June 29 , 2000
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC. 20549
Boston Financial Qualified Housing Tax Credits L.P. III
Form 10-KSB Annual Report for Year Ended March 31, 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
QH310K-K
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
---------------------------------
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
----------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
100,000
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Subsection 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
State the aggregate sales price of partnership units held by nonaffiliates of
the registrant.
$99,610,000 as of March 31, 2000
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-KSB INTO WHICH THE
DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS;
(2) ANY PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO
RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933.
Part of Report on
Form 10-KSB into
Which the Document
Documents incorporated by reference is Incorporated
Post-effective Amendment No. 1 to the Form S-11
Registration Statement, File # 33-24175 Part I, Item 1
Supplement No. 4 to the Prospectus, dated May 9, 1989 Part I, Item 1
Report on Form 8-K dated November 21, 1989 Part I, Item 1
Acquisition Reports Part I, Item 1
Prospectus - Sections Entitled:
"Investment Objectives and Policies -
Principal Investment Policies" Part I, Item 1
"Estimated Use of Proceeds" Part III, Item 12
"Management Compensation and Fees" Part III, Item 12
"Profits and Losses for Tax Purposes, Tax
Credits and Cash Distributions" Part III, Item 12
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(a Limited Partnership)
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I Page No.
Item 1 Business K-3
Item 2 Properties K-7
Item 3 Legal Proceedings K-19
Item 4 Submission of Matters to a
Vote of Security Holders K-19
PART II
Item 5 Market for the Registrant's Units
and Related Security Holder Matters K-19
Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations K-20
Item 7 Financial Statements and Supplementary Data K-24
Item 8 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure K-24
PART III
Item 9 Directors and Executive Officers
of the Registrant K-24
Item 10 Management Remuneration K-25
Item 11 Security Ownership of Certain Beneficial
Owners and Management K-26
Item 12 Certain Relationships and Related
Transactions K-26
PART IV
Item 13 Exhibits and Reports on Form 8-K K-29
SIGNATURES K-30
<PAGE>
PART I
Item 1. Business
Boston Financial Qualified Housing Tax Credits L.P. III (the "Partnership") is a
limited partnership formed on August 9, 1988 under the Uniform Limited
Partnership Act of the State of Delaware. The Certificate and Agreement of
Limited Partnership ("Partnership Agreement") authorized the sale of up to
100,000 units of Limited Partnership Interest ("Units") at $1,000 per Unit,
adjusted for certain discounts. The Partnership raised $99,610,000 ("Gross
Proceeds"), net of discounts of $390,000, through the sale of 100,000 Units.
Such amounts exclude five unregistered Units previously acquired for $5,000 by
the Initial Limited Partner, which is also one of the General Partners. The
offering of Units terminated on May 30, 1989. No further sale of Units is
expected.
The Partnership is engaged solely in the business of real estate investment.
Accordingly, a presentation of information about industry segments is not
applicable and would not be material to an understanding of the Partnership's
business taken as a whole.
The Partnership has invested as a limited partner in fifty-two other limited
partnerships ("Local Limited Partnerships") which own and operate residential
apartment complexes ("Properties"), some of which benefit from some form of
federal, state or local assistance programs and all of which qualify for the
low-income housing tax credits ("Tax Credits") that were added to the Internal
Revenue Code by the Tax Reform Act of 1986 (the "Code"). The investment
objectives of the Partnership include the following: (i) to provide current tax
benefits in the form of Tax Credits which qualified limited partners may use to
offset their federal income tax liability; (ii) to preserve and protect the
Partnership's capital; (iii) to provide limited cash distributions from property
operations which are not expected to constitute taxable income during the
expected duration of the Partnership's operations; and (iv) to provide cash
distributions from sale or refinancing transactions. There cannot be any
assurance that the Partnership will attain any or all of these investment
objectives. A more detailed discussion of these investment objectives, along
with the risks in achieving them, is contained in the section of the prospectus
entitled "Investment Objectives and Policies - Principal Investment Policies"
which is herein incorporated by this reference.
