November 12, 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 for Quarter Ended September 30, 1999
File Number 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-QSB
(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, 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 September 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>
<S> <C>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Combined Financial Statements
Combined Balance Sheet - September 30, 1999 (Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 1999 and 1998 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 1999 3
Combined Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 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
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 596,054
Marketable securities, at fair value 422,706
Investments in Local Limited Partnerships, net
of reserve for valuation of $2,017,192 (Note 1) 13,932,614
Accounts receivable, net 108,868
Interest receivable 13,276
Prepaid expenses 29,466
Tenant security deposits 81,897
Replacement reserves 264,161
Operating reserves 41,285
Rental property at cost, net of accumulated
depreciation and reserve for valuation 12,910,834
Deferred acquisition fees escrow 112,500
Deferred expenses, net of $147,949 accumulated amortization 205,843
Other assets 264,108
-------------
Total Assets $ 28,983,612
=============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,163,680
Accounts payable and accrued expenses 600,154
Interest payable 330,754
Note payable, affiliate 514,968
Security deposits payable 78,179
Deferred acquisition fees payable 112,500
Advances from affiliate 200,000
Mortgage notes payable 7,822,709
-------------
Total Liabilities 11,822,944
Minority interest in Local Limited Partnerships 882,337
-------------
General, Initial and Investor Limited Partners' Equity 16,280,001
Net unrealized losses on marketable securities (1,670)
Total Partners' Equity 16,278,331
-------------
Total Liabilities and Partners' Equity $ 28,983,612
=============
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, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
-------------- --------------- -------------- ------------
Revenue:
<S> <C> <C> <C> <C>
Rental $ 607,009 $ 620,267 $ 1,220,362 $ 1,200,173
Investment 11,307 9,280 23,536 17,886
Other 25,287 35,747 77,044 81,263
------------- -------------- ------------- ------------
Total Revenue 643,603 665,294 1,320,942 1,299,322
------------- -------------- ------------- ------------
Expenses:
Asset management fees, related party 97,540 95,938 189,355 191,876
General and administrative (includes
reimbursements to affiliates of $67,024
and $65,076 in 1999 and 1998, respectively) (16,084) 83,940 87,358 197,012
Bad debt 178,637 123,785 97,998 96,904
Provision for valuation of investment in
Local Limited Partnership 382,192 - 382,192 -
Property management fees 28,475 29,339 58,158 79,493
Rental operations, exclusive of depreciation 393,475 352,194 794,656 697,349
Interest 185,936 204,152 392,943 394,574
Depreciation 155,359 155,339 310,698 321,531
Amortization 43,088 44,257 84,264 88,560
------------- -------------- ------------- ------------
Total Expenses 1,448,618 1,088,944 2,397,622 2,067,299
------------- -------------- ------------- ------------
Loss before equity in losses of Local Limited
Partnerships, minority interest, and loss
on liquidation of interest in Local Limited
Partnership (805,015) (423,650) (1,076,680) (767,977)
Equity in losses of Local Limited Partnerships
(Note 1) (537,859) (711,318) (1,092,500) (1,559,340)
Minority interest in (income) losses of
Local Limited Partnerships 2,233 (4,469) 4,390 (2,347)
Loss on liquidation of interest in Local
Limited Partnership (Note 2) - - (193,883) -
------------- -------------- ------------- ------------
Loss before gain on transfer (1,340,641) (1,139,437) (2,358,673) (2,329,664)
Gain on transfer of assets - 640,183 - 640,183
------------- -------------- ------------- ------------
Net Loss $ (1,340,641) $ (499,254) $ (2,358,673) $ (1,689,481)
============= ============== ============= ============
Net Loss allocated:
To General Partners $ (13,407) $ (4,993) $ (23,587) $ (16,895)
To Limited Partners (1,327,234) (494,261) (2,335,086) (1,672,586)
------------- -------------- ------------- ------------
$ (1,340,641) $ (499,254) $ (2,358,673) $ (1,689,481)
============= ============== ============= ============
Net Loss before gain on transfer per
Limited Partnership Unit (100,000 Units) $ (13.27) $ (11.28) $ (23.35) $ (23.06)
============= ============== ============= ============
Gain on transfer per Limited Partnership
Unit (100,000 Units) $ - $ 6.34 $ - $ 6.34
============= ============== ============= ============
Net Loss per Limited Partnership Unit
(100,00 Units) $ (13.27) $ (4.94) $ (23.35) $ (16.72)
============= ============== ============= ============
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 Six Months Ended September 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 net unrealized
gains on marketable securities
available for sale - - - (1,907) (1,907)
Net Loss (23,587) - (2,335,086) - (2,358,673)
----------- -------- ------------ ---------- -------------
Comprehensive Loss (23,587) - (2,335,086) (1,907) (2,360,580)
----------- -------- ------------ ---------- -------------
Balance at September 30, 1999 $ (713,045) $ 5,000 $ 16,988,046 $ (1,670) $ 16,278,331
=========== ======== ============ ========== =============
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, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net cash used for operating activities $ (160,335) $ (106,273)
Net cash provided by investing activities 325,442 364,413
Net cash provided by (used for) financing activities (9,418) 30,121
------------- -------------
Net increase in cash and cash equivalents 155,689 288,261
Cash and cash equivalents, beginning 440,365 311,867
------------- -------------
Cash and cash equivalents, ending $ 596,054 $ 600,128
============= =============
Supplemental Disclosure:
Cash paid for interest $ 395,077 $ 376,784
============= =============
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 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 of the Local Limited Partnerships that is included in the
accompanying financial statements is as of June 30, 1999 and 1998. 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 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 interests are 97%, 49% and 48.96%,
respectively. Upon dissolution, proceeds will be distributed according to each
respective partnership agreement.
