February 11, 2000
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 December 31, 1999
File No. 01-18462
Gentlemen:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, filed herewith is one copy of subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH3-Q3.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 December 31, 1999
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 01-18462
Boston Financial Qualified Housing Tax Credits L.P. III
(Exact name of registrant as specified in its charter)
Delaware 04-3032106
(State or other jurisdiction of (I.R.S. Employer 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 - December 31, 1999 (Unaudited) 1
Combined Statements of Operations (Unaudited) - For the Three and Nine
Months Ended December 31, 1999 and 1998 2
Combined Statement of Changes in Partners' Equity (Deficiency)
(Unaudited) - For the Nine Months Ended December 31, 1999 3
Combined Statements of Cash Flows (Unaudited) - For the
Nine Months Ended December 31, 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 13
SIGNATURE 14
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED BALANCE SHEET
December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 423,541
Marketable securities, at fair value 501,891
Investments in Local Limited Partnerships, net of reserve
for valuation of $2,017,192 (Note 1) 13,253,492
Accounts receivable, net 111,773
Interest receivable 7,765
Prepaid expenses 25,439
Tenant security deposits 83,216
Replacement reserves 214,366
Operating reserves 41,285
Rental property at cost, net of accumulated
depreciation and reserve for valuation 12,789,457
Deferred expenses, net of accumulated amortization of $154,736 199,056
Other assets 239,257
----------------
Total Assets $ 27,890,538
================
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,259,660
Accounts payable and accrued expenses 373,545
Interest payable 336,925
Note payable, affiliate 514,968
Security deposits payable 81,784
Advances from affiliate 200,000
Mortgage notes payable 7,951,381
----------------
Total Liabilities 11,718,263
Minority interest in Local Limited Partnerships 879,756
----------------
General, Initial and Investor Limited Partners' Equity 15,294,778
Net unrealized gains on marketable securities (2,259)
Total Partners' Equity 15,292,519
----------------
Total Liabilities and Partners' Equity $ 27,890,538
================
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
For the Three and Nine Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
-------------- --------------- -------------- -----------
Revenue:
<S> <C> <C> <C> <C>
Rental $ 611,414 $ 594,032 $ 1,831,776 $ 1,794,205
Investment 13,133 12,008 36,669 29,894
Other 137,452 410,139 214,496 491,402
------------ ------------- ------------ ------------
Total Revenue 761,999 1,016,179 2,082,941 2,315,501
------------ ------------- ------------ ------------
Expenses:
Asset management fees, related party 95,409 95,938 284,764 287,814
General and administrative (includes
reimbursements to affiliates of $104,186
and $100,157 in 1999 and 1998, respectively) 116,196 96,085 203,554 293,097
Bad debt 5,000 5,165 102,998 102,069
Provision for valuation of investment in Local
Limited Partnership - - 382,192 -
Property management fees 28,561 29,115 86,719 108,608
Rental operations, exclusive of depreciation 400,545 378,702 1,195,201 1,076,051
Interest 185,966 180,149 578,909 574,723
Depreciation 156,743 155,296 467,441 476,827
Amortization 27,669 44,569 111,933 133,129
------------ ------------- ------------ ------------
Total Expenses 1,016,089 985,019 3,413,711 3,052,318
------------ ------------- ------------ ------------
Income (loss) before equity in losses of Local
Limited Partnerships, minority interest and
loss on liquidation of interest in Local
Limited Partnership (254,090) 31,160 (1,330,770) (736,817)
Equity in losses of Local Limited Partnerships
(Note 1) (733,714) (570,195) (1,826,214) (2,129,535)
Minority interest in losses of Local Limited
Partnerships 2,581 2,415 6,971 68
Loss on liquidation of interest in Local Limited
Partnerships (Note 2) - - (193,883) -
------------ ------------- ------------ ------------
Loss before gain on transfer (985,223) (536,620) (3,343,896) (2,866,284)
Gain on transfer of assets - - - 640,183
------------ ------------- ------------ ------------
Net Loss $ (985,223) $ (536,620) $ (3,343,896) $ (2,226,101)
============ ============= ============ ============
Net Loss allocated:
To General Partners $ (9,852) $ (5,366) $ (33,439) $ (22,261)
To Limited Partners (975,371) (531,254) (3,310,457) (2,203,840)
------------ ------------- ------------ ------------
$ (985,223) $ (536,620) $ (3,343,896) $ (2,226,101)
============ ============= ============ ============
Net Loss before gain on transfer per
Limited Partnership Unit (100,000 Units) $ (9.75) $ (5.31) $ (33.10) $ (28.38)
============ ============= ============ ===========
Gain on transfer per Limited Partnership
Unit (100,000 Units) $ - $ - $ - $ 6.34
============ ============= ============ ============
Net Loss per Limited Partnership Unit
(100,000 Units) $ (9.75) $ (5.31) $ (33.10) $ (22.04)
============ ============= ============ ===========
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Nine Months Ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <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 - - - (2,496) (2,496)
Net Loss (33,439) - (3,310,457) - (3,343,896)
----------- --------- ------------ ----------- -------------
Comprehensive Loss (33,439) - (3,310,457) (2,496) (3,346,392)
----------- --------- ------------ ----------- -------------
Balance at December 31, 1999 $ (722,897) $ 5,000 $ 16,012,675 $ (2,259) $ 15,292,519
=========== ========= ============ =========== =============
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