Table A on the following pages lists the Properties originally acquired by Local
Limited Partnerships in which the Partnership has invested. Item 6 of this
Report contains other significant information with respect to such Local Limited
Partnerships. As required by applicable rules, the terms of the acquisition of
Local Limited Partnership interests have been described in supplements to the
Prospectus and collected in one post-effective amendment to the Registration
Statement, in another supplement to the Prospectus and in a report on Form 8-K
listed in Part IV of this Report (collectively, the "Acquisition Reports"); such
descriptions are incorporated herein by this reference.
<PAGE>
<TABLE>
<CAPTION>
TABLE A
SELECTED LOCAL LIMITED
PARTNERSHIP DATA
(Unaudited)
Properties Owned by Date
Local Limited Interest
Partnerships Location Acquired
<S> <C> <C>
West Dade Miami, FL 12/31/88
West Dade II Miami, FL 12/31/88
Regency Square *** Dayton, OH 03/13/89
Westwood Manor Flint, MI 02/21/89
Rolling Hills *** Dayton, OH 03/13/89
Boulevard Commons II **** Chicago, IL 04/04/89
Boulevard Commons IIA Chicago, IL 04/04/89
Fox Run Housing Victoria, TX 04/07/89
Waterfront Buffalo, NY 04/28/89
Shoreline Buffalo, NY 04/28/89
Colony Apartments* Columbia, SC 05/19/89
Admiral Court Philadelphia, PA 06/07/89
Crestwood** Bridgeport, TX 06/05/89
Elmwood Aurora, CO 05/16/89
El Jardin Davie, FL 06/14/89
Ashley Place Orlando, FL 06/23/89
Willowick** Gainesville, TX 06/30/89
Kirkendall Heights Ellsworth, KS 07/19/89
Bentley Hill Syracuse, KS 06/30/89
Columbia Townhouses Burlington, IA 07/28/89
Quartermill Richmond, VA 08/02/89
Ponca Manor Satanta, KS 07/28/89
Pearl Place Rossville, KS 07/28/89
Crown Point** Venus, TX 08/22/89
Godley Arms** Godley, TX 08/25/89
Pilot Point** Pilot Point, TX 08/22/89
Sherwood Arms** Keene, TX 08/22/89
South Holyoke Holyoke, MA 08/29/89
Walker Woods Dover, DE 08/30/89
Lakeway Colony** Lake Dallas, TX 08/30/89
One Main Place** Little Elm, TX 08/22/89
Eaglewood Covington, TN 09/06/89
Harbour View* Staten Island, NY 09/29/89
Georgetown II Georgetown, DE 09/28/89
Granite* Boston, MA 09/29/89
Garden Plain Garden Plain, KS 08/09/89
Fulton Fulton, KY 10/05/89
Lone Oak** Graham, TX 10/06/89
Hallet West** Hallettsville, TX 11/20/89
<PAGE>
Properties Owned by Date
Local Limited Interest
Partnerships Location Acquired
Glenbrook** St. Jo, TX 10/06/89
Eagles Nest** Decatur, TN 10/06/89
Billings Family Billings, MO 08/09/89
Brownsville Brownsville, TN 08/09/89
Sunnyhill Villa Wayne, NE 08/09/89
Longview Humboldt, KS 10/13/89
Horseshoe Bend Horseshoe Bend, AR 08/09/89
Briarwood II Lake Havasua, AZ 10/04/89
Quail Run** Iowa Park, TX 10/06/89
Smithville Smithville, MO 08/09/89
Aurora East Denver, CO 11/06/89
Elver Park II Madison, WI 11/09/89
Elver Park III Madison, WI 11/09/89
Tucson Trails I Madison, WI 11/22/89
Tucson Trails II Madison, WI 11/23/89
Pleasant Plaza Malden, MA 12/01/89
241 Pine Street**** Manchester, NH 12/04/89
Heather Oaks Oak Grove, MO 11/24/89
Riverfront Sunbury, PA 12/26/89
Susquehanna View Camp Hill, PA 12/26/89
Breckenridge* Duluth, GA 12/19/89
Wood Creek Calcium, NY 12/15/89
Willow Lake* Kansas City, MO 12/20/89
Ashton Heights Bolivar, MO 12/15/89
Fouche Valley Perryville, AR 05/01/90
Altheimer Altheimer, AR 04/18/90
Kyle Hotel Temple, TX 06/12/90
Diversey Square Chicago, IL 12/01/90
Poplar Village Cumberland, KY 12/30/90
Lexington Lexington, TN 12/29/90
</TABLE>
* The Partnership's interest in profits and losses of each Local Limited
Partnership arising from normal operations is 99% with the exception of
five Local Limited Partnerships in which the Partnership acquired a 98%
interest (Willow Lake), 98% interest (Breckenridge), 97% interest
(Granite), 49% interest (Colony Apartments) and a 48.96% interest (Harbour
View). Profits and losses arising from sale or refinancing transactions
are allocated in accordance with the respective Local Limited Partnership
Agreements.