<TABLE>
<CAPTION>
The following is a summary of Investments in Local Limited Partnerships at
September 30, 1999, excluding the Combined Entities:
Capital contributions to Local Limited Partnerships and purchase
<S> <C>
price paid to withdrawing partners of Local Limited Partnerships $ 59,419,634
Cumulative equity in losses of Local Limited Partnerships (net of
cumulative unrecognized losses of $48,463,506) (44,600,670)
Cumulative cash distributions received from Local Limited Partnerships (2,850,076)
-------------
Investments in Local Limited Partnerships before adjustment 11,968,888
Excess of investment costs over the underlying net assets acquired:
Acquisition fees and expenses 5,335,849
Accumulated amortization of acquisition fees and expenses (1,354,931)
-------------
Investments in Local Limited Partnerships 15,949,806
Reserve for valuation of investments in Local Limited Partnerships (2,017,192)
-------------
$ 13,932,614
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO 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, 1999
totaled $2,747,032. For the six months ended September 30, 1999, the Partnership
has not recognized $1,660,616 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
For financial reporting purposes, loss on liquidation of interest in Local
Limited Partnership of $193,883 was recognized in the six months ended September
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 COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. 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 $ 297,169 $ 147,403 $ 151,482 $ 596,054
Marketable securities, at fair value 422,706 - - 422,706
Investments in Local Limited
Partnerships, net 16,012,790 - (2,080,176) 13,932,614
Accounts receivable, net - 108,868 - 108,868
Interest receivable 13,276 - - 13,276
Notes receivable 1,389,038 - (1,389,038) -
Prepaid expenses - 29,466 - 29,466
Tenant security deposits - 81,897 - 81,897
Replacement reserves - 264,161 - 264,161
Operating reserves - 41,285 - 41,285
Rental property at cost, net of
accumulated depreciation and
reserve for valuation - 12,143,005 767,829 12,910,834
Deferred acquisition fees escrow 112,500 - - 112,500
Deferred expenses, net - 205,843 - 205,843
Other assets - 264,108 - 264,108
------------- ------------- ------------- -------------
Total Assets $ 18,247,479 $ 13,286,036 $ (2,549,903) $ 28,983,612
============= ============= ============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,149,886 $ 930,798 $ (917,004) $ 2,163,680
Accounts payable and accrued
expenses 260,280 339,874 - 600,154
Interest payable - 330,754 - 330,754
Note payable, affiliate 514,968 - - 514,968
Security deposits payable - 78,179 - 78,179
Deferred acquisition fees payable 112,500 - - 112,500
Advances from affiliate - 200,000 - 200,000
Mortgage notes payable - 9,211,747 (1,389,038) 7,822,709
------------- ------------- ------------- -------------
Total Liabilities 3,037,634 11,091,352 (2,306,042) 11,822,944
------------- ------------- ------------- -------------
Minority interest in Local
Limited Partnerships - - 882,337 882,337
------------- ------------- ------------- -------------
General, Initial and Investor Limited
Partners' Equity 15,211,515 2,194,684 (1,126,198) 16,280,001
Net unrealized losses on marketable
securities (1,670) - - (1,670)
------------- ------------- ------------- -------------
Total Partners' Equity 15,209,845 2,194,684 (1,126,198) 16,278,331
------------- ------------- ------------- -------------
Total Liabilities and
Partners' Equity $ 18,247,479 $ 13,286,036 $ (2,549,903) $ 28,983,612
============= ============= ============= =============
</TABLE>
(A) As of September 30, 1999.