For the Nine Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Net cash provided by (used for) operating activities $ (413,847) $ 230,130
Net cash provided by investing activities 321,462 178,096
Net cash provided by financing activities 75,561 12,937
--------------- --------------
Net increase (decrease) in cash and cash equivalents (16,824) 421,163
Cash and cash equivalents, beginning 440,365 311,867
--------------- --------------
Cash and cash equivalents, ending $ 423,541 $ 733,030
=============== ==============
Supplemental Disclosure:
Cash paid for interest $ 594,467 $ 594,508
=============== ==============
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 of the Local Limited Partnerships that is included in the
accompanying financial statements is as of September 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
December 31, 1999, excluding the Combined Entities:
<S> <C>
Capital contributions to Local Limited Partnerships and purchase
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 $50,213,158) (45,236,239)
Cumulative cash distributions received from Local Limited Partnerships (2,880,076)
-------------
Investments in Local Limited Partnerships before adjustment 11,303,319
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 5,335,849
Accumulated amortization of acquisition fees and expenses (1,368,484)
-------------
Investments in Local Limited Partnerships 15,270,684
Reserve for valuation of investments in Local Limited Partnerships (2,017,192)
-------------
$ 13,253,492
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
1. Investments in Local Limited Partnerships (continued)
The Partnership's share of the net losses of the Local Limited Partnerships,
excluding the Combined Entities, for the nine months ended December 31, 1999
totaled $5,132,253. For the nine months ended December 31, 1999, the Partnership
has not recognized $3,410,268 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 nine months ended December
31, 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 $ 122,742 $ 167,799 $ 133,000 $ 423,541
Marketable securities, at fair value 501,891 - - 501,891
Investments in Local Limited
Partnerships, net 15,168,793 - (1,915,301) 13,253,492
Accounts receivable, net - 111,773 - 111,773
Interest receivable 7,765 - - 7,765
Notes receivable 1,345,345 - (1,345,345) -
Prepaid expenses - 25,439 - 25,439
Tenant security deposits - 83,216 - 83,216
Replacement reserves - 214,366 - 214,366
Operating reserves - 41,285 - 41,285
Rental property at cost, net of
accumulated depreciation and reserve
for valuation - 12,028,957 760,500 12,789,457
Deferred expenses, net - 199,056 - 199,056
Other assets - 239,257 - 239,257
------------- ------------- ------------- -------------
Total Assets $ 17,146,536 $ 13,111,148 $ (2,367,146) $ 27,890,538
============= ============= ============= =============
Liabilities and Partners' Equity
Accounts payable to affiliates $ 2,251,824 $ 1,076,322 $ (1,068,486) $ 2,259,660
Accounts payable and accrued
expenses 288,711 84,834 - 373,545
Interest payable - 336,925 - 336,925
Note payable, affiliate 514,968 - - 514,968
Security deposits payable - 81,784 - 81,784
Advance from affiliate - 200,000 - 200,000
Mortgage notes payable - 9,296,726 (1,345,345) 7,951,381
------------- ------------- ------------- -------------
Total Liabilities 3,055,503 11,076,591 (2,413,831) 11,718,263
------------- ------------- ------------- -------------
Minority interest in Local
Limited Partnerships - - 879,756 879,756
------------- ------------- ------------- -------------
General, Initial and Investor Limited
Partners' Equity 14,093,292 2,034,557 (833,071) 15,294,778
Net unrealized losses on marketable
securities (2,259) - - (2,259)
------------- ------------- ------------- -------------
Total Partners' Equity 14,091,033 2,034,557 (833,071) 15,292,519
------------- ------------- ------------- -------------
Total Liabilities and
Partners' Equity $ 17,146,536 $ 13,111,148 $ (2,367,146) $ 27,890,538
============= ============= ============= =============
(A) As of December 31, 1999.
(B) As of September 30, 1999.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
Boston Financial
Qualified Housing Combined
Tax Credits Entities
L.P. III(A) (B) Eliminations Combined
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 1,831,776 $ - $ 1,831,776
Investment 29,380 7,289 - 36,669
Other 186,397 67,863 (39,764) 214,496
------------- ------------- ------------- -------------
Total Revenue 215,777 1,906,928 (39,764) 2,082,941
------------- ------------- ------------- -------------
Expenses:
Asset management fees, related party 284,764 - - 284,764
General and administrative 286,622 - (83,068) 203,554
Bad debt 1,250,848 - (1,147,850) 102,998
Provision for valuation of investment in
Local Limited Partnership 382,192 - - 382,192
Property management fees - 86,719 - 86,719
Rental operations, exclusive of depreciation - 1,165,769 29,432
1,195,201
Interest 4,500 614,173 (39,764) 578,909
Depreciation - 467,441 - 467,441
Amortization 91,573 20,360 - 111,933
------------- ------------- ------------- -------------
Total Expenses 2,300,499 2,354,462 (1,241,250) 3,413,711
------------- ------------- ------------- -------------
Loss before equity in losses of Local
Limited Partnerships, minority
interest and loss on liquidation of interest
in Local Limited Partnership (2,084,722) (447,534) 1,201,486 (1,330,770)
Equity in losses of Local Limited
Partnerships (2,266,777) - 440,563 (1,826,214)
Minority interest in losses of
Local Limited Partnerships - - 6,971 6,971
Loss on liquidation of interest in Local
Limited Partnership (193,883) - - (193,883)
------------- ------------- ------------- -------------
Net loss $ (4,545,382) $ (447,534) $ 1,649,020 $ (3,343,896)
============= ============= ============= =============
(A) For the nine months ended December 31, 1999.