** The Managing General Partner transferred all of the assets of the
following Local Limited Partnerships, subject to their liabilities, to
unaffiliated entities. The transfer of Crown Point, Godley Arms, Glenbrook
Apartments, Quail Run Apartments, Sherwood Arms Housing, Lone Oak
Apartments, Hallet West Apartments, Crestwood Place, Eagle Nest
Apartments, One Main Place, Pilot Point Apartments, Lakeway Colony and
Willowick were effective February 21, 1996, February 21, 1996, June 7,
1996, July 3, 1996, November 26, 1996, August 6, 1997, September 23, 1997,
October 28, 1997, October 28, 1997, October 28, 1997, October 28, 1997,
October 30, 1997 and August 4, 1998, respectively.
*** The titles of Rolling Hills and Regency Square were transferred to the
lender. The transfers were effective May 2, 1997.
**** The interests in 241 Pine Street and Boulevard Commons II were transferred
to an unaffiliated entity. The transfers were effective January 1, 2000
and January 1, 1999, respectively.
<PAGE>
Although the Partnership's investments in Local Limited Partnerships are not
subject to seasonal fluctuations, the Partnership's equity in losses of Local
Limited Partnerships, to the extent they reflect the operations of individual
Properties, may vary from quarter to quarter based upon changes in occupancy and
operating expenses as a result of seasonal factors.
With the exception of The Temple Kyle, Breckenridge and Willow Lake, each Local
Limited Partnership has its general partners ("Local General Partners") one or
more individuals or entities not affiliated with the Partnership or its General
Partners. In accordance with the partnership agreements under which such
entities are organized ("Local Limited Partnership Agreements"), the Partnership
depends on the Local General Partners for the management of each Local Limited
Partnership. As of March 31, 2000, the following Local Limited Partnerships have
a common Local General Partner or affiliated group of Local General Partners
accounting for the specified percentage of the total capital contributions in
Local Limited Partnerships: (i) Ellsworth, Syracuse, Satanta, Rossville,
Longview, Smithville, Brownsville, Briarwood, Billings, Garden Plain, Wayne,
Horseshoe Bend, Bolivar, Oak Grove, Westgate and Altheimer, representing 2.46%,
have The Lockwood Group as Local General Partner; (ii) Elver Park II, Elver Park
III, Tucson Trails I and Tucson Trails II, representing 6.58%, have Gorman
Associates as Local General Partner; (iii) Riverfront Apartments and Susquehanna
View, representing 6.27%, have NCHP as Local General Partner; (iv) West Dade and
West Dade II, representing 6.83%, have Romat, Inc. and Arbor, Inc.,
respectively, both of which have Aristedes Martinez as principal, as Local
General Partner; (v) Elmwood and Fox Run, representing 4.06%, have Delwood
Ventures, Inc. and R.S.F. Ventures, Inc. as Local General Partners,
respectively, both of which have Raymond Baker as principal; (vi) Eaglewood,
Lexington and Fulton, representing 0.79%, have Tommy Harper, Jerry Blurt and
Chris Turskey as Local General Partners; and (vii) Waterfront and Shoreline,
representing 7.01%, have M.B. Associates as Local General Partner. The Local
General Partners of the remaining Local Limited Partnerships are identified in
the Acquisition Reports, which are incorporated herein by reference.
