August 11, 1999
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-QSB Edgar for Quarter Ended June 30, 1999
File Number 01-18462
Dear Sir/Madam:
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-Q1.DOC
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to 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 June 30, 1999
-------------------------------
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, 1999 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
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
Item 1. Combined Financial Statements
Combined Balance Sheets - June 30, 1999 (Unaudited)
and March 31, 1999 1
Combined Statements of Operations (Unaudited) - For the Three
Months Ended June 30, 1999 and 1998 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Three Months Ended June 30, 1999 3
Combined Statements of Cash Flows (Unaudited) - For the
Three Months Ended June 30, 1999 and 1998 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 14
SIGNATURE 15
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED BALANCE SHEET
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 576,356
Marketable securities, at fair value 522,838
Investments in Local Limited Partnerships, net (Note 1) 14,953,274
Accounts receivable, net 112,830
Interest receivable 32,250
Prepaid expenses 10,104
Tenant security deposits 94,211
Replacement reserves 215,427
Rental property at cost, net of accumulated
depreciation and reserve for valuation 13,057,771
Deferred acquisition fees escrow 112,500
Deferred expenses, net of $178,178
accumulated amortization 212,629
Other assets 228,699
-------------
Total Assets $ 30,128,889
=============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,068,949
Accounts payable and accrued expenses 531,229
Interest payable 323,056
Note payable, affiliate 514,968
Security deposits payable 84,471
Deferred acquisition fees payable 112,500
Advances from affiliate 200,000
Mortgage notes payable 7,789,986
-------------
Total Liabilities 11,625,159
Minority interest in Local Limited Partnerships 884,570
-------------
General, Initial and Investor Limited Partners' Equity 17,620,642
Net unrealized losses on marketable securities (1,482)
Total Partners' Equity 17,619,160
-------------
Total Liabilities and Partners' Equity $ 30,128,889
=============
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 Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- ------------
Revenue:
<S> <C> <C>
Rental $ 613,353 $ 579,906
Investment 12,229 8,606
Recovery of bad debt 80,639 26,881
Other 51,757 67,885
------------- ------------
Total Revenue 757,978 683,278
------------- ------------
Expenses:
Asset management fees, related party 91,815 95,938
General and administrative (includes
reimbursements to affiliates of $36,662 and
$32,550 in 1999 and 1998, respectively) 103,442 113,072
Property management fees 29,683 50,154
Rental operations, exclusive of depreciation 407,096 345,155
Interest 201,092 212,791
Depreciation 155,339 166,192
Amortization 41,176 44,303
------------- ------------
Total Expenses 1,029,643 1,027,605
------------- ------------
Lossbefore equity in losses of Local Limited Partnerships,
minority interest and loss on liquidation of interests in
Local Limited Partnerships (271,665) (344,327)
Equity in losses of Local Limited Partnerships (Note 1) (554,641) (848,022)
Minority interest in losses of
Local Limited Partnerships 2,157 2,122
Loss on liquidation of interests in Local Limited
Partnerships (Note 2) (193,883) -
------------- ------------
Net Loss $ (1,018,032) $ (1,190,227)
============= ============
Net Loss allocated:
To General Partners $ (10,180) $ (11,902)
To Limited Partners (1,007,852) (1,178,325)
------------- ------------
$ (1,018,032) $ (1,190,227)
============= ============
Net Loss per Limited Partnership Unit
(100,000 Units) $ (10.08) $ (11.78)
============ ============
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)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
(Unaudited)
For the Three Months Ended June 30, 1999
<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, 1999 $ (689,458) $ 5,000 $ 19,323,132 $ 237 $ 18,638,911
----------- --------- ------------- ----------- -------------
Comprehensive Loss:
Net change in unrealized gains
on marketable securities
available for sale - - - (1,719) (1,719)
Net Loss (10,180) - (1,007,852) - (1,018,032)
----------- --------- -------------- ----------- --------------
Comprehensive Loss (10,180) - (1,007,852) (1,719) (1,019,751)
---------- --------- ------------- ----------- -------------
Balance at June 30, 1999 $ (699,638) $ 5,000 $ 18,315,280 $ (1,482) $ 17,619,160
========== ========= ============= =========== =============
