February 13, 1998
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 December 31, 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/George Fondulis
George Fondulis
Assistant Controller
QH3-Q3.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, 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 December 31, 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, Massachusett 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, 1997 (Unaudited)
and March 31, 1997 1
Combined Statements of Operations (Unaudited) - For the Three and Nine
Months Ended December 31, 1997 and 1996 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 1997 3
Combined Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 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 - December 31, 1997 and March 31, 1997
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 156,413 $ 379,614
Marketable securities, at fair value 288,358 331,319
Investments in Local Limited Partnerships, net of reserve
for valuation of $1,635,000 (Note 1) 21,449,235 23,983,675
Accounts receivable, net of allowance for bad
debt of $292,860 and $46,702, respectively 105,700 175,669
Interest receivable 4,268 17,607
Prepaid expenses 22,035 40,019
Tenant security deposits 67,861 66,439
Replacement reserves 166,567 210,045
Rental property at cost, net of accumulated
depreciation and reserve for valuation of $5,591,877
and $7,175,143, respectively 15,484,934 17,884,234
Deferred acquisition fees escrow 225,000 337,500
Deferred expenses, net of $130,697 and $111,038
of accumulated amortization, respectively 215,680 235,339
Other assets 267,888 130,130
------------ ------------
Total Assets $ 38,453,939 $ 43,791,590
============ ============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,494,772 $ 1,193,182
Accounts payable and accrued expenses 710,205 611,515
Interest payable 283,261 377,295
Note payable, affiliate 514,968 514,968
Security deposits payable 69,279 82,054
Due to affiliate 323,046 323,046
Deferred acquisition fees payable 225,000 337,500
General Partner advances 200,000 200,000
Mortgage notes payable 8,677,248 11,754,415
------------ ------------
Total Liabilities 12,497,779 15,393,975
------------ ------------
Minority interest in Local Limited Partnerships 914,695 1,053,122
------------ ------------
General, Initial and Investor Limited Partners' Equity 25,040,812 27,346,440
Net unrealized gains (losses) on marketable securities 653 (1,947)
------------ ------------
Total Partners' Equity 25,041,465 27,344,493
------------ ------------
Total Liabilities and Partners' Equity $ 38,453,939 $ 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 Nine Months Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
-------------- --------------- -------------- --------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 619,190 $ 436,089 $ 1,868,953 $ 1,321,350
Investment 10,176 4,401 31,451 71,763
Other 34,287 24,568 193,661 152,507
------------ ------------- ------------ ------------
Total Revenue 663,653 465,058 2,094,065 1,545,620
------------ ------------- ------------ ------------
Expenses:
Asset management fees, related party 109,095 113,861 327,285 341,583
General and administrative (includes
reimbursements to affiliates of $135,989
and $115,671 in 1997 and 1996, respectively) 138,783 122,737 380,417 319,052
Bad debt 690,469 - 754,636 -
Rental operations, exclusive of depreciation 409,452 255,111 1,263,861 859,606
Property management fees 43,797 33,524 131,987 102,545
Interest 212,401 122,584 677,102 571,293
Depreciation 200,925 125,083 596,022 375,255
Amortization 40,751 44,420 133,348 133,264
------------ ------------- ------------ ------------
Total Expenses 1,845,673 817,320 4,264,658 2,702,598
------------ ------------- ------------ ------------
Loss before equity in losses of Local Limited Partnerships, minority interest,
loss on liquidation of interests in Local Limited Partnerships and
extraordinary items (1,182,020) (352,262) (2,170,593) (1,156,978)
Equity in losses of Local Limited Partnerships (838,977) (727,754) (2,130,935) (2,625,319)
Minority interest in losses of
Local Limited Partnerships 135,249 2,532 146,100 8,216
Loss on liquidation of interests in Local Limited
Partnerships (Note 2) (12,835) - (18,251) -
------------ ------------- ------------ ------------
Net Loss before extraordinary items (1,898,583) (1,077,484) (4,173,679) (3,774,081)
Extraordinary gain on cancellation of
indebtedness (Note 2) 1,789,885 - 1,868,051 -
Extraordinary loss on forgiveness
of indebtedness - - - (51,595)
------------ ------------- ------------ ------------
Net Loss $ (108,698) $ (1,077,484) $ (2,305,628) $ (3,825,676)
============ ============= ============ ============
Net Loss allocated:
To General Partners $ (1,087) $ (10,775) $ (23,056) $ (38,257)
