November 9, 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 September 30, 1998
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/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH3-Q2.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1998
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ ---------------------
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
incorporation or organization) Identification No.)
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, 1998 (Unaudited)
and March 31, 1998 1
Combined Statements of Operations (Unaudited) - For
the Three and Six Months Ended September 30, 1998 and 1997 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1998 3
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 30, 1998 and 1997 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, 1998 and March 31, 1998
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
(Unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 600,128 $ 311,867
Marketable securities, at fair value 201,476 275,387
Investments in Local Limited Partnerships, net
of reserve for valuation of $1,635,000 (Note 1) 17,322,203 19,319,502
Accounts receivable, net of allowance for bad debt of
$37,445 and $77,010, respectively 85,607 90,467
Interest receivable 13,160 13,298
Prepaid expenses 25,721 25,247
Tenant security deposits 78,096 68,292
Replacement reserves 218,136 194,671
Rental property at cost, net of accumulated
depreciation and reserve for valuation 15,214,113 16,267,802
Deferred acquisition fees escrow 225,000 225,000
Deferred expenses, net of $117,646 and $104,540
of accumulated amortization, respectively 196,021 209,127
Other assets 150,490 131,127
------------- -------------
Total Assets $ 34,330,151 $ 37,131,787
============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,775,497 $ 1,702,519
Accounts payable and accrued expenses 472,926 484,817
Interest payable 317,558 312,091
Note payable, affiliate 514,968 514,968
Security deposits payable 77,379 70,630
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 7,453,114 8,641,832
------------- -------------
Total Liabilities 11,359,488 12,474,903
------------- -------------
Minority interest in Local Limited Partnerships 909,862 907,515
------------- -------------
General, Initial and Investor Limited Partners' Equity 22,059,124 23,748,605
Net unrealized gains on marketable securities 1,677 764
------------- -------------
Total Partners' Equity 22,060,801 23,749,369
------------- -------------
Total Liabilities and Partners' Equity $ 34,330,151 $ 37,131,787
============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<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, 1998 and 1997
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------------- --------------- -------------- ------------
Revenue:
<S> <C> <C> <C> <C>
Rental $ 620,267 $ 642,717 $ 1,200,173 $ 1,249,763
Investment 9,280 11,546 17,886 21,275
Other 35,747 40,909 81,263 159,374
------------ ------------- ------------ ------------
Total Revenue 665,294 695,172 1,299,322 1,430,412
------------ ------------- ------------ ------------
Expenses:
Asset management fees, related party 95,938 109,095 191,876 218,190
General and administrative (includes
reimbursements to affiliates of $65,076
and $98,159 in 1998 and 1997, respectively) 83,940 118,805 197,012 241,634
Bad debt 123,785 52,331 96,904 64,167
Rental operations, exclusive of depreciation 352,194 394,505 697,349 854,409
Property management fees, related party 29,339 45,965 79,493 88,190
Interest 204,152 216,925 394,574 464,701
Depreciation 155,339 203,985 321,531 395,097
Amortization 44,257 46,299 88,560 92,597
------------ ------------- ------------ ------------
Total Expenses 1,088,944 1,187,910 2,067,299 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 (423,650) (492,738) (767,977) (988,573)
Equity in losses of Local Limited Partnerships
(Note 1) (711,318) (540,762) (1,559,340) (1,291,958)
Minority interest in losses of
Local Limited Partnerships (4,469) 7,967 (2,347) 10,851
Loss on liquidation of interests in Local Limited
Partnerships (Note 3) (4,835) (5,416) (4,835) (5,416)
------------ ------------- ------------ ------------
Net Loss before extraordinary items (1,144,272) (1,030,949) (2,334,499) (2,275,096)
Extraordinary gain on cancellation of
indebtedness (Note 3) 645,018 78,166 645,018 78,166
------------ ------------- ------------ ------------
Net Loss $ (499,254) $ (952,783) $ (1,689,481) $ (2,196,930)
============ ============= ============ ============
Net Loss allocated:
To General Partners $ (4,993) $ (9,528) $ (16,895) $ (21,969)
To Limited Partners (494,261) (943,255) (1,672,586) (2,174,961)