The Properties owned by Local Limited Partnerships in which the Partnership has
invested are and will continue to be subject to competition from existing and
future properties in the same areas. The continued success of the Partnership
will depend on many factors, most of which are beyond the control of the
Partnership and cannot be predicted at this time. Such factors include general
economic and real estate market conditions, both on a national basis and in
those areas where the Properties are located, the availability and cost of
borrowed funds, real estate tax rates, operating expenses, energy costs and
government regulations. In addition, other risks inherent in real estate
investment may influence the ultimate success of the Partnership, including: (i)
possible reduction in rental income due to an inability to maintain high
occupancy levels or adequate rental levels; (ii) possible adverse changes in
general economic conditions and adverse local conditions, such as competitive
overbuilding, a decrease in employment rates or adverse changes in real estate
laws, including building codes; and (iii) the possible future adoption of rent
control legislation which would not permit increased costs to be passed on to
the tenants in the form of rent increases or which would suppress the ability of
the Local Limited Partnership to generate operating cash flow. Since most of the
Properties benefit from some form of government assistance, the Partnership is
subject to the risks inherent in that area including decreased subsidies,
difficulties in finding suitable tenants and obtaining permission for rent
increases. In addition, any Tax Credits allocated to investors with respect to a
Property are subject to recapture to the extent that the Property or any portion
thereof ceases to qualify for the Tax Credits. Other future changes in federal
and state income tax laws affecting real estate ownership or limited
partnerships could have a material and adverse affect on the business of the
Partnership.
The Partnership is managed by Arch Street III, Inc., the Managing General
Partner of the Partnership. The other General Partner of the Partnership is Arch
Street III Limited Partnership. The Partnership, which does not have any
employees, reimburses Lend Lease Real Estate Investments, Inc. ("Lend Lease"),
an affiliate of the General Partners, for certain expenses and overhead costs. A
complete discussion of the management of the Partnership is set forth in Item 9
of this Report.
<PAGE>
Item 2. Properties
The Partnership owns limited partnership interests in fifty-two local Limited
Partnerships which own and operate Properties, some of which benefit from some
form of federal, state or local assistance programs and all of which qualify for
the Tax Credits added to the Code by the Tax Reform Act of 1986. The
Partnership's ownership interest in each Local Limited Partnership is 99%,
except for Willow Lake, Breckenridge, Granite, Colony Apartments and Harbour
View, where the Partnership's ownership interest is 98%, 98%, 97%, 49% and
48.96%, respectively.
Each of the Local Limited Partnerships has received an allocation of Tax Credits
from its relevant state tax credit agency. In general, the Tax Credit runs for
ten years from the date the Property is placed in service. The required holding
period (the "Compliance Period") of the Properties is fifteen years. During
these fifteen years, the Properties must satisfy rent restrictions, tenant
income limitations and other requirements, as promulgated by the Internal
Revenue Code, in order to maintain eligibility for the Tax Credit at all times
during the Compliance Period. Once a Local Limited Partnership has become
eligible for the Tax Credits, it may lose such eligibility and suffer an event
of recapture if its Property fails to remain in compliance with the
requirements.
In addition, some of the Local Limited Partnerships have obtained one or a
combination of different types of loans such as: i) below market rate interest
loans; ii) loans provided by a redevelopment agency of the town or city in which
the property is located at favorable terms; and iii) loans which have repayment
terms that are based on a percentage of cash flow.
The schedules on the following pages provide certain key information on the
Local Limited Partnership interests acquired by the Partnership.
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans payable
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
West Dade LTD, A Limited Partnership
West Dade
<S> <C> <C> <C> <C> <C> <C>
Miami, FL 122 $1,513,936 $1,513,936 $4,154,658 Section 8 100%
West Dade LTD II, A Limited Partnership
West Dade II
Miami, FL 209 3,039,442 3,039,442 8,220,237 Section 8 100%
Westwood Manor Limited Dividend
Housing Association L.P.
Westwood Manor
Flint, MI 144 1,165,925 1,165,925 3,156,226 Section 8 94%
Rolling Hills Associates L.P. (B)
Rolling Hills
Dayton, OH
Regency Square Limited Partnership (B)
Regency Square
Dayton, OH
Shoreline Limited Partnership
Shoreline
Buffalo, NY 142 1,079,318 1,079,318 7,429,995 None 79%
Waterfront Limited Partnership
Waterfront
Buffalo, NY 472 3,597,307 3,597,307 26,550,861 None 70%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Fox Run Housing
Fox Run
Victoria, TX 150 1,605,775 1,605,775 4,179,638 Section 8 93%
Boulevard Commons Limited
Partnership II (C)
Boulevard Commons II
Chicago, IL
The Colony Apartments, L.P.