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 Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net cash used for operating activities $ (245,308) $ (80,525)
Net cash provided by investing activities 253,804 217,282
Net cash provided by financing activities 127,495 41,031
------------ ------------
Net increase in cash and cash equivalents 135,991 177,788
Cash and cash equivalents, beginning 440,365 311,867
------------ ------------
Cash and cash equivalents, ending $ 576,356 $ 489,655
============ ============
Supplemental Disclosure:
Cash paid for interest $ 190,755 $ 195,058
============ ============
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-QSB 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 Form 10-K for the
year ended March 31, 1999. 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 about the Local Limited Partnerships that is included in the
accompanying financial statements is as of March 31, 1999 and 1998. Certain
reclassifications have been made to prior periods 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 partnership
interests in forty-nine 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 June
30, 1999, 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 $ 59,334,634
Cumulative equity in losses of Local Limited Partnerships (net of
cumulative unrecognized losses of $47,708,566) (44,066,348)
Cumulative cash distributions received from Local Limited Partnerships (2,689,902)
-------------
Investments in Local Limited Partnerships before adjustment 12,578,384
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 5,335,849
Accumulated amortization of acquisition fees and expenses (1,325,959)
-------------
Investments in Local Limited Partnerships 16,588,274
Reserve for valuation of investments in Local Limited Partnerships (1,635,000)
-------------
$ 14,953,274
</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, 1999 is
$1,457,770. For the three months ended June 30, 1999, the Partnership has not
recognized $905,676 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 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, Pilot Point
Apartments and Willowick were transferred prior to March 31, 1999. 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 interest in Local
Limited Partnership of $193,883 was recognized in the period ended June 30, 1999
as a result of the redemption of Boulevard Commons II.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
3. Supplemental Combining Schedules
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 $ 421,450 $ 154,906 $ - $ 576,356
Marketable securities, at fair value 522,838 - - 522,838
Investments in Local Limited
Partnerships, net 17,169,105 - (2,215,831) 14,953,274
Accounts receivable, net 928,240 101,594 (917,004) 112,830
Interest receivable 32,250 - - 32,250
Notes receivable 1,389,038 - (1,389,038) -
Prepaid expenses 1,120 8,984 - 10,104
Tenant security deposits - 94,211 - 94,211
Replacement reserves - 215,427 - 215,427
Rental property at cost, net of accumulated
depreciation and reserve for valuation - 12,282,612 775,159 13,057,771
Deferred acquisition fees escrow 112,500 - - 112,500
Deferred expenses, net - 212,629 - 212,629
Other assets - 228,699 - 228,699
------------- ------------- ------------- -------------
Total Assets $ 20,576,541 $ 13,299,062 $ (3,746,714) $ 30,128,889
============= ============= ============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,058,585 $ 927,368 $ (917,004) $ 2,068,949
Accounts payable and accrued
expenses 271,328 259,901 - 531,229
Interest payable - 323,056 - 323,056
Note payable, affiliate 514,968 - - 514,968
Security deposits payable - 84,471 - 84,471
Due to affiliate - - - -
Deferred acquisition fees payable 112,500 - - 112,500
Advances from affiliate - 200,000 - 200,000
Mortgage notes payable - 9,179,024 (1,389,038) 7,789,986
------------- ------------- ------------- -------------
Total Liabilities 2,957,381 10,973,820 (2,306,042) 11,625,159
------------- ------------- ------------- -------------
Minority interest in Local
Limited Partnerships - - 884,570 884,570
------------- ------------- ------------- -------------
General, Initial and Investor Limited
Partners' Equity 17,620,642 2,325,242 (2,325,242) 17,620,642
Net unrealized losses on marketable
securities (1,482) - - (1,482)
------------- ------------- ------------- -------------
Total Partners' Equity 17,619,160 2,325,242 (2,325,242) 17,619,160
------------- ------------- ------------- -------------
Total Liabilities and
Partners' Equity $ 20,576,541 $ 13,299,062 $ (3,746,714) $ 30,128,889
============= ============= ============= =============
</TABLE>
(A) As of June 30, 1999.
