November , 2000
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC. 20549
Re: Boston Financial Qualified Housing Tax Credits L.P. III
Report on Form 10-QSB for Quarter Ended September 30, 2000
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-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, 2000
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 01-18462
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Boston Financial Qualified Housing Tax Credits L.P. III
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3032106
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 Arch Street, Boston, Massachusetts 02110-1106
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(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. Financial Statements
Balance Sheet - September 30, 2000 (Unaudited) 1
Statements of Operations (Unaudited) - For the Three and Six
Months Ended September 30, 2000 and 1999 2
Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Six Months Ended September 30, 2000 3
Statements of Cash Flows (Unaudited) - For the
Six Months Ended September 30, 2000 and 1999 4
Notes to the Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Items 1-6 10
SIGNATURE 11
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
BALANCE SHEET
September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 116,806
Marketable securities, at fair value 696,102
Investments in Local Limited Partnerships, net (Note 1) 12,243,979
Interest receivable 11,281
Note receivable 1,328,367
-------------
Total Assets $ 14,396,535
=============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,672,651
Accounts payable and accrued expenses 301,697
Note payable, affiliate 514,968
-------------
Total Liabilities 3,489,316
-------------
General, Initial and Investor Limited Partners' Equity 10,905,177
Net unrealized gains on marketable securities 2,042
-------------
Total Partners' Equity 10,907,219
-------------
Total Liabilities and Partners' Equity $ 14,396,535
=============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership
STATEMENTS OF OPERATIONS
the Three and Six Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
September 30, 1999 September 30, 1999
2000 (Restated) 2000 (Restated)
-------------- --------------- -------------- -----------
Revenue:
<S> <C> <C> <C> <C>
Investment $ 12,042 $ 9,755 $ 22,810 $ 20,760
Other 17,895 25,307 55,962 49,993
------------- -------------- ------------- ------------
Total Revenue 29,937 35,062 78,772 70,753
------------- -------------- ------------- ------------
Expenses:
Asset management fees, related party 99,521 97,540 190,066 189,355
General and administrative (includes
reimbursements to affiliates of $111,487
and $67,024 in 2000 and 1999,
respectively) 102,169 66,984 219,911 170,426
Provision for valuation of investments in
Local Limited Partnerships 10,000 1,575,679 - 1,495,040
Interest 1,000 1,500 2,500 3,000
Amortization 21,011 34,892 44,662 67,871
------------- -------------- ------------- ------------
Total Expenses 233,701 1,776,595 457,139 1,925,692
------------- -------------- ------------- ------------
Loss before equity in losses of Local Limited
Partnerships, and loss on liquidation of
interest in Local Limited Partnership (203,764) (1,741,533) (378,367) (1,854,939)
Equity in losses of Local Limited Partnerships
(Note 1) (542,832) (656,663) (947,970) (1,359,658)
Loss on liquidation of interest in Local
Limited Partnership (Note 2) - - - (193,883)
------------- -------------- ------------- ------------
Net Loss $ (746,596) $ (2,398,196) $ (1,326,337) $ (3,408,480)
============= ============== ============= ============
Net Loss allocated:
To General Partners $ (7,466) $ (23,982) $ (13,263) $ (34,085)
To Limited Partners (739,130) (2,374,214) (1,313,074) (3,374,395)
------------- -------------- ------------- ------------
$ (746,596) $ (2,398,196) $ (1,326,337) $ (3,408,480)
============= ============== ============= ============
Net Loss per Limited Partnership
Unit (100,000 Units) $ (7.39) $ (23.74) $ (13.13) $ (33.74)
============= ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Six Months Ended September 30, 2000
(Unaudited)
<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, 2000 $ (753,529) $ 5,000 $ 12,980,043 $ (999) $ 12,230,515
----------- --------- ------------- ----------- -------------
Comprehensive Income (Loss):
Change in net unrealized losses
on marketable securities
available for sale - - - 3,041 3,041
Net Loss (13,263) - (1,313,074) - (1,326,337)
----------- --------- ------------- ----------- -------------
Comprehensive Income (Loss) (13,263) - (1,313,074) 3,041 (1,323,296)
----------- --------- ------------- ----------- -------------
Balance at September 30, 2000 $ (766,792) $ 5,000 $ 11,666,969 $ 2,042 $ 10,907,219
=========== ========= ============= =========== =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999
2000 (Restated)
------------- ------------
<S> <C> <C>
Net cash used for operating activities $ (64,479) $ (123,001)
Net cash provided by investing activities 8,492 81,177
------------- -------------
Net decrease in cash and cash equivalents (55,987) (41,824)
Cash and cash equivalents, beginning 172,793 338,993
------------- -------------
Cash and cash equivalents, ending $ 116,806 $ 297,169
============= =============
Supplemental Disclosure:
Cash paid for interest $ 2,500 $ -
============= =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to the 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-KSB for the
year ended March 31, 2000. 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, 2000 and 1999.
1. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in fifty-two Local Limited Partnerships 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, Harbour View, Willow Lake and Breckenridge,
where the Partnership's ownership interest is 97%, 49%, 48.96%, 98% and 98%,
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, 2000:
Capital contributions and advances paid to Local
Limited Partnerships and purchase price paid
to withdrawing partners of Local Limited Partnerships $ 68,121,077
Cumulative equity in losses of Local Limited Partnerships
(excluding cumulative unrecognized losses of $54,433,664) (52,863,068)
Cumulative cash distributions received from
Local Limited Partnerships (3,169,197)
-------------
Investments in Local Limited Partnerships before adjustment 12,088,812
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 6,220,170
Accumulated amortization of acquisition fees and expenses (1,675,832)
-------------
Investments in Local Limited Partnerships before
reserve for valuation 16,633,150
Reserve for valuation of investments in
Local Limited Partnerships (4,389,171)
-------------
Investments in Local Limited Partnerships $ 12,243,979
=============
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Notes to Financial Statements (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
----------------------------------------------------
The Partnership's share of the net losses of the Local Limited Partnerships for
the six months ended September 30, 2000 is $3,303,858. For the six months ended
September 30, 2000, the Partnership has not recognized $2,376,397 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. The Partnership recognized $20,509 of previously
unrecognized losses in the six months ended September 30, 2000.
2. Liquidation of Interest in Local Limited Partnership
For financial reporting purposes, loss on liquidation of interest in Local
Limited Partnership of $193,883 was recognized in the period 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)
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 and interest rates.
Liquidity and Capital Resources
The Partnership had a decrease in cash and cash equivalents of $55,987 for the
six months ended September 30, 2000. This decrease is primarily attributable to
purchases of marketable securities and cash used for operations. These decreases
are partially offset by proceeds from sales of marketable securities, cash
distributions received from Local Limited Partnerships and repayment of notes
receivable from affiliate.
The Managing General Partner initially designated 3% of the 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
March 31, 1993, the Managing General Partner decided to increase the Reserve
level to 3.75%. Professional fees relating to various property issues totaling
approximately $2,027,000 have been paid from Reserves. 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 $897,000 (net of paydowns) to purchase the mortgage of a
Local Limited Partnership. To date, the Partnership has used approximately
$2,256,000 of operating funds to replenish Reserves. At September 30, 2000,
approximately $638,000 of cash, cash equivalents and marketable securities have
been designated as Reserves. Reserves may be used to fund Partnership operating
deficits, if the Managing General Partner deems funding appropriate. If Reserves
are not adequate to cover the Partnership's operations, the Partnership will
seek other financing sources including, but not limited to, the deferral of
Asset Management Fees paid to an affiliate of the Managing General Partner or
working with Local Limited Partnerships to increase cash distributions.