To Limited Partners (107,611) (1,066,709) (2,282,572) (3,787,419)
------------ ------------- ------------ ------------
$ (108,698) $ (1,077,484) $ (2,305,628) $ (3,825,676)
============ ============= ============ ============
Net Loss before extraordinary items per
Limited Partnership Unit (100,000 Units) $ (18.80) $ (10.66) $ (41.32) $ (37.36)
=========== ============ =========== ============
Extraordinary items per Limited Partnership
Unit (100,000 Units) $ 17.72 $ - $ 18.49 $ (0.51)
=========== ============ =========== ===========
Net Loss per Limited Partnership Unit
(100,000 Units) $ (1.08) $ (10.66) $ (22.83) $ (37.87)
=========== ============ =========== ============
</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 Nine Months Ended December 31, 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 - - - 2,600 2,600
Net Loss (23,056) - (2,282,572) - (2,305,628)
---------- ------- ------------ --------- -------------
Balance at December 31, 1997 $ (625,437) $ 5,000 $ 25,661,249 $ 653 $ 25,041,465
========== ======= ============ ========= =============
</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 Nine Months Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------
<S> <C> <C>
Net cash provided by (used for) operating activities $ (185,016) $ 55,634
------------ ------------
Cash flows from investing activities:
Advances to affiliates (317,709) (116,335)
Purchases of marketable securities (373,539) (74,188)
Proceeds from sales and maturities of
marketable securities 420,313 58,983
Cash distributions received from Local
Limited Partnerships 315,906 423,644
Decrease in deferred acquisition fee escrow 112,500 112,500
Payment of deferred acquisition fee (112,500) (112,500)
Purchase of rental property (197,866) (55,554)
Deposits to replacement reserves 35,020 (330)
------------ ------------
Net cash provided by (used for) investing activities (117,875) 236,220
------------ ------------
Cash flows from financing activities:
Repayment of mortgage notes payable (86,431) (117,178)
Advances from affiliate 149,119 62,872
Repayment of notes receivable, affiliate 17,002 -
------------ ------------
Net cash provided by (used for) financing activities 79,690 (54,306)
------------ ------------
Net increase (decrease) in cash and cash equivalents (223,201) 237,548
Cash and cash equivalents, beginning 379,614 268,040
------------ ------------
Cash and cash equivalents, ending $ 156,413 $ 505,588
============ ============
</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 prior year financial statements to conform to the current year
presentation.
The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90 day lag basis, because the Local Limited Partnerships
report their results on a calendar year basis. Accordingly, the financial
information about the Local Limited Partnerships that is included in the
accompanying combined financial statements is as of September 30, 1997 and 1996.
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
December 31, 1997, 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 $ 59,851,809
Cumulative equity in loss of Local Limited Partnerships (excluding
cumulative unrecognized losses of $23,981,475) (39,676,371)
Cumulative cash distributions received from Local Limited Partnerships (2,147,880)
-------------
Investments in Local Limited Partnerships before adjustment 18,027,558
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 6,430,577
Accumulated amortization of acquisition fees and expenses (1,373,900)
-------------
Investments in Local Limited Partnerships 23,084,235
Reserve for valuation of investments in Local Limited Partnerships (1,635,000)
-------------
$ 21,449,235
=============
</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 nine months ended December 31, 1997 is
$5,035,488. For the nine months ended December 31, 1997, the Partnership has not
recognized $2,941,221 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, Hallet West Apartments and
Lakeway Colony were transferred on August 6, 1997, September 23, 1997 and
October 30, 1997, respectively. Crestwood Place, Eagle Nest Apartments, One Main
Place and Pilot Point Apartments were transferred on October 28, 1997. If
negotiations continue as expected, transfer of the remaining property will occur
during the first half of 1998. 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 $18,251 and extraordinary gain on cancellation of
indebtedness of $1,868,051 were recognized in the period ended December 31, 1997
as a result of the transfer of Hallet West Apartments, Crestwood Place, Eagle
Nest Apartments, Lakeway Colony, One Main Place and Pilot Point 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
these investments 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 $ 48,880 $ 107,533 $ - $ 156,413