------------ ------------- ------------ ------------
$ (499,254) $ (952,783) $ (1,689,481) $ (2,196,930)
============ ============= ============ ============
Net Loss before extraordinary item per
Limited Partnership Unit (100,000 Units) $ (11.33) $ (10.20) $ (23.11) $ (22.52)
============ ============= ============ ============
Extraordinary item per Limited Partnership
Unit (100,000 Units) $ 6.39 $ 0.77 $ 6.39 $ 0.77
============ ============= ============ ============
Net Loss per Limited Partnership Unit
(100,00 Units) $ (4.94) $ (9.43) $ (16.72) $ (21.75)
============ ============= ============ ============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
Initial Investor Net
General Limited Limited Unrealized
Partners Partners Partners Gains Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1998 $ (638,359) $ 5,000 $ 24,381,964 $ 764 $ 23,749,369
----------- -------- ------------ ---------- -------------
Comprehensive Loss:
Net Loss (16,895) - (1,672,586) - (1,689,481)
Change in net unrealized
gains on marketable securities
available for sale - - - 913 913
----------- ------- ------------ ---------- -------------
Comprehensive Loss (16,895) - (1,672,586) 913 (1,688,568)
----------- ------- ------------ ---------- -------------
Balance at
September 30, 1998 $ (655,254) $ 5,000 $ 22,709,378 $ 1,677 $ 22,060,801
=========== ======== ============ ========== =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<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, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- -------------
<S> <C> <C>
Net cash used for operating activities $ (106,273) $ (129,377)
------------- -------------
Cash flows from investing activities:
Advances to affiliates (17,986) (52,009)
Purchases of marketable securities (148,718) (273,744)
Proceeds from sales and maturities of
marketable securities 223,718 204,811
Cash distributions received from Local
Limited Partnerships 380,746 270,375
Deposits to replacement reserves (23,884) (10,046)
Additions to rental property (49,463) (72,981)
------------- -------------
Net cash provided by investing activities 364,413 66,406
------------- -------------
Cash flows from financing activities:
Repayment of mortgage notes payable (38,029) (61,707)
Advances from affiliate 68,150 119,885
------------- -------------
Net cash provided by financing activities 30,121 58,178
------------- -------------
Net increase (decrease) in cash and cash equivalents 288,261 (4,793)
Cash and cash equivalents, beginning 311,867 379,614
------------- -------------
Cash and cash equivalents, ending $ 600,128 $ 374,821
============= =============
Supplemental Disclosure:
Cash paid for interest $ 376,784 $ 489,090
============= =============
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<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, 1998. 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.
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 of the Local Limited Partnerships that is included in the
accompanying financial statements is as of June 30, 1998 and 1997. Certain
reclassifications have been made to prior period financial statements to conform
to current period classifications.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partner
interests in fifty-five 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 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, 1998, 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 losses of Local Limited Partnerships (net of
cumulative unrecognized losses of $27,836,395) (42,398,677)
Cumulative cash distributions received from Local Limited Partnerships (2,637,457)
-------------
Investments in Local Limited Partnerships before adjustment 14,815,675
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 5,398,026
Accumulated amortization of acquisition fees and expenses (1,256,498)
-------------
Investments in Local Limited Partnerships 18,957,203
Reserve for valuation of investments in Local Limited Partnerships (1,635,000)
-------------
$ 17,322,203
-------------
</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, 1998 is
$3,473,038. For the six months ended September 30, 1998, the Partnership has not
recognized $1,917,235 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. Effect of Recently Issued Accounting Standard
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
Statement, which is effective for fiscal years beginning after December 15,
1997, requires that the Partnership display an amount representing total
comprehensive income for the period in its financial statements. The Partnership
adopted the new standard effective April 1, 1998.