A Limited Partnership
Colony Apartments
Columbia, SC 300 1,762,500 1,762,500 8,497,396 Section 8 96%
Boulevard Commons Limited
Partnership IIA
Boulevard Commons IIA
Chicago, IL 42 1,179,812 1,179,812 1,486,625 Section 8 41%
Ashley Place, LTD
A Florida Limited Partnership
Ashley Place
Orlando, FL 96 2,002,560 2,002,560 2,889,604 None 96%
Admiral Housing Limited Partnership
Admiral Court
Philadelphia, PA 46 1,900,000 1,900,000 2,686,503 Section 8 96%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 of March 31, 2000
Subsidy*
------------------------------------------------------------------------------------------------------------------------------------
Prarieland Property of Syracuse, L.P.
Bentley Hill
Syracuse, KS 8 52,150 52,150 239,872 FmHA 100%
El Jardin of Davie, Ltd.
El Jardin
Davie, FL 236 2,022,100 2,022,100 6,767,068 Section 8 99%
EDM Housing Associates LTD
A Limited Partnership
Elmwood Delmar
Aurora, CO 95 1,102,025 1,102,025 3,206,293 Section 8 96%
Bridgeport Housing Associates, LTD (A)
Crestwood
Bridgeport, TX
Willowick Housing Associates, LTD (A)
Willowick
Gainesville, FL
Ellsworth Senior Housing, L.P.
Kirkendall Heights
Ellsworth, KS 12 69,658 69,658 326,881 FmHA 91%
Prairieland Properties of Satanta, L.P.
Ponca Manor
Satanta, KS 8 49,915 49,915 222,874 FmHA 100%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 of March 31, 2000
Subsidy*
-----------------------------------------------------------------------------------------------------------------------------------
Rossville Senior Housing L.P.
Pearl Place
Rossville, KS 10 58,855 58,855 278,006 FmHA 90%
Columbia Townhouse Associates, L.P.
Columbia Townhouses
Burlington, IA 56 837,450 837,450 702,952 Section 8 90%
Quartermill Associates, L.P.
A Virginia Limited Partnership
Quartermill
Richmond, VA 266 7,705,500 7,705,500 7,076,993 None 97%
One Main Place Housing
Associates, LTD (A)
One Main Place
Little Elm, TX
Pilot Point Housing Associates, LTD (A)
Pilot Point
Pilot Point, TX
Sherwood Arms Housing
Associates, LTD (A)
Sherwood Arms
Keene, TX
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Crown Point Housing
Associates, LTD (A)
A Texas Limited Partnership
Crown Point
Venus, TX
Godley Arms Housing
Associates, LTD (A)
Godley Arms
Godley, TX
South Holyoke Limited Partnership
South Holyoke
Holyoke, MA 48 1,119,330 1,119,330 2,596,058 None 98%
Harbour View
A Limited Partnership
Harbour View
Staten Island, NY 122 1,350,000 1,350,000 10,777,440 None 97%
Walker Woods Partners, L.P.
Walker Woods
Dover, DE 51 1,452,380 1,452,380 2,628,061 None 94%
Boston Financial Texas Properties
Limited Partnership III (A)
Lakeway Colony
Lake Dallas, TX
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Eaglewood VIII, L.P.
A Limited Partnership
Eaglewood
Covington, TN 40 255,000 255,000 1,111,271 FmHA 100%
Georgetown Associates II, L.P.
Georgetown II
Georgetown, DE 50 1,200,000 1,200,000 1,711,401 None 98%
Blue Mountain Associates, L.P.
A Massachusetts Limited Partnership
Granite V
Boston, MA 217 5,774,113 5,774,113 9,602,081 Section 8 97%
Garden Plain Senior Apts., LTD
Garden Plain
Garden Plain, KS 12 70,030 70,030 302,192 FmHA 91%
Fulton Associates I, L.P.