Marketable securities, at fair value 288,358 - - 288,358
Investments in Local Limited
Partnerships, net 25,017,759 - (3,568,524) 21,449,235
Accounts receivable, net 453,784 105,700 (453,784) 105,700
Interest receivable 4,268 - - 4,268
Notes receivable 1,406,251 - (1,406,251) -
Prepaid expenses 4,247 17,788 - 22,035
Tenant security deposits - 67,861 - 67,861
Replacement reserves - 166,567 - 166,567
Rental property at cost, net of
accumulated depreciation - 15,484,934 - 15,484,934
Deferred acquisition fees escrow 225,000 - - 225,000
Deferred expenses, net - 215,680 - 215,680
Other assets - 267,888 - 267,888
------------ ------------- ------------ ------------
Total Assets $ 27,448,547 $ 16,433,951 $ (5,428,559) $ 38,453,939
============ ============= ============ ============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,482,331 $ 466,225 $ (453,784) $ 1,494,772
Accounts payable and accrued
expenses 184,783 525,422 - 710,205
Interest payable - 283,261 - 283,261
Notes payable, affiliate 514,968 - - 514,968
Security deposits payable - 69,279 - 69,279
Due to affiliate - 323,046 - 323,046
Deferred acquisition fees payable 225,000 - - 225,000
General partner advances - 200,000 - 200,000
Mortgage notes payable - 10,083,499 (1,406,251) 8,677,248
------------ ------------- ------------ ------------
Total Liabilities 2,407,082 11,950,732 (1,860,035) 12,497,779
------------ ------------- ------------ ------------
Minority interest in Local
Limited Partnerships - - 914,695 914,695
------------ ------------- ------------ ------------
General, Initial and Investor Limited
Partners' Equity 25,040,812 4,483,219 (4,483,219) 25,040,812
Net unrealized losses on marketable
securities 653 - - 653
------------ ------------- ------------ ------------
Total Partners' Equity 25,041,465 4,483,219 (4,483,219) 25,041,465
------------ ------------- ------------ ------------
Total Liabilities and
Partners' Equity $ 27,448,547 $ 16,433,951 $ (5,428,559) $ 38,453,939
============ ============= ============ ============
</TABLE>
(A) As of December 31, 1997. (B) As of September 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 December 31, 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 $ - $ 619,190 $ - $ 619,190
Investment 8,344 1,832 - 10,176
Other 86,394 (27,277) (24,830) 34,287
------------ ----------- ------------ ------------
Total Revenue 94,738 593,745 (24,830) 663,653
------------ ----------- ------------ ------------
Expenses:
Asset management fees, related party 109,095 - - 109,095
General and administrative 138,783 - - 138,783
Bad debt 690,469 - - 690,469
Rental operations, exclusive
of depreciation - 409,452 - 409,452
Property management fees - 43,797 - 43,797
Interest 1,500 235,731 (24,830) 212,401
Depreciation - 200,925 - 200,925
Amortization 34,197 6,554 - 40,751
------------ ----------- ------------ ------------
Total Expenses 974,044 896,459 (24,830) 1,845,673
------------ ----------- ------------ ------------
Loss before equity in income (losses)
of Local Limited Partnerships,
minority interest, loss on
liquidation of interests in Local
Limited Partnerships and
extraordinary item (879,306) (302,714) - (1,182,020)
Equity in income (losses) of Local
Limited Partnerships 783,443 - (1,622,420) (838,977)
Minority interest in losses of Local
Limited Partnerships - - 135,249 135,249
Loss on liquidation of interests
in Local Limited Partnerships (12,835) - - (12,835)
------------ ----------- ------------ ------------
Net Loss before extraordinary item (108,698) (302,714) (1,487,171) (1,898,583)
Extraordinary gain on cancellation
of indebtedness - 1,789,885 - 1,789,885
------------ ----------- ------------ ------------
Net Income (Loss) $ (108,698) $ 1,487,171 $ (1,487,171) $ (108,698)
============ =========== ============ ============
</TABLE>
(A) For the three months ended December 31, 1997. (B) For the three months ended
September 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 Nine Months Ended December 31, 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 $ - $ 1,868,953 $ - $ 1,868,953
Investment 25,786 5,665 - 31,451
Other 188,564 56,930 (51,833) 193,661
------------ ----------- ------------ ------------
Total Revenue 214,350 1,931,548 (51,833) 2,094,065
------------ ----------- ------------ ------------
Expenses:
Asset management fees, related party 327,285 - - 327,285
General and administrative 380,417 - - 380,417
Bad debt 754,636 - - 754,636
Rental operations, exclusive
of depreciation - 1,263,861 - 1,263,861
Property management fees - 131,987 - 131,987
Interest 4,500 724,435 (51,833) 677,102
Depreciation - 596,022 - 596,022
Amortization 113,689 19,659 - 133,348
------------ ----------- ------------ ------------
Total Expenses 1,580,527 2,735,964 (51,833) 4,264,658
------------ ----------- ------------ ------------
