August 13, 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 June 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/ Veronica J Curioso
Veronica J.Curioso
Assistant Controller
QH3-Q1.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Actof1934
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1997
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 June 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 - June 30, 1997 (Unaudited)
and March 31, 1997 1
Combined Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 1997 and 1996 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 1997 3
Combined Statements of Cash Flows (Unaudited) - For the
Three Months Ended June 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 10
PART II - OTHER INFORMATION
Items 1-6 13
SIGNATURE 14
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
<TABLE>
COMBINED BALANCE SHEETS - June 30, 1997 and March 31, 1997
<CAPTION>
June 30, March 31,
1997 1997
(Unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 422,420 $ 379,614
Marketable securities, at fair value 406,598 331,319
Investments in Local Limited Partnerships, net (Note 1) 23,028,149 23,983,675
Accounts receivable, net 59,737 175,669
Interest receivable 5,951 17,607
Prepaid expenses 18,219 40,019
Tenant security deposits 69,749 66,439
Replacement reserves 214,681 210,045
Rental property at cost, net of accumulated
depreciation 17,693,122 17,884,234
Deferred acquisition fees escrow 337,500 337,500
Deferred expenses, net 228,786 235,339
Other assets 264,701 130,130
------------ ------------
Total Assets $ 42,749,613 $ 43,791,590
============ ============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,283,651 $ 1,193,182
Accounts payable and accrued expenses 622,613 611,515
Interest payable 444,351 377,295
Note payable, affiliate 573,822 514,968
Security deposits payable 82,626 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 11,721,805 11,754,415
------------ ------------
Total Liabilities 15,589,414 15,393,975
------------ ------------
Minority interest in Local Limited Partnerships 1,057,911 1,053,122
------------ ------------
General, Initial and Investor Limited Partners' Equity 26,102,293 27,346,440
Net unrealized losses on marketable securities (5) (1,947)
------------ ------------
Total Partners' Equity 26,102,288 27,344,493
------------ ------------
Total Liabilities and Partners' Equity $ 42,749,613 $ 43,791,590
============ ============
</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)
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, 1997 and 1996
<CAPTION>
1997 1996
------------- --------
Revenue:
<S> <C> <C>
Rental $ 607,046 $ 451,156
Investment 9,729 59,519
Other 118,465 45,065
------------- ------------
Total Revenue 735,240 555,740
------------- ------------
Expenses:
Asset management fees, related party 109,095 113,861
General and administrative (includes
reimbursements to affiliates of $58,855 and
$45,344 in 1997 and 1996, respectively) 122,829 80,382
Bad debt 11,836 -
Property management fees 42,225 22,133
Rental operations, exclusive of depreciation 459,904 277,122
Interest 247,776 227,403
Depreciation 191,112 113,217
Amortization 46,298 48,064
------------- ------------
Total Expenses 1,231,075 882,182
------------- ------------
Loss before equity in losses of
Local Limited Partnerships (495,835) (326,442)
Equity in losses of Local Limited Partnerships (751,196) (739,798)
Minority interest in losses of
Local Limited Partnerships 2,884 2,236
------------- ------------
Net Loss $ (1,244,147) $ (1,064,004)
============= ============
Net Loss allocated:
To General Partners $ (12,441) $ (10,640)
To Limited Partners (1,231,706) (1,053,364)
------------- ------------
$ (1,244,147) $ (1,064,004)
============= ============
Net Loss per Limited Partnership Unit
(100,000 Units) $ (12.32) $ (10.53)
============ ============
</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)
<TABLE>
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Three Months Ended June 30, 1997
<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 - - - 1,942 1,942
Net Loss (12,441) - (1,231,706) - (1,244,147)
---------- ------- ------------ --------- -------------
Balance at June 30, 1997 $ (614,822) $ 5,000 $ 26,712,115 $ (5) $ 26,102,288
========== ======= ============ ========= =============
</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)
<TABLE>
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended June 30, 1997 and 1996
<CAPTION>
1997 1996
------------- -------
<S> <C> <C>
Net cash used for operating activities $ (143,987) $ (81,007)
------------ ------------
Cash flows from investing activities:
Advances to affiliates (57,497) -
Purchases of marketable securities (124,573) -
Proceeds from sales and maturities of
marketable securities 51,439 26,411
Cash distributions received from Local
Limited Partnerships 179,290 216,126
Additions to fixed assets - (670)
Deposits to replacement reserves (4,636) (29,373)
------------ ------------
Net cash provided by investing activities 44,023 212,494
------------ ------------
Cash flows from financing activities:
Repayment of mortgage notes payable (32,610) (71,435)
Advances from affiliate 116,526 13,153
Advances on notes payable, affiliate 58,854 -
Payments to developer - (5,172)
Repayment of notes receivable, affiliate - 13,317
------------ ------------
Net cash provided by (used for) financing activities 142,770 (50,137)
------------ ------------
Net increase in cash and cash equivalents 42,806 81,350
Cash and cash equivalents, beginning 379,614 268,040
------------ ------------
Cash and cash equivalents, ending $ 422,420 $ 349,390
============ ============
</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, 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 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.