A Limited Partnership
Fulton
Fulton, KY 24 180,000 180,000 796,088 FmHA 100%
Lone Oak Housing Associates, LTD (A)
Lone Oak
Graham, TX
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
West Hallettsville Housing
Associates, LTD(A)
Hallet-West
Hallettsville, TX
Glenbrook Housing Associates, LTD (A)
Glenbrook
St. Jo, TX
Eagles Nest Housing
Associates, LTD(A)
Eagles Nest
Decatur, TX
Billings Family Housing, L.P.
Cedar Tree
Billings, MO 12 58,855 58,855 281,728 FmHA 100%
Brownsville Associates, L.P.
Brownsville
Brownsville, TN 28 161,665 161,665 782,007 FmHA 97%
Wayne Senior Housing, L.P.
Sunnyhill Villa
Wayne, NE 15 81,205 81,205 426,664 FmHA 93%
Longview Apartments, L.P.
Longview
Humbolt, KS 14 91,635 91,635 397,069 FmHA 71%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Horseshoe Bend Associates I, L.P.
Horseshoe Bend
Horseshoe Bend, AR 24 143,785 143,785 645,881 FmHA 88%
Briarwood Associates II, L.P.
Briarwood II
Lake Havasua, AZ 32 219,030 219,030 1,105,844 FmHA 100%
North Quail Run Housing
Associates, LTD (A)
Quail Run
Iowa Park, TX
Smithville Rural Housing
A Limited Partnership
Smithville
Smithville, MO 24 108,025 108,025 541,449 FmHA 92%
Aurora Properties, LTD.
A Limited Partnership
Aurora East Apartments
Denver, CO 125 765,000 765,000 4,071,411 Section 8 98%
Elver Park Limited Partnership II
Elver Park II
Madison, WI 56 1,246,385 1,246,385 1,668,019 None 100%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
-----------------------------------------------------------------------------------------------------------------------------------
Elver Park Limited Partnership III
Elver Park III
Madison, WI 48 1,047,470 1,047,470 1,420,773 None 100%
Tuscon Trails Limited Partnership I
Tuscon Trails I
Madison, WI 48 1,047,470 1,047,470 1,391,193 None 98%
Tuscon Trails Limited Partnership II
Tuscon Trails II
Madison, WI 48 1,047,470 1,047,470 1,397,756 None 98%
Pleasant Plaza Housing L.P.
Pleasant Plaza
Malden, MA 125 3,340,138 3,340,138 17,466,812 Section 8 99%
241 Pine Street Associates, L.P. (C)
241 Pine Street
Manchester, NH
Missouri Rural Housing of
Oak Grove, L.P.
Heather Oaks
Oak Grove, MO 24 118,828 118,828 560,746 FmHA 88%
Wood Creek Associates
A New York Limited Partnership
Wood Creek
Calcium, NY 104 1,850,000 1,850,000 3,096,957 None 75%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Breckenridge Creste Apartments, L.P.
Breckenridge
Duluth, GA 164 3,520,000 3,520,000 4,649,015 None 90%
Willow Lake Partners II, L.P.
A Limited Partnership
Willow Lake
Kansas City, MO 132 2,130,700 2,130,700 2,673,765 None 95%
Bolivar Senior Housing, L.P.
Ashton Heights
Bolivar, MO 20 95,360 95,360 465,517 FmHA 100%
Lexington Associates I L.P.
A Limited Partnership
Lexington Civic 24 95,000 95,000 813,500 FmHA 100%
Lexington, TN
Riverfront Apartments, L.P.
Riverfront
Sunbury, PA 200 1,984,908 1,984,908 7,029,400 Section 8 98%
Susquehanna View L.P.
Susquehanna View
Camp Hill, PA 201 2,194,314 2,194,314 8,853,242 Section 8 100%
Westgate Associates I, L.P.
Fouche Valley
Perryville, AR 20 131,865 131,865 637,512 FmHA 80%
<PAGE>
Capital Contributions
Local Limited Partnership Total Total Mtge. Loans
Property Name Number of Committed at March Paid through March payable at Type of Occupancy at
Property Location Apt. Units 31, 2000 31, 2000 December 31, 1999 Subsidy* March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Altheimer Associates I, L.P.
Altheimer
Altheimer, AR 20 130,375 130,375 595,770 FmHA 100%
The Temple-Kyle L.P.