(B) As of March 31, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
3. Supplemental Combining Schedules (continued)
Statements of Operations
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III (A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 613,353 $ - $ 613,353
Investment 11,005 1,224 - 12,229
Recovery of bad debt 80,639 - - 80,639
Other 24,686 27,071 - 51,757
---------------- ------------- ------------- -------------
Total Revenue 116,330 641,648 - 757,978
---------------- ------------- ------------- -------------
Expenses:
Asset management fees, related party 91,815 - - 91,815
General and administrative 103,442 - - 103,442
Property management fees - 29,683 - 29,683
Rental operations, exclusive of depreciation - 407,096 - 407,096
Interest 1,500 199,592 - 201,092
Depreciation - 155,339 - 155,339
Amortization 34,389 6,787 - 41,176
---------------- ------------- ------------- -------------
Total Expenses 231,146 798,497 - 1,029,643
---------------- ------------- ------------- -------------
Loss before equity in losses of Local Limited
Partnerships, minority interest
and loss on liquidation of interest in Local
Limited Partnership (114,816) (156,849) - (271,665)
Equity in losses of Local Limited
Partnerships (709,333) - 154,692 (554,641)
Minority interest in losses of Local
Limited Partnerships - - 2,157 2,157
Loss on liquidation of interest in
Local Limited Partnership (193,883) - - (193,883)
---------------- ------------- ------------- -------------
Net Loss $ (1,018,032) $ (156,849) $ 156,849 $ (1,018,032)
================ ============== ============= =============
</TABLE>
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
<CAPTION>
3. Supplemental Combining Schedules (continued)
Statements of Cash Flows
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III (A) (B) Eliminations (A)
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (88,793) $ (156,515) $ - $ (245,308)
Net cash provided by investing activities 171,250 82,554 - 253,804
Net cash provided by financing activities - 127,495 - 127,495
------------- -------------- ------------- -------------
Net increase in cash and cash equivalents 82,457 53,534 - 135,991
Cash and cash equivalents, beginning 338,993 101,372 - 440,365
------------- -------------- ------------- -------------
Cash and cash equivalents, ending $ 421,450 $ 154,906 $ - $ 576,356
============= ============== ============= =============
</TABLE>
(A) For the three months ended June 30, 1999.
(B) For the three months ended March 31, 1999.
<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
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and are including this
statement for purposes of complying with these safe harbor provisions. Although
the Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions, interest rates and unanticipated delays or expenses on the
part of the Partnership and their suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
At June 30, 1999, the Partnership, including the Combined Entities, had cash and
cash equivalents of $576,356 as compared to $440,365 at March 31, 1999. The
increase is primarily attributable to proceeds from sales and maturities of
marketable securities in excess of purchases of marketable securities and cash
distributions received from Local Limited Partnerships. The increase is
partially offset by cash used for operations, improvements 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
June 30, 1993, the Managing General Partner decided to increase the Reserve
level to 3.75%. Funds approximating $196,000 have been withdrawn from the
Reserves to pay legal and other costs. Additionally, professional fees relating
to various property issues totaling approximately $1,755,000 have been paid from
Reserves. This amount includes approximately $1,314,000 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 $1,073,000 (net
of paydowns) to purchase the mortgage of a Local Limited Partnership. To date,
the Partnership has used approximately $2,241,000 of operating funds to
replenish Reserves. At June 30, 1999, approximately $873,000 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 $1,313,000 noted above, the Partnership has also advanced
approximately $789,000 to the Texas Partnerships and $957,000 to three 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, 1999, 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 three months ended June 30, 1999.