Loss before equity in losses of Local
Limited Partnerships, minority
interest, loss on liquidation of
interests in Local Limited
Partnerships and extraordinary item (1,366,177) (804,416) - (2,170,593)
Equity in losses of Local Limited
Partnerships (921,200) - (1,209,735) (2,130,935)
Minority interest in losses of Local
Limited Partnerships - - 146,100 146,100
Loss on liquidation of interests
in Local Limited Partnerships (18,251) - - (18,251)
------------ ----------- ------------ ------------
Net Loss before extraordinary item (2,305,628) (804,416) (1,063,635) (4,173,679)
Extraordinary gain on cancellation
of indebtedness - 1,868,051 - 1,868,051
------------ ----------- ------------ ------------
Net Income (Loss) $ (2,305,628) $ 1,063,635 $ (1,063,635) $ (2,305,628)
============ =========== ============ ============
</TABLE>
(A) For the nine months ended December 31, 1997. (B) For the nine months ended
September 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 $ (116,595) $ (68,421) $ - $ (185,016)
-------------- ------------- ------------ -------------
Cash flows from investing activities:
Advances to affiliates (427,215) - 109,506 (317,709)
Purchases of marketable securities (373,539) - - (373,539)
Proceeds from sales and maturities
of marketable securities 420,313 - - 420,313
Cash distributions received from
Local Limited Partnerships 315,906 - - 315,906
Decrease in deferred acquisition
fee escrow 112,500 - - 112,500
Payment of deferred acquisition fee (112,500) - - (112,500)
Purchase of rental property - (197,866) - (197,866)
Deposits to replacement reserves - 35,020 - 35,020
-------------- ------------- ------------ -------------
Net cash used for
investing activities (64,535) (162,846) 109,506 (117,875)
-------------- ------------- ------------ -------------
Cash flows from financing activities:
Repayment of mortgage notes
payable - (86,431) - (86,431)
Advances from affiliate - 258,625 (109,506) 149,119
Repayment of notes receivable,
affiliate 17,002 - - 17,002
-------------- ------------- ------------ -------------
Net cash provided by
financing activities 17,002 172,194 (109,506) 79,690
-------------- ------------- ------------ -------------
Net decrease in cash
and cash equivalents (164,128) (59,073) - (223,201)
Cash and cash equivalents,
beginning 213,008 166,606 - 379,614
-------------- ------------- ------------- --------------
Cash and cash equivalents,
ending $ 48,880 $ 107,533 $ - $ 156,413
============== ============= ============= ==============
</TABLE>
(A) For the nine months ended December 31, 1997. (B) For the nine months ended
September 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 $223,201 from $379,614 at March 31, 1997 to $156,413 at
December 31, 1997. This decrease is attributable to cash used for operating
activities and purchases of rental property. These decreases are offset by cash
distributions received from Local Limited Partnerships and proceeds from sales
and maturities of marketable securities in excess of purchases of marketable
securities.
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 $1,559,000 have been paid from Reserves.
This amount includes approximately $1,290,000 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 $1,196,000 (net of paydowns) to purchase
the mortgage of a Local Limited Partnership. To date, the Partnership has used
approximately $1,262,000 of operating funds to replenish Reserves. At December
31, 1997, approximately $283,000 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 $1,290,000 noted above, the Partnership has also advanced
approximately $768,000 to the Texas Partnerships and $608,000 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, 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 nine months ended December 31, 1997.
Results of Operations
For the three and nine months ended December 31, 1997, Partnership operations
resulted in net losses of $108,698 and $2,305,628, respectively, as compared to
net losses of $1,077,484 and $3,825,676 for the respective 1996 periods. The
decrease in net loss is primarily attributable to extraordinary gain on
cancellation of indebtedness for Crestwood Place, Eagle Nest Apartments, Hallet
West Apartments, Lakeway Colony, One Main Place and Pilot Point Apartments. The
decrease is offset by an increase in bad debt expense due to the write off of
accounts receivable from the transferred properties. The decrease in net losses
is also offset by increases in rental operations, interest and depreciation
expenses because Breckenridge Creste's operations were combined with the
Partnership's effective September 1, 1996. One Texas Partnership is expected to
transfer in the first quarter of 1998. Extraordinary gain on cancellation of
indebtedness will be recognized for this transfer.