Kyle Hotel
Temple, TX 64 1,624,100 1,624,100 0 Section 8 99%
Diversey Square Associates II
Diversey Square II
Chicago, IL 48 1,031,825 1,031,825 2,558,542 Section 8 100%
Poplar Village, LTD
Poplar Village
Cumberland, KY 36 283,945 283,945 1,197,577 None 100%
------ ------------- ------------ ---------------
4,634 $ 66,694,434 $ 66,694,434 $ 182,325,423
====== ============= ============ ===============
</TABLE>
*FmHA This subsidy, which is authorized under Section 515 of the Housing
Act of 1949, can be one or a combination of different types of
financing. For instance, FmHA may provide: 1) direct below-market-
rate mortgage loans for rural rental housing; 2) mortgage interest
subsidies which effectively lower the interest rate of the loan to
1%; 3) a rental assistance subsidy to tenants which allows them to
pay no more than 30% of their monthly income as rent with the balance
paid by the federal government; or 4) a combination of any of the
above.
Section 8 This subsidy, which is authorized under Section 8 of Title II of
the Housing and Community Development Act of 1974, allows qualified
low- income tenants to pay 30% of their monthly income as rent with
the balance paid by the federal government.
(A) During 1996, 1997 and 1998, the Managing General Partner transferred
all of the assets of these Local Limited Partnerships subject to
their liabilities. These Local Limited Partnerships had total
capital contributions and mortgage payable amounts of $1,580,498 and
$6,516,496, respectively, as of the transfer dates.
(B) Effective May 2, 1997, the titles of Rolling Hills and Regency
Square were transferred to the lender. These Local Limited
Partnerships had capital contributions and mortgage payable amounts
of $5,655,000 and $6,409,457, respectively as of the transfer date.
(C) Effective January 1, 2000 and January 1, 1999, the Managing General
Partner transferred the interest in 241 Pine Street and Boulevard
Commons II, respectively to an unaffiliated entity. This Partnership
had total capital contributions and mortgage payable amounts of
$1,891,473 and $1,061,156, respectively as of the transfer dates.
<PAGE>
One Local Limited Partnership, Quarter Mill Associates L.P., invested in by the
Partnership represents more than 10% of the total capital contributions to be
made to Local Limited Partnerships by the Partnership. Quarter Mill is a
266-unit apartment complex located in Richmond, Virginia.
Quarter Mill is financed by a combination of private and public sources. The
first mortgage is at 8.75% interest, has a 40-year term and is insured by HUD.
The apartment project is pledged as collateral for the note. In addition to the
first mortgage, there is a subordinated nonrecourse note that is payable each
year only to the extent of 30% of the property's net cash flow, as defined by
the note agreement.
Duration of leases for occupancy in the Properties described above is six to
twelve months. The Managing General Partner believes the described herein are
adequately covered by insurance.
Additional information required under this item, as it pertains to the
Partnership, is contained in Items 1, 6 and 7 of this report.
Item 3. Legal Proceedings
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.
Except as noted above, the Partnership is not a party to any pending legal or
administrative proceeding, and to the best of its knowledge, no legal or
administrative proceeding is threatened or contemplated against it.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
There is no public market for the Units, and it is not expected that a public
market will develop. If a Limited Partner desires to sell Units, the buyer of
those Units will be required to comply with the minimum purchase and retention
requirements and investor suitability standards imposed by applicable federal or
state securities laws and the minimum purchase and retention requirements
imposed by the Partnership. The price to be paid for the Units, as well as the
commissions to be received by any participating broker-dealers, will be subject
to negotiation by the Limited Partner seeking to sell his Units. Units will not
be redeemed or repurchased by the Partnership.
The Partnership Agreement does not impose on the Partnership or its General
Partners any obligation to obtain periodic appraisals of assets or to provide
Limited Partners with any estimates of the current value of Units.
As of June 15, 2000, there were 5,876 record holders of Units of the
Partnership.
Cash distributions, when made, are paid annually. No cash distribution was paid
in the years ended March 31, 2000 and 1999.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements, and are including this
statement for purposes of complying with these safe harbor provisions. Although
the Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions and interest rates.