3. Liquidation of Interests in Local Limited Partnerships
As previously reported, the Managing General Partner transferred all of the
assets of twelve of the Texas Partnerships, subject to their liabilities, to
unaffiliated entities. Crown Point, Godley Arms, Glenbrook Apartments, Quail Run
Apartments, Sherwood Arms Housing, Lone Oak Apartments, Hallet West Apartments,
Lakeway Colony, Crestwood Place, Eagle Nest Apartments, One Main Place and Pilot
Point Apartments were transferred prior to March 31, 1998. For tax purposes,
these events resulted in both Section 1231 gain and cancellation of indebtedness
income. In addition, the transfer of ownership resulted 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 $4,835 and extraordinary gain on cancellation of
indebtedness of $645,018 were recognized in the period ended September 30, 1998
as a result of the transfer of the thirteenth Texas Partnership, Willowick.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Supplemental Combining Schedules
<TABLE>
<CAPTION>
Balance Sheets
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III (A) (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 505,207 $ 94,921 $ - $ 600,128
Marketable securities, at fair value 201,476 - - 201,476
Investments in Local Limited
Partnerships, net 21,780,791 - (4,458,588) 17,322,203
Accounts receivable, net 658,866 85,607 (658,866) 85,607
Interest receivable 13,160 - - 13,160
Notes receivable 1,394,916 - (1,394,916) -
Prepaid expenses 4,480 21,241 - 25,721
Tenant security deposits - 78,096 - 78,096
Replacement reserves - 218,136 - 218,136
Rental property at cost, net of
accumulated depreciation - 14,416,969 797,144 15,214,113
Deferred acquisition fees escrow 225,000 - - 225,000
Deferred expenses, net - 196,021 - 196,021
Other assets - 150,490 - 150,490
------------- ------------- ------------- -------------
Total Assets $ 24,783,896 $ 15,261,481 $ (5,715,226) $ 34,330,151
============= ============= ============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 1,767,740 $ 666,623 $ (658,866) $ 1,775,497
Accounts payable and accrued
expenses 215,387 257,539 - 472,926
Interest payable - 317,558 - 317,558
Note payable, affiliate 514,968 - - 514,968
Security deposits payable - 77,379 - 77,379
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 - 8,848,030 (1,394,916) 7,453,114
------------- ------------- ------------- -------------
Total Liabilities 2,723,095 10,690,175 (2,053,782) 11,359,488
------------- ------------- ------------- -------------
Minority interest in Local
Limited Partnerships - - 909,862 909,862
------------- ------------- ------------- -------------
General, Initial and Investor Limited
Partners' Equity 22,059,124 4,571,306 (4,571,306) 22,059,124
Net unrealized gains on marketable
securities 1,677 - - 1,677
------------- ------------- ------------- -------------
Total Partners' Equity 22,060,801 4,571,306 (4,571,306) 22,060,801
------------- -------------- ------------- -------------
Total Liabilities and
Partners' Equity $ 24,783,896 $ 15,261,481 $ (5,715,226) $ 34,330,151
============= ============= ============= =============
</TABLE>
(A) As of September 30, 1998.
(B) As of June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
For the Three Months Ended September 30, 1998
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 620,267 $ - $ 620,267
Investment 8,586 694 - 9,280
Other 23,659 12,088 - 35,747
------------ ------------- ------------- -------------
Total Revenue 32,245 633,049 - 665,294
------------ -------------- ------------- -------------
Expenses:
Asset management fees, related party 95,938 - - 95,938
General and administrative 83,940 - - 83,940
Bad debt 123,785 - - 123,785
Rental operations, exclusive of depreciation - 352,194 - 352,194
Property management fee, related party - 29,339 - 29,339
Interest 2,000 202,152 - 204,152
Depreciation - 155,339 - 155,339
Amortization 37,704 6,553 - 44,257
------------ ------------- ------------- -------------
Total Expenses 343,367 745,577 - 1,088,944
------------ ------------- ------------- -------------
Loss before equity in losses of Local Limited
Partnerships, minority interest, loss on
liquidation of interest in Local Limited
Partnership and extraordinary item (311,122) (112,528) - (423,650)
Equity in losses of Local Limited
Partnerships (183,297) - (528,021) (711,318)
Minority interest in losses of
Local Limited Partnerships - - (4,469) (4,469)
Loss on liquidation of interest in Local
Limited Partnership (4,835) - - (4,835)
------------ ------------- ------------- -------------
Net loss before extraordinary item (499,254) (112,528) (532,490) (1,144,272)
Extraordinary gain on cancellation of
indebtedness - 645,018 - 645,018
------------ ------------- ------------- -------------
Net Income (Loss) $ (499,254) $ 532,490 $ (532,490) $ (499,254)
============ ============= ============= =============
</TABLE>
(A) For the three months ended September 30, 1998.