<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
fifty-five 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.
Willow Lake, located in Kansas, is experiencing operating difficulties due to
soft rental market conditions. As previously reported, The Managing General
Partner had negotiated a workout in 1994. The two year extension to this workout
will expire on June 30, 1998. The Managing General Partner is working with the
Local General Partner to negotiate permanent debt service relief. The Local
General Partner and the Management Agent are working together to increase rents
and monitor property expenses.
As previously reported, 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. It is
possible that fund reserves will be used to support the property until these
issues can be resolved. The Local General Partner is in negotiations with the
MHFA to fund debt service deficits that had been covered by the SHARP mortgage
subsidies and avoid a default on its mortgage. The Local General Partner
believes it will cover the SHARP subsidy gap by increasing rents and some cost
containments. In the meantime, The Local General Partner has negotiated a 1998
budget with the MHFA. However, further negotiations to resolve these issues with
the MHFA, are expected in the first half of 1998. As we previously reported, the
Local General Partner was seeking bankruptcy protection. His reorganization plan
was approved in September 1997. The plan will not 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.
Property Discussions (continued)
Waterfront and Shoreline, both located in Buffalo, New York, continue to have
operating deficits 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.
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. As previously reported, a capital improvement plan had been
implemented to improve the curb appeal of the property. The capital improvements
completed to date include exterior painting, exterior wood trim replacement,
landscaping, laundry room decorating and improvements, pool repairs, gutter
installation, interior unit rehab, carpet, vinyl floor and appliance
replacements. 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. Property management is currently preparing the 1998 budget and capital
improvement plan.
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 these investments
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. In 1997, The Managing General Partner transferred
all of the assets of seven more of the Texas Partnerships, subject to their
liabilities, to unaffiliated entities. Negotiations between the Managing General
Partner, the Lender and a prospective buyer for the remaining property are
continuing and a transfer is expected in the first quarter of 1998. 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)
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, 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: February 13, 1998 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 156,413
<SECURITIES> 288,358
<RECEIVABLES> 109,968<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 15,484,934
<DEPRECIATION> 000
<TOTAL-ASSETS> 38,453,939<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 25,041,465
<TOTAL-LIABILITY-AND-EQUITY> 38,453,939<F3>
<SALES> 000
<TOTAL-REVENUES> 2,094,065<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 3,587,556<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 677,102
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 1,868,051
<CHANGES> 000
<NET-INCOME> (2,305,628)<F6>
<EPS-PRIMARY> (22.83)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts receivable $105,700 and Interest
receivable $4,268.
<F2>Included in total assets: Prepaid expenses $22,035, Tenant security deposits
$67,861, Other assets $267,888, Investments in Local Limited Partnerships
$21,449,235, Replacement reserves $166,567, Deferred acquisition fees escrow
$225,000 and Deferred expenses, net $215,680. <F3>Included in Total Liabilities
and Equity: Accounts payable to affiliates $1,494,772, Accounts payable and
accrued expenses $710,205, Interest payable $283,261, Notes payable, affiliate
$514,968, Security deposits payable $69,279, Due to affiliate $323,046, Deferred
acquisition fees payable $225,000, General partner advances $200,000, Mortgage
notes payable $8,677,248 and Minority interest in Local Limited Partnerships
$914,695. <F4>Total revenue includes: Rental $1,868,953, Investment $31,451 and
Other $193,661. <F5>Included in Other Expenses: Asset management fees $327,285,
General and Administrative $380,417, Bad debt $754,636, Property management fees
$131,987, Rental operations, exclusive of depreciation $1,263,861, Depreciation
$596,022 and Amortization $133,348. <F6>Net loss reflects: equity in losses of
Local Limited Partnerships of $2,130,935, loss on liquidation of interests in
Local Limited Partnerships of $18,251, gain on transfer and liquidation of real
estate of $1,868,051 and minority interest in losses of Local Limited
Partnerships $146,100.
</FN>
</TABLE>