(B) As of June 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended September 30, 1999
Boston Financial
Qualified Housing Combined
Tax Credits Entities Combined
L.P. III(A) (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 1,220,362 $ - $ 1,220,362
Investment 20,760 2,776 - 23,536
Other 49,993 47,220 (20,169) 77,044
------------ ------------- ------------- ------------
Total Revenue 70,753 1,270,358 (20,169) 1,320,942
------------ ------------- ------------- ------------
Expenses:
Asset management fees, related party 189,355 - - 189,355
General and administrative 170,426 - (83,068) 87,358
Bad debt 1,112,848 - (1,014,850) 97,998
Provision for valuation of investment in
Local Limited Partnership 382,192 - - 382,192
Property management fees - 58,158 - 58,158
Rental operations, exclusive of depreciation - 765,224 29,432 794,656
Interest 3,000 410,112 (20,169) 392,943
Depreciation - 310,698 - 310,698
Amortization 70,691 13,573 - 84,264
------------ ------------- ------------- -------------
Total Expenses 1,928,512 1,557,765 (1,088,655) 2,397,622
------------ ------------- ------------- -------------
Loss before equity in losses of Local
Limited Partnerships, minority
interest and loss on liquidation of interest
in Local Limited Partnership (1,857,759) (287,407) 1,068,486 (1,076,680)
Equity in losses of Local Limited
Partnerships (1,375,517) - 283,017 (1,092,500)
Minority interest in losses of
Local Limited Partnerships - - 4,390 4,390
Loss on liquidation of interest in Local
Limited Partnership (193,883) - - (193,883)
------------ ------------- ------------- -------------
Net Loss $ (3,427,159) $ (287,407) $ 1,355,893 $ (2,358,673)
============ ============= ============= =============
</TABLE>
(A) For the six months ended September 30, 1999.
(B) For the six months ended June 30, 1999.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. 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)
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (123,001) $ (90,970) $ 53,636 $ (160,335)
Net cash provided by (used for) investing
activities 81,177 (23,217) 267,482 325,442
Net cash provided by (used for) financing
activities - 160,218 (169,636) (9,418)
------------- -------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents (41,824) 46,031 151,482 155,689
Cash and cash equivalents, beginning 338,993 101,372 - 440,365
------------- -------------- ------------- -------------
Cash and cash equivalents, ending $ 297,169 $ 147,403 $ 151,482 $ 596,054
============= ============== ============= =============
</TABLE>
(A) For the six months ended September 30, 1999.
(B) For the six 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
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 is 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 its suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
At September 30, 1999, the Partnership, including the Combined Entities, had
cash and cash equivalents of $596,054 as compared to $440,365 at March 31, 1999.
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 and additions to rental property.
The Managing General Partner initially designated 3% of Gross Proceeds as
Reserves. The Reserves, as defined in the Partnership Agreement, 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 $196,000 have been withdrawn from the Reserves to pay legal and
other costs. Additionally, professional fees relating to various property issues
totaling approximately $1,757,000 have been paid from Reserves. This amount
includes approximately $1,313,000 for the Texas Partnerships. To date, Reserve
funds in the amount of approximately $434,000 have also been used to make
additional capital contributions to three Local Limited Partnerships, and the
Partnership has paid approximately $1,038,000 (net of paydowns) to purchase the
mortgage of a Local Limited Partnership. To date, the Partnership has used
approximately $2,169,000 of operating funds to replenish Reserves. At September
30, 1999, approximately $677,000 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 $594,000 to the Texas Partnerships and $1,223,000 to four 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, 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 the six months ended September 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 six months ended September 30, 1999, Partnership operations resulted in
a net loss of $2,358,673, as compared to a net loss of $1,689,481 for the same
period in 1998. The increase in net loss is primarily attributable to an
increase in loss on liquidation due to the transfer of Boulevard Commons II and
the reserve for Boulevard Commons IIA. The increase in net loss is also
attributable to a gain on transfer of Willowick in the quarter ended September
30, 1998. These changes are partially offset by a decrease in equity in losses
of Local Limited Partnership's due to decreases in general and administrative
expenses, interest, depreciation, and amortization expenses.
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. At Boulevard Commons IIA, 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 may cause
investors to have minimal taxable gain or loss for the 1999 tax year, depending
upon the tax basis of the property.