<TABLE>
The following is a summary of Investments in Local Limited Partnerships at June
30, 1997, excluding the Combined Entities:
<CAPTION>
<S> <C>
Capital contributions to Local Limited Partnerships and purchase
price paid to withdrawing partners of Local Limited Partnerships $ 60,012,604
Cumulative equity in loss of Local Limited Partnerships (excluding
cumulative unrecognized losses of $22,165,501) (38,488,460)
Cumulative cash distributions received from Local Limited Partnerships (2,011,264)
-------------
Investments in Local Limited Partnerships before adjustment 19,512,880
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 6,455,925
Accumulated amortization of acquisition fees and expenses (1,305,656)
-------------
Investments in Local Limited Partnerships 24,663,149
Reserve for valuation of investments in Local Limited Partnerships (1,635,000)
-------------
$ 23,028,149
</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 three months ended June 30, 1997 is
$1,770,747. For the three months ended June 30, 1997, the Partnership has not
recognized $1,026,583 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. Negotiations between the Managing General
Partner, the Lender and prospective buyers have continued through the past
quarter resulting in a revised disposition plan for the remaining 8 properties.
The new plan will transfer title to the remaining 8 properties to unaffiliated
buyers. If negotiations continue as expected, this transfer will occur during
the third 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.
As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were transferred to the bank 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 bank 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
<TABLE>
Balance Sheets
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. III (A) Entities (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 308,781 $ 113,639 $ - $ 422,420
Marketable securities, at fair value 406,598 - - 406,598
Investments in Local Limited
Partnerships, net 25,101,232 - (2,073,083) 23,028,149
Accounts receivable, net 826,867 59,737 (826,867) 59,737
Interest receivable 23,507 - (17,556) 5,951
Notes receivable 1,423,253 - (1,423,253) -
Prepaid expenses 7,077 11,142 - 18,219
Tenant security deposits - 69,749 - 69,749
Replacement reserves - 214,681 - 214,681
Rental property at cost, net of
accumulated depreciation - 17,693,122 - 17,693,122
Deferred acquisition fees escrow 337,500 - - 337,500
Deferred expenses, net - 228,786 - 228,786
Other assets - 264,701 - 264,701
------------ ------------- ------------ ------------
Total Assets $ 28,434,815 $ 18,655,557 $ (4,340,759) $ 42,749,613
============ ============= ============ ============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,250,618 $ 859,900 $ (826,867) $ 1,283,651
Accounts payable and accrued
expenses 170,587 452,026 - 622,613
Interest payable - 461,907 (17,556) 444,351
Notes payable, affiliate 573,822 - - 573,822
Security deposits payable - 82,626 - 82,626
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 - 13,145,058 (1,423,253) 11,721,805
------------ ------------- ------------ ------------
Total Liabilities 2,332,527 15,524,563 (2,267,676) 15,589,414
------------ ------------- ------------ ------------
Minority interest in Local
Limited Partnerships - - 1,057,911 1,057,911
------------ ------------- ------------ ------------
General, Initial and Investor Limited
Partners' Equity 26,102,293 3,130,994 (3,130,994) 26,102,293
Net unrealized losses on marketable
securities (5) - - (5)
------------ ------------- ------------ ------------
Total Partners' Equity 26,102,288 3,130,994 (3,130,994) 26,102,288
------------ ------------- ------------ ------------
Total Liabilities and
Partners' Equity $ 28,434,815 $ 18,655,557 $ (4,340,759) $ 42,749,613
============ ============= ============ ============
</TABLE>
(A) As of June 30, 1997.