<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 (continued)
Results of Operations
For the three months ended June 30, 1999, Partnership operations resulted in a
net loss of $1,018,032 as compared to a net loss of $1,190,227 for the same
period in 1998. The decrease in net loss is primarily attributable to a decrease
in equity in losses. This decrease in equity in losses is primarily attributable
to a decrease in property operating expenses, interest and depreciation expenses
due to the transfer of one of the Combined Entities in 1998. In addition the
decrease in net loss is attributable to a decrease in property management fees,
general and administrative expenses, interest and depreciation, partially offset
by an increase in loss on liquidation due to the transfer of Boulevard Commons
II.
Property Discussions
Many of the 53 Local Limited Partnerships in which the Partnership has invested
have stable operations and are operating satisfactorily. Several properties are
experiencing operating difficulties and are 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 II and IIA, located in Chicago, Illinois, and both having the
same Local General Partner have been experiencing operating deficits. Expenses
have increased due to increasing maintenance, capital needs, security issues and
high turnover at the property. The Managing General Partner has been in
negotiations with the Local General Partner to develop a plan that will
ultimately transfer ownership of the property to the Local General Partner. The
plan includes provisions to minimize the risk of recapture. Effective January 1,
1999, the Partnership redeemed its interest in Boulevard Commons II to the Local
Limited Partnership. The redemption of the Partnership's interest avoids a
possible recapture event. However, the redemption will cause investors to have
minimal taxable gain or loss for the 1999 tax year, depending upon the tax basis
of the property.
The Managing General Partner is still negotiating with the Local General Partner
regarding Boulevard Commons IIA to develop a plan that will ultimately transfer
ownership of the property to the Local General Partner and minimize the risk of
recapture. However, given the severity of the operating deficits, it is possible
that the Partnership will not be able to retain its interest in the property
through 1999. A foreclosure would result in recapture of credits for investors,
the allocation of taxable income to the Partnership and loss of future benefits
associated with this property.
Breckenridge Creste, located in Duluth, Georgia, is experiencing operating
deficits as a result of higher vacancies during the summer of 1998. However
occupancy for the last two quarters has increased from 96% in December 31, 1998
to 97% in March 31, 1999. The Managing General Partner is working with property
management to review completion of needed capital improvements and to review the
revised marketing strategy.
Columbia Townhouses, located in Burlington, Iowa, has been experiencing
operating deficits due to consistent increases in vacancy. As of March 31, 1999,
occupancy was 89%. 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. In addition, the Local General Partner has
approached the lender about the possibility of refinancing the mortgage. 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
<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 (continued)
Property Discussions (continued)
with the new lender. However, if the negotiations are not successful, it is
possible that the Partnership will not be able to retain its interest in the
property through 1999. A foreclosure would result in recapture of credits for
investors, the allocation of taxable income to the Partnership and loss of
future benefits associated with this property. Occupancy for this property as of
March 31, 1999 was 96%.
As previously reported, 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 still monitoring the progress of the application approval
process.
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. 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.
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. Shoreline was approved for the 1998 New Approach Anti-Drug
Grant. The Grant was issued in February, 1999 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 nine year extension to the original workout agreement. The
nine 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.
<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 (continued)
Property Discussions (continued)
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for assessing impairment of
its real estate assets and investments in local limited partnerships. Each asset
is analyzed by real estate experts to determine if an impairment indicator
exists. If so, the carrying value is compared to the future cash flows expected
to be derived from the asset. If the total undiscounted cash flows are less than
the carrying value, a provision to write down the asset to fair value will be
charged against income.
Impact of Year 2000
The Managing General Partner's plan to resolve year 2000 issues involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Managing General Partner has fully completed an assessment of all
information systems that may not be operative subsequent to 1999 and has begun
the remediation, testing and implementation phase on both hardware and software
systems. Because the hardware and software systems of both the Partnership and
Local Limited Partnerships are generally the responsibility of obligated third
parties, the plan primarily involves ongoing discussions with and obtaining
written assurances from these third parties that pertinent systems will be 2000
compliant. In addition, neither the Partnership nor the Local Limited
Partnerships are incurring significant additional costs since such expenses are
principally covered under the service contracts with vendors. As of August 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes that all major systems are compliant; any systems still being updated
are not considered significant to the Partnership's operations. However, despite
the likelihood that all significant year 2000 issues are expected to be resolved
in a timely manner, the Managing General Partner has no means of ensuring that
all systems of outside vendors or other entities that impact operations will be
2000 compliant. The Managing General Partner does not believe that the inability
of third parties to address their year 2000 issues in a timely manner will have
a material impact on the Partnership. However, the effect of non-compliance by
third parties is not readily determinable.