As previously reported, the Managing General Partner has been in negotiations
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. Effective January 2, 1999, the
Managing General Partner consummated the transfer of 49.5% of the Partnership's
capital and profits in the properties to the Local General Partner. The Managing
General Partner has the right to transfer the Partnership's remaining interest
in the property to the Local General Partner any time after one year has
elapsed. The Partnership will retain its full share of tax credits until such
time as the remaining interest is put to the Local General Partner. In addition,
the Local General Partner has the right to call the remaining interest after the
tax credit period has expired.
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 been in the mid 90% range. 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 June 30, 1999,
occupancy was 96%. The Local General Partner, Managing General Partner and
management agent have been working together to review the marketing, security
and long-term strategy for this property. In addition, the Local General Partner
is in negotiations with the lender about the possibility of refinancing the
mortgage. Effective September 1999, the City of Burlington acquired through
eminent domain, one of the buildings comprising Columbia Townhomes. The City
acquired the building for the purpose of allowing
<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)
access to a contemplated Walgreens development. For tax purposes, the taking of
one building by eminent domain will result in both Section 1231 Gain and
cancellation of indebtedness income. In addition, there will be tax credit
recapture of approximately $1.40 per unit for the 1999 tax year. The Managing
General Partner continues to work with the Local General Partner in monitoring
this property and the outcome of the refinancing.
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. 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 June 30, 1999 was 93%.
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. The
Management Agent has applied for consideration for a Project Improvement Program
(PIP) and applied for a Safe Neighborhood Grant for both Waterfront and
Shoreline. At this point, deficits continue to be funded by the Management
Agent. 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.
<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)
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.
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 service contracts with vendors. As of November 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes 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 before 2000, 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., ("Lend Lease") 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 had reached
a memorandum of understanding to acquire The Boston Financial Group Limited
Partnership ("Boston Financial"). Lend Lease closed the acquisition of Boston
Financial on November 3, 1999.
Headquartered in New York and Atlanta, Lend Lease Corporation has regional
offices in 12 cities nationwide. The company ranks as the leading U.S. manager
of tax-exempt assets invested in real estate. Lend Lease is a subsidiary of Lend
Lease Corporation, an international real estate and financial services group
listed on the Australian Stock Exchange. Worldwide, Lend Lease Corporation
operates from more than 30 cities on five continents: North America, Europe,
Asia, Australia and South America. 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)
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, 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: November 12, 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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 596,054
<SECURITIES> 422,706
<RECEIVABLES> 122,144<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 12,910,834
<DEPRECIATION> 000
<TOTAL-ASSETS> 28,983,612<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 16,278,331
<TOTAL-LIABILITY-AND-EQUITY> 28,983,612<F3>
<SALES> 000
<TOTAL-REVENUES> 1,320,942<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 2,004,679<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 392,943
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (2,358,673)<F6>
<EPS-BASIC> (23.35)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts Receivable of $108,868 and Interest receivable of $13,276.
<F2>Included in Total assets: Prepaid expenses of $29,466, Tenant security
deposits of $81,897, Other assets of $264,108, Investments in Local Limited
Partnerships-net of $13,932,614, Operating reserves of $41,285. Replacement
reserves of $264,161, Deferred acquisition fees escrow of $112,500 and Deferred
expenses, net of $205,843. <F3>Included in Total Liabilities and Equity:
Accounts payable to affiliates of $2,163,680, Accounts payable and accrued
expenses of $600,154, Interest payable of $330,754, Notes payable, affiliate of
$514,968, Security deposits payable of $78,179, Deferred acquisition fees
payable of $112,500, Advances from affiliate of $200,000, Mortgage notes payable
of $7,822,709 and Minority interest in Local Limited Partnerships of $882,337.
<F4>Included in Total revenue is Rental of $1,220,362, Investment of $23,536 and
Other of $77,044. <F5>Included in Other Expenses: Asset management fees of
$189,355, General and administrative of $87,358, Bad debt of $97,998, Property
management fees of $58,158, Rental operations, exclusive of depreciation of
$794,656, Depreciation of $310,698, Amortization of $84,264 and Provision for
valuation of investment in Local Limited Partnership of $382,192. <F6>Included
in Net loss is Equity in losses of Local Limited Partnerships of $1,092,500,
Loss on liquidation of interests in Local Limited Partnerships of $193,883 and
Minority interest in losses of Local Limited Partnerships of ($4,390).
</FN>
</TABLE>