(B) As of March 31, 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)
<TABLE>
Statements of Operations
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. III (A) Entities (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 607,046 $ - $ 607,046
Investment 8,025 1,704 - 9,729
Other 69,735 48,730 - 118,465
------------ ----------- ---------- ------------
Total Revenue 77,760 657,480 - 735,240
------------ ----------- ---------- ------------
Expenses:
Asset management fees, related party 109,095 - - 109,095
General and administrative 122,829 - - 122,829
Bad debt 11,836 - - 11,836
Property management fees - 42,225 - 42,225
Rental operations, exclusive
of depreciation - 459,904 - 459,904
Interest 1,500 246,276 - 247,776
Depreciation - 191,112 - 191,112
Amortization 39,745 6,553 - 46,298
------------ ----------- ---------- ------------
Total Expenses 285,005 946,070 - 1,231,075
------------ ----------- ---------- ------------
Loss before equity in losses of Local
Limited Partnerships (207,245) (288,590) - (495,835)
Equity in losses of Local Limited
Partnerships (1,036,902) - 285,706 (751,196)
Minority interest in losses of Local
Limited Partnerships - - 2,884 2,884
------------ ----------- ---------- ------------
Net Loss $ (1,244,147) $ (288,590) $ 288,590 $ (1,244,147)
============ =========== ========== ============
</TABLE>
(A) For the three months ended June 30, 1997.
(B) For the three months ended March 31, 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)
<TABLE>
Statements of Cash Flows
<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 $ (11,740) $ (132,247) $ - $ (143,987)
-------------- ------------- ------------ -------------
Cash flows from investing activities:
Advances to affiliates (57,497) - - (57,497)
Purchases of marketable securities (124,573) - - (124,573)
Proceeds from sales and maturities
of marketable securities 51,439 - - 51,439
Cash distributions received from
Local Limited Partnerships 179,290 - - 179,290
Deposits to replacement reserves - (4,636) - (4,636)
-------------- ------------- ------------ -------------
Net cash provided by (used for)
investing activities 48,659 (4,636) - 44,023
-------------- -------------- ------------ -------------
Cash flows from financing activities:
Repayment of mortgage notes
payable - (32,610) - (32,610)
Advances from affiliate - 116,526 - 116,526
Advances on notes payable,
affiliate 58,854 - - 58,854
-------------- ------------- ------------ -------------
Net cash provided by
financing activities 58,854 83,916 - 142,770
-------------- ------------- ------------ -------------
Net increase (decrease) in cash
and cash equivalents 95,773 (52,967) - 42,806
Cash and cash equivalents,
beginning 213,008 166,606 - 379,614
-------------- ------------- ------------- --------------
Cash and cash equivalents,
ending $ 308,781 $ 113,639 $ - $ 422,420
============== ============= ============= ==============
</TABLE>
(A) For the three months ended June 30, 1997.
(B) For the three months ended March 31, 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 an increase in cash and
cash equivalents of $42,806 from $379,614 at March 31, 1997 to $422,420 at June
30, 1997. This increase is attributable to net proceeds received from sales and
maturities of marketable securities, cash distributions received from Local
Limited Partnerships and advances from an affiliate. These are offset by the
repayment of mortgage notes payable and cash used for operations.