(B) For the nine months ended September 30, 1999.
</TABLE>
<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
L.P. III (A) (B) Eliminations Combined
<S> <C> <C> <C> <C>
Net cash used for operating activities $ (153,348) $ (314,135) $ 53,636 $ (413,847)
Net cash provided by (used for)
investing activities (62,903) (16,117) 400,482 321,462
Net cash provided by financing activities - 396,679 (321,118) 75,561
------------- -------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents (216,251) 66,427 133,000 (16,824)
Cash and cash equivalents, beginning 338,993 101,372 - 440,365
------------- -------------- ------------- -------------
Cash and cash equivalents, ending $ 122,742 $ 167,799 $ 133,000 $ 423,541
============= ============== ============= =============
(A) For the nine months ended December 31, 1999.
(B) For the nine months ended September 30, 1999.
</TABLE>
<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
At December 31, 1999, the Partnership, including the Combined Entities, had cash
and cash equivalents of $423,541 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, as defined in the Partnership Agreement. 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 December 31, 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 $1,795,000 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 $974,000 (net of paydowns) to purchase the mortgage of a
Local Limited Partnership. To date, the Partnership has used approximately
$2,163,000 of operating funds to replenish Reserves. At December 31, 1999,
approximately $559,000 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. The
Partnership has advanced approximately $1,955,000 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 December 31, 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 nine months ended December 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
Results of Operations
For the nine months ended December 31, 1999, Partnership operations resulted in
a net loss of $3,343,896, as compared to a net loss of $2,226,101 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, depreciation, management fees and amortization expenses.
Property Discussions
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. 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 1999 tax year, depending upon the tax basis of the property.
As we previously reported, the Managing General Partner has been in negotiations
with the Local General Partner of 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 increased to 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. In addition, the Managing General Partner is working closely with the
Local General Partner to develop a plan that will ultimately transfer ownership
of the property. The plan includes provisions to minimize the risk of recapture.
Columbia Townhouses, located in Burlington, Iowa, has been experiencing
operating deficits due to increases in vacancy. As of December 31, 1999,
occupancy was 100%. The Local General Partner, the Managing General Partner and
the 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 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.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property Discussions (continued)
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 2000. 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
ODL's. 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.
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)
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K
(a)Exhibits - None
(b)Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended December 31, 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: February 11, 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>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 423,541
<SECURITIES> 501,891
<RECEIVABLES> 119,538<F1>
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 12,789,457
<DEPRECIATION> 000
<TOTAL-ASSETS> 27,890,538<F2>
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 15,292,519
<TOTAL-LIABILITY-AND-EQUITY> 27,890,538<F3>
<SALES> 000
<TOTAL-REVENUES> 2,082,941<F4>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 2,834,802<F5>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 578,909
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (3,343,896)<F6>
<EPS-BASIC> (33.10)
<EPS-DILUTED> 000
<FN>
<F1>Included in receivables: Accounts Receivable of $111,773 and Interest
receivable of $7,765. <F2>Included in Total assets: Prepaid expenses of $25,439,
Tenant security deposits of $83,216, Other assets of $239,257, Investments in
Local Limited Partnerships, net of $13,253,492, Operating reserves of $41,285,
replacement reserves of $214,366 and Deferred expenses, net of $199,056.
<F3>Included in Total Liabilities and Equity: Accounts payable to affiliates of
$2,259,660, Accounts payable and accrued expenses of $373,545, Interest payable
of $336,925, Notes payable, affiliate of $514,968, Security deposits payable of
$81,784, Advances from affiliates $200,000, Mortgage notes payable of $7,951,381
and Minority interest in Local Limited Partnerships of $879,756. <F4>Included in
Total revenue: Rental of $1,831,776, Investment of $36,669 and Other of
$214,496. <F5>Included in Other Expenses: Asset management fees of $284,764,
General and administrative of $203,554, Bad debt of $102,998, Property
management fees of $86,719, Rental operations, exclusive of depreciation of
$1,195,201, Depreciation of $467,441, Amortization of $111,933, and provision
for valuation of investment in Local Limited Partnership of $382,192.
<F6>Included in net loss: Equity in losses of Local Limited Partnerships of
$1,826,214, Loss on liquidation of interests in Local Limited Partnerships of
$193,883, and Minority interest in losses of Local Limited Partnerships of
$(6,971).
</FN>
</TABLE>
