Operating Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 374,821
<SECURITIES> 403,848
<RECEIVABLES> 128,145<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 17,253,110
<DEPRECIATION> 000
<TOTAL-ASSETS> 41,713,115<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 25,150,881
<TOTAL-LIABILITY-AND-EQUITY> 41,713,115<F3>
<SALES> 000
<TOTAL-REVENUES> 1,430,412<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,954,284<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 464,701
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 78,166
<CHANGES> 000
<NET-INCOME> (2,196,930)<F6>
<EPS-PRIMARY> (21.75)
<EPS-DILUTED> 000
<FN>
<F1> Included in receivables: Accounts receivable $120,860 and Interest
receivable $7,285.
<F2>Included in total assets: Prepaid expenses $47,071, Tenant security deposits
$76,084, Other assets $299,217, Investments in Local Limited Partnerships
$22,351,139, Replacement reserves $219,946, Deferred acquisition fees escrow
$337,500 and Deferred expenses, net $222,234.
<F3>Included in Total Liabilities and Equity: Accounts payable to affiliates
$1,380,973, Accounts payable and accrued expenses $842,213, Interest payable
$424,995, Notes payable, affiliate $514,968, Security deposits payable $84,484,
Due to affiliate $323,046, Deferred acquisition fees payable $337,500, General
Partner advances $200,000, Mortgage notes payable $11,404,111 and Minority
interest in Local Limited Partnerships $1,049,944.
<F4>Total revenue includes: Rental $1,249,763, Investment $21,275 and Other
$159,374.
<F5>Included in Other Expenses: Asset management fees $218,190, General and
Administrative $241,634, Bad debt $64,167, Property management fees $88,190,
Rental operations, exclusive of depreciation $854,409, Depreciation $395,097 and
Amortization $92,597.
<F6>Net loss reflects: equity in losses of Local Limited Partnerships of
$1,291,958, loss on liquidation of interests in Local Limited Partnerships
of $(5,416), extraordinary gain on cancellation of indebtedness of $78,166 and
minority interest in losses of Local Limited Partnerships $10,851.
</FN>
</TABLE>