The Managing General Partner initially designated 3% of the Gross Proceeds to
Reserves. The Reserves were established to be used for working capital of the
Partnership and contingencies related to the ownership of Local Limited
Partnership interests. The Managing General Partner may increase or decrease
such Reserves from time to time, as it deems appropriate. During the year ended
March 31, 1993, the Managing General Partner decided to increase the Reserve
level to 3.75%. Funds approximating $195,000 have been withdrawn from the
Reserves to pay legal and other costs related to the Mod Rehab Issue as
previously discussed. Additionally, professional fees relating to various
property issues totaling approximately $1,513,000 have been paid from Reserves.
This amount includes approximately $1,229,000 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 $1,279,000 (net of paydowns) to purchase
the mortgage of a Local Limited Partnership. To date, the Partnership has used
approximately $1,198,000 of operating funds to replenish Reserves. At June 30,
1997, approximately $606,000 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 $1,229,000 noted above, the Partnership has also advanced
approximately $678,000 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 June 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 three months ended June 30, 1997.
Results of Operations
For the three months ended June 30, 1997, Partnership operations resulted in a
net loss of $1,244,147 as compared to a net loss of $1,064,004 for the three
months ended June 30, 1996. The increase in net loss is primarily attributable
to an increase in rental operations and depreciation offset by an increase in
rental revenue. These changes are the result of Breckenridge Creste's operations
being combined with the Partnership; this occurred on August 20, 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions
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 continue to improve 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 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 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 a revised disposition plan for the remaining 8 properties.
The new plan will transfer title to the remaining 8 properties to unaffiliated
buyers. If negotiations continue as expected, this transfer will occur during
the third 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.
New on-site management and rent increases have resulted in a marked improvement
in operations at Columbia. Occupancy is stable at 100% as of June 30, 1996. The
Local General Partner continues to work with the first mortgage lender and with
HUD to renegotiate the property's debt. As a result of improved operations, the
property is now covering its debt service from funds from operations.
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, community outreach and tighter expense monitoring. In addition,
additional SHARP subsidy from the local housing authority has been requested.
<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)
Waterfront and Shoreline, two Buffalo, New York properties, continue to
experience operating difficulties due to a soft rental market, deferred
maintenance and security issues. 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 usedto 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 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 bank 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 bank 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 high 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 June 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: August 13, 1997 BOSTON FINANCIAL QUALIFIED HOUSING TAX
CREDITS L.P. III
By: Arch Street III, Inc.,
its Managing General Partner
/s/ Vinsent J. Constantini
Vincent J. Costantini
Treasurer and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 422,420
<SECURITIES> 406,598
<RECEIVABLES> 65,688<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 17,693,122
<DEPRECIATION> 000
<TOTAL-ASSETS> 42,749,613<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 26,102,288
<TOTAL-LIABILITY-AND-EQUITY> 42,749,613<F3>
<SALES> 000
<TOTAL-REVENUES> 735,240<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 983,299<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 247,776
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (1,244,147)<F6>
<EPS-PRIMARY> (12.32)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts receivable $59,737 and Interest receivable
$5,951.
<F2>Included in total assets: Prepaid expenses $18,219, Tenant security deposits
$69,749, Other assets $264,701, Investments in Local Limited Partnerships
$23,028,149, Replacement reserves $214,681, Deferred acquisition fees escrow
$337,500 and Deferred expenses, net $228,786. <F3>Included in Total Liabilities
and Equity: Accounts payable to affiliates $1,283,651, Accounts payable and
accrued expenses $622,613, Interest payable $444,351, Notes payable, affiliate
$573,822, Security deposits payable $82,626, Due to affiliate $323,046, Deferred
acquisition fees payable $337,500, General partner advances $200,000, Mortgage
notes payable $11,721,805 and Minority interest in Local Limited Partnerships
$1,057,911. <F4>Total revenue includes: Rental $607,046, Investment $9,729 and
Other $118,465. <F5>Included in Other Expenses: Asset management fees $109,095,
General and Administrative $122,829, Bad debt $11,836, Property management fees
$42,225, Rental operations, exclusive of depreciation $459,904, Depreciation
$191,112 and Amortization $46,298. <F6>Net loss reflects: equity in losses of
Local Limited Partnerships of $751,196, and minority interest in losses of Local
Limited Partnerships $2,884.
</FN>
</TABLE>