(B) For the three months ended June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended September 30, 1998
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III(A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 1,200,173 $ - $ 1,200,173
Investment 15,467 2,419 - 17,886
Other 53,045 50,587 (22,369) 81,263
------------ ------------- ------------- ------------
Total Revenue 68,512 1,253,179 (22,369) 1,299,322
------------ -------------- ------------- ------------
Expenses:
Asset management fees, related party 191,876 - - 191,876
General and administrative 197,012 - - 197,012
Bad debt 96,904 - - 96,904
Rental operations, exclusive of depreciation - 697,349 - 697,349
Property management fee, related party - 79,493 - 79,493
Interest 3,500 413,443 (22,369) 394,574
Depreciation - 321,531 - 321,531
Amortization 75,454 13,106 - 88,560
------------ ------------- ------------- ------------
Total Expenses 564,746 1,524,922 (22,369) 2,067,299
------------ -------------- ------------- ------------
Loss before equity in losses of Local Limited
Partnerships, minority interest, loss on
liquidation of interest in Local Limited
Partnership and extraordinary item (496,234) (271,743) - (767,977)
Equity in losses of Local Limited
Partnerships (1,188,412) - (370,928) (1,559,340)
Minority interest in losses of
Local Limited Partnerships - - (2,347) (2,347)
Loss on liquidation of interest in Local
Limited Partnership (4,835) - - (4,835)
------------ ------------- ------------- ------------
Net loss before extraordinary item (1,689,481) (271,743) (373,275) (2,334,499)
Extraordinary gain on cancellation of
indebtedness - 645,018 - 645,018
------------ ------------- ------------- ------------
Net Income (Loss) $ (1,689,481) $ 373,275 $ (373,275) $ (1,689,481)
============ ============= ============= ============
</TABLE>
(A) For the six months ended September 30, 1998.
(B) For the six months ended June 30, 1998.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Cash Flows
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III (A) (B) Eliminations (A)
Net cash provided by (used for)
<S> <C> <C> <C> <C>
operating activities $ (156,457) $ 50,184 $ - $ (106,273)
------------- -------------- ------------- -------------
Cash flows from investing activities:
Advances to affiliates (17,986) - - (17,986)
Repayment of notes receivable, affiliate 11,335 - (11,335) -
Purchases of marketable securities (148,718) - - (148,718)
Proceeds from sales and maturities
of marketable securities 223,718 - - 223,718
Cash distributions received from
Local Limited Partnerships 380,746 - - 380,746
Deposits to replacement reserves - (23,884) - (23,884)
Additions to rental property - (49,463) - (49,463)
------------- -------------- ------------- -------------
Net cash provided by (used for)
investing activities 449,095 (73,347) (11,335) 364,413
------------- -------------- ------------- -------------
Cash flows from financing activities:
Repayment of mortgage notes
payable - (49,364) 11,335 (38,029)
Advances from affiliate - 68,150 - 68,150
------------- -------------- ------------- -------------
Net cash provided by
financing activities - 18,786 11,335 30,121
------------- -------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents 292,638 (4,377) - 288,261
Cash and cash equivalents,
beginning 212,569 99,298 - 311,867
------------- -------------- ------------- -------------
Cash and cash equivalents,
ending $ 505,207 $ 94,921 $ - $ 600,128
============= ============== ============= =============
</TABLE>
(A) For the six months ended September 30, 1998.
(B) For the six months ended June 30, 1998.
<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
At September 30, 1998, the Partnership, including the Combined Entities, had
cash and cash equivalents of $600,128 as compared to $311,867 at March 31, 1998.
The increase is primarily attributable to cash distributions received from Local
Limited Partnerships and proceeds from sales and maturities of marketable
securities. The increase is partially offset by cash used for operations,
purchases of marketable securities, additions to rental property and repayment
of mortgage notes payable.
The Managing General Partner initially designated 3% of Gross Proceeds as
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
September 30, 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. Additionally, professional fees relating
to various property issues totaling approximately $1,694,000 have been paid from
Reserves. This amount includes approximately $1,311,000 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 $1,126,000 (net
of paydowns) to purchase the mortgage of a Local Limited Partnership. To date,
the Partnership has used approximately $1,592,000 of operating funds to
replenish Reserves. At September 30, 1998, approximately $660,000 of cash, cash
equivalents and marketable securities has been designated as Reserves. Reserves
may be used to fund Partnership operating deficits, if the Managing General
Partner deems funding appropriate. If Reserves are not adequate to cover the
Partnership's operations, the Partnership will seek other financing sources
including, but not limited to, the deferral of Asset Management Fees paid to an
affiliate of the Managing General Partner or working with Local Limited
Partnerships to increase cash distributions.