In the event a Local Limited Partnership encounters operating difficulties
requiring additional funds, the Partnership might deem it in its best interests
to provide such funds, voluntarily, in order to protect its investment. The
Partnership has advanced approximately $2,010,000 to 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, 2000, 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, 2000.
<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 and six months ended September 30, 2000, Partnership operations
resulted in net losses of $746,596 and $1,326,337, respectively as compared to
net losses of $2,398,196 and $3,408,480, respectively for the same periods in
1999. These decreases in net losses are primarily attributable to decreases in
provisions for valuation of investments in Local Limited Partnerships.
Provisions for valuation of investments in Local Limited Partnerships was
incurred during the three and six months ended September 30, 1999 due to the
reserve of advances to the Local Limited Partnerships. The decrease in net
losses for the three and six months ended September 30, 2000 is also
attributable to a decrease in equity in losses of Local Limited Partnerships due
to an increase in unrecognized losses.
Property Discussions
Boulevard Commons IIA, located in Chicago, Illinois continues to generate an
operating deficit. Expense levels at the property are high due to increasing
maintenance, capital needs, security issues and high turnover. The Managing
General Partner developed a plan with the Local General Partner to transfer
ownership of the property to the Local General Partner. The plan includes
provisions to minimize the risk of recapture. In 1999, the Partnership redeemed
49.5% of its interest in Boulevard Commons IIA and in 2000, plans to redeem all
but 1% of the remaining half. The final redemption will occur in 2001. The
redemption of the Partnership's interest avoided a possible recapture event.
However, the redemption will cause investors to have minimal taxable gain or
loss for the 2000 tax year, depending upon the tax basis of the property.
Although operations at Breckenridge Creste (Duluth, Georgia) have slightly
improved over the past year, the property operated below break-even for the
period ending September 30, 2000 primarily due to significant capital
improvements made at the property during the third quarter. As previously
reported, the Managing General Partner continues to work closely with the Local
General Partner and the Lender to develop a plan that will ultimately transfer
ownership of the property. The plan includes provisions to minimize the risk of
recapture.
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. However, the
Managing General Partner expects that the Partnership will not be able to retain
its interest in the property and that a foreclosure will occur in the first
quarter of 2001. A foreclosure will result in recapture of credits for
investors, the allocation of taxable income to the Partnership and loss of
future benefits associated with this property.
As previously reported, Pleasant Plaza, located in Malden, Massachusetts, and
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,
separate from its responsibilities to Pleasant Plaza or South Holyoke, joined a
group of SHARP property owners called the Responsible SHARP Owners, Inc. (RSO)
and is negotiating with MHFA 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, both
properties are in default on their mortgage obligations. On September 16, 1998,
the Partnership also 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
<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)
-------------------------------
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. Pleasant Plaza was included in a "Dilution Pool" composed of approximately
20 of the 77 SHARP properties. MHFA made an offering to Wall Street brokerage
houses, which consisted primarily of an effort to sell the tax losses, generated
by the 20 partnerships, assuming restructured mortgages. Because so few owners
responded positively to the dilution proposal, it is unlikely that there will be
sufficient participation to proceed with restructuring. The Managing General
Partner continues to work to resolve these issues and minimize adverse tax
consequences to the 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. Shoreline was approved for the 1998 New Approach Anti-Drug
Grant. The Grant was issued in February 1999 and is being used to support drug
prevention, educational programs and increased security on the property. The
property still experiences fluctuating occupancy and as of June 30, was 75%
occupied. Waterfront was 71% occupied. 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, the
Management Agent is not funding deficits and payables have increased. The
Managing General Partner is working closely with the Local General Partner to
develop a plan that will address these issues.
The Partnership has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. Real estate experts
analyze the investments to determine if impairment indicators exist. If so, the
carrying value is compared to the undiscounted future cash flows expected to be
derived from the asset. If there is a significant impairment in carrying value,
a provision to write down the asset to fair value will be recorded in the
Partnership's financial statements.
<PAGE>
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, 2000.
<PAGE>
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 , 2000 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>