Management has also evaluated a worst case scenario projection with respect to
the year 2000 and expects any resulting disruption of either the Managing
General Partner's activities or any Local Limited Partnership's operations to be
short-term inconveniences. Such problems, however, are not likely to fully
impede the ability to carry out necessary duties of the Partnership. Moreover,
because expected problems under a worst case scenario are not extensively
detrimental, and because the likelihood that all systems affecting the
Partnership will be compliant in early 1999, the Managing General Partner has
determined that a formal contingency plan that responds to material system
failures is not necessary.
Other Development
Lend Lease Real Estate Investments, Inc., the U.S. subsidiary of Lend Lease
Corporation and the leading U.S. institutional real estate advisor as ranked by
assets under management, announced on July 29, 1999 it has reached a memorandum
of understanding to acquire The Boston Financial Group Limited Partnership. The
transaction remains subject to final due diligence, legal agreements, and
regulatory approvals with no guarantee that the acquisition will be completed.
The two companies are targeting to complete the transactions by the end of
September.
Headquartered in New York and Atlanta, Lend Lease Real Estate Investments, Inc.
has regional offices in 12 cities nationwide. Worldwide, Lend Lease Real Estate
Investments operates from more than 30 cities on five continents: North America,
Europe, Asia, Australia and South America. The company ranks as the leading U.S.
manager of tax-exempt assets invested in real estate. It is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. In addition to real estate investments,
the Lend Lease Group operates in the areas of property development, project
management and construction, and capital services (infrastructure). Financial
services activities include funds management, life insurance, and wealth
protection.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
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, 1999.
<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 11, 1999 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 576,356
<SECURITIES> 522,838
<RECEIVABLES> 145,080<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 13,057,771
<DEPRECIATION> 000
<TOTAL-ASSETS> 30,128,889<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 17,619,160
<TOTAL-LIABILITY-AND-EQUITY> 30,128,889<F3>
<SALES> 000
<TOTAL-REVENUES> 757,978<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 828,551<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 201,092
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (1,018,032)<F6>
<EPS-BASIC> (10.08)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts receivable, net of $112,830 and Interest
receivable of $32,250. <F2>Included in total assets: Prepaid expenses of
$10,104, Tenant security deposits of $94,211, Replacement reserves of $215,427,
Other assets of $228,699, Investments in Local Limited Partnerships of
$14,953,274, Deferred acquisition fees escrow of $112,500 and Deferred expenses,
net of $212,629. <F3>Included in Total Liabilities and Equity: Accounts payable
to affiliates of $2,068,949, Accounts payable and accrued expenses of $531,229,
Interest payable of $323,056, Notes payable, affiliate of $514,968, Security
deposits payable of $84,471, Deferred acquisition fees payable of $112,500,
Advances from affiliate of $200,000, Mortgage notes payable of $7,789,986 and
Minority interest in Local Limited Partnerships of $884,570. <F4>Total revenue
includes: Rental of $613,353, Investment of $12,229, Recovery of bad debt of
$80,639, and Other of $51.757. <F5>Included in Other Expenses: Asset management
fees of $91,815, General and administrative of $103,442, Property management
fees of $29,683, Rental operations, exclusive of depreciation of $407,096,
Depreciation of $155,339 and Amortization of $41,176. <F6>Net loss reflects:
Equity in losses of Local Limited Partnerships of $554,641, Loss on liquidation
of interest in Local Limited Partnership of $193,883 and minority interest in
losses of Local Limited Partnerships of $2,157.
</FN>
</TABLE>