In the event a Local Limited Partnership encounters operating difficulties
requiring additional funds, the Partnership might deem it in its best interests
to provide such funds, voluntarily, in order to protect its investment. To date,
in addition to the $1,311,000 noted above, the Partnership has also advanced
approximately $622,000 to the Texas Partnerships and $695,000 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, 1998, 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, 1998.
Results of Operations
For the six months ended September 30, 1998, Partnership operations resulted in
a net loss of $1,689,481 as compared to a net loss of $2,196,930 for the same
period in 1997. The decrease in net loss is primarily attributable to a decrease
in property operating expenses, net of a decrease in rental and other revenue
due to the transfer of seven of the Combined Entities. These decreases are
partially offset by a increase in equity in losses of Local Limited
Partnership's due to increases in property operating expenses. In addition,
extraordinary gain on cancellation of indebtedness increased due to the transfer
of Willowick in the quarter ended September 30, 1998.
<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.
Many of the remaining fifty-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.
Boulevard Commons IIA, located in Chicago, Illinois, has been experiencing
operating deficits. Expenses have been increasing due to increasing maintenance
and capital needs, security issues and high turnover at the property. The
Managing General Partner is working with the Local General Partner to
restructure the current debt. Negotiations between the Managing General Partner
and Local General Partner are ongoing. The Managing General Partner is closely
monitoring this property.
Columbia Townhouses, located in Burlington, Iowa, has been experiencing
operating deficits. As of September 30, 1998, occupancy was 57%. Recently, the
Local General Partner approached the lender about the possibility of refinancing
the mortgage. In addition, the Local General Partner, Managing General Partner
and Management Agent are working together to review the marketing, security and
long-term strategy for this property. The Managing General Partner is closely
monitoring this property.
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 mortgage was sold at auction to an unaffiliated
institutional buyer. The Managing General Partner and Local General Partner
continue to participate in workout 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 and Partnership affiliates to negotiate a
satisfactory workout agreement with the new lender. The Partnership's carrying
value of this investment for financial reporting purposes is zero. Occupancy for
this property as of June 30, 1998 was 98%.
A refinancing application was submitted for Kyle Hotel, located in Temple,
Texas, in December 1997. The potential lender needs to approve several issues
before the application will be approved. The Managing General Partner is
monitoring the progress.
Pleasant Plaza, located in Malden, Massachusetts, as well as South Holyoke,
located in Holyoke, Massachusetts, receive a subsidy under the State Housing
Assistance Rental Program (SHARP), which is an important part of their annual
income. As originally conceived, the SHARP subsidy was scheduled to decline over
time to match increases in net operating income. However, increases in net
operating income failed to keep pace with the decline in the SHARP subsidy. Many
of the SHARP properties (including Pleasant Plaza and South Holyoke) structured
workouts that included additional subsidies in the form of Operating Deficit
Loans (ODL's). Effective October 1, 1997, the Massachusetts Housing Finance
Agency (MHFA), which provided the SHARP subsidies, withdrew funding of the
Operating Deficit Loans. Properties unable to make full debt service payments
were declared in default by MHFA. The Managing General Partner joined a group of
SHARP property owners called the Responsible SHARP Owners, Inc. (RSO) and is
negotiating with MHFA and the Local General Partners of Pleasant Plaza and South
Holyoke to find a solution to the problems that will result from the withdrawn
subsidies.
<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)
Given existing operating deficits and the dependence on these subsidies by
Pleasant Plaza and South Holyoke House, it is likely that both properties will
default on their mortgage obligations in the near future. On September 16, 1998,
the Partnership joined with the RSO and about 20 other SHARP property owners and
filed suit against the MHFA (Mass. Sup. Court Civil Action #98-4720). Among
other things, the suit seeks to enforce the MHFA's previous financial
commitments to the SHARP properties. The lawsuit is complex and in its early
stages, so no predications can be made at this time as to the ultimate outcome.
In the meantime, the Managing General Partner intends to continue to participate
in the RSO's efforts to negotiate a resolution of this matter with MHFA.
In addition, the Local General Partner for Pleasant Plaza 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 plans to cover the SHARP subsidy gap by increasing rents and containing
costs. 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 near future. As previously reported, the Local General
Partner sought 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 Local Limited Partnership.
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 Drug Elimination Grant (NOFA) for
Shoreline. Waterfront was turned down for the NOFA grant. However, they will
reapply next year. The Shoreline grant should be funded during 1998 and will be
used to support drug prevention, educational programs and increased security on
the property. For both Waterfront and Shoreline, the Management Agent has
applied for consideration for a Project Improvement Program (PIP) and applied
for a Safe Neighborhood Grant. At this point, 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 grants. Both properties
currently carry cash flow mortgages with New York State. The Managing General
Partner is working closely with the Local General Partner to develop a plan that
will address these concerns.
Willow Lake, located in Kansas, is experiencing operating difficulties due to
soft rental market conditions. As previously reported, the Managing General
Partner negotiated a six year extension to the original workout agreement. The
six year extension will expire on May 31, 2001. In addition, the Managing
General Partner is working with the Local General Partner to negotiate permanent
debt service relief, increase rents and monitor property expenses.
As previously reported, negotiations between the Managing General Partner,
Lender and prospective buyer for the remaining Texas Partnership, Willowick,
have been successful, and a transfer was effective August 4, 1998. For tax
purposes, this event will result in both Section 1231 gain and cancellation of
indebtedness income. In addition, the transfer of ownership will result in an
estimated tax credit recapture of $2.44 per unit for 1998.
Impact of Year 2000
The Managing General Partner has assessed the Partnership's exposure to date
sensitive computer software programs that may not be operative subsequent to
1999 and has executed a requisite course of action to minimize Year 2000 risk
and ensure that neither significant costs nor disruption of normal business
operations are encountered. However, due to the inherent uncertainty that all
systems of outside vendors or other companies on which the Partnership and/or
Local Limited Partnerships rely will be compliant, the Partnership remains
susceptible to consequences of the Year 2000 issue.
<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, 1998.
<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 9, 1998 BOSTON FINANCIAL QUALIFIED HOUSING TAX
CREDITS L.P. III
By: Arch Street III, Inc.,
its Managing General Partner
/s/Randolph G. Hawthorne
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 600,128
<SECURITIES> 201,476
<RECEIVABLES> 98,767<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 15,214,113
<DEPRECIATION> 000
<TOTAL-ASSETS> 34,330,151<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 22,060,801
<TOTAL-LIABILITY-AND-EQUITY> 34,330,151<F3>
<SALES> 000
<TOTAL-REVENUES> 1,299,322<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,672,725<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 394,574
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 645,018
<CHANGES> 000
<NET-INCOME> (1,689,481)<F6>
<EPS-PRIMARY> (16.72)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts Receivable of $85,607 and Interest receivable of $13,160.
<F2>Included in Total assets: Prepaid expenses of $25,721, Tenant security
deposits of $78,096, Other assets of $150,490, Investments in Local Limited
Partnerships-net of $17,322,203, Replacement reserves of $218,136, Deferred
acquisition fees escrow of $225,000 and Deferred expenses, net of $196,021.
<F3>Included in Total Liabilities and Equity: Accounts payable to affiliates of
$1,775,497, Accounts payable and accrued expenses of $472,926, Interest payable
of $317,558, Notes payable, affiliate of $514,968, Security deposits payable of
$77,379, Due to affiliate of $323,046, Deferred acquisition fees payable of
$225,000, General partner advances of $200,000, Mortgage notes payable of
$7,453,114 and Minority interest in Local Limited Partnerships of $909,862.
<F4>Total revenue includes: Rental of $1,200,173, Investment of $17,886 and
Other of $81,263. <F5>Included in Other Expenses: Asset management fees of
$191,876, General and administrative of $197,012, Bad debt of $96,904, Property
management fees of $79,493, Rental operations, exclusive of depreciation of
$697,349, Depreciation of $321,531 and Amortization of $88,560. <F6>Net loss
reflects: Equity in losses of Local Limited Partnerships of $1,559,340, Loss on
liquidation of interests in Local Limited Partnerships of $4,835, and minority
interest in losses of Local Limited Partnerships of $2,347.
</FN>
</TABLE>