Liquidity and Capital Resources
The Partnership had a decrease in cash and cash equivalents of $166,200 for the
year ended March 31, 2000. This decrease is attributable to purchases of
marketable securities, advances to affiliates, investment in a Local Limited
Partnership 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%. 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 $1,800,000 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 $950,000 (net of
paydowns) to purchase the mortgage of a Local Limited Partnership. To date, the
Partnership has used approximately $2,120,000 of operating funds to replenish
Reserves. At March 31, 2000, approximately $480,000 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 March 31, 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 in the years ended March 31, 2000 or 1999. It is
not expected that cash available for distribution, if any, will be significant
during the 2000 calendar year. Based on the results of 1999 operations, the
Local Limited Partnerships are not expected to distribute significant amounts of
cash to the Partnership because such amounts will be needed to fund Property
operating costs. In addition, many of the Properties benefit from some type of
federal or state subsidy and, as a consequence, are subject to restrictions on
cash distributions.
Results of Operations
2000 versus 1999
For the year ended March 31, 2000, Partnership operations resulted in a net loss
of $6,671,150 as compared to a net loss of $5,441,237 for the same period in
1999. The increase in net loss is primarily attributable to an increase in
provision for valuation of investment in Local Limited Partnership related to
the reserve of Boulevard Commons IIA, an increase in provision for valuation of
investments in Local Limited Partnerships caused by the write-off of
uncollectable advances made to Local Limited Partnerships, a decrease in other
revenue, an increase in loss on liquidation of interests in Local Limited
Partnerships due to the transfer of 241 Pine Street and Boulevard Commons II and
a decrease in equity in losses of Local Limited Partnerships. The decrease in
equity in losses of Local Limited Partnerships is due to an increase in losses
not recognized by the Partnership for Local Limited Partnerships whose
cumulative equity in losses and cumulative distributions exceed its total
investment in those partnerships.
Low-Income Housing Tax Credits
The 1999 and 1998 Tax Credits per Unit for individuals were $92.39 and $125.55,
respectively. The 1999 and 1998 Tax Credits per Unit for corporations were
$97.35 and $131.03, respectively. The credits, which have stabilized, are
expected to remain stable for the next year, and then they are expected to
decrease as certain properties reach the end of the ten year credit period.
However, because the compliance periods extend significantly beyond the tax
credit periods, the Partnership is expected to retain most of its interest in
the Local Limited Partnerships for the foreseeable future.
The Tax Credits per Unit for corporate investors will be slightly higher for the
remaining years of the credit period than that for individual investors because
certain of the Properties took advantage of 1990 federal legislation that
allowed the acceleration of future tax credits to individuals in the tax year
ended December 31, 1990. For those Properties that elected to accelerate the
individual credit, the accelerated portion is being amortized over the remainder
of the credit period, thereby causing a reduction of this and future year's tax
credits passed through by those Properties. In total, both individual and
corporate investors will be allocated equal amounts of Tax Credits.
Property Discussions
Boulevard Commons II and IIA, which are located in Chicago, Illinois, and have
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 remaining interest in Boulevard Commons II.
The redemption of the Partnership's interest avoided a possible recapture event.
However, the redemption did 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. During 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 occupancy turnovers. However, as of March 31, 2000,
occupancy was 90%. 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. During the year ended March 31, 2000, the Partnership fully
reserved its investment in Breckenridge Crest because it was determined that its
investment had a net realizable value of zero.
Columbia Townhouses, located in Burlington, Iowa, has been experiencing
operating deficits due to consistent increases in vacancy. As of March 31, 2000,
occupancy was 90%. The Local General Partner, the 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 access to a contemplated
Walgreens development. For tax purposes, the taking of one building by eminent
domain resulted in both Section 1231 Gain and cancellation of indebtedness
income for the 1999 tax year. In addition, there was a 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. For financial statement purposes, $806,414 of
equity in income was recognized for this property in 1999.
241 Pine Street, located in Manchester, New Hampshire has been experencing
operating deficits. 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. Effective January 1,
2000, the Partnership transferred its interest in 241 Pine Street. The
redemption of the Partnership's interest will cause investors to have minimal
taxable gain or loss for the 2000 tax year, depending upon the basis of the
property.
As previously reported, Harbour View, located in Staten Island, New York, had
defaulted on its HUD-insured loan. Subsequently, the lender assigned the loan to
HUD. In December 1996, the mortgage was sold at auction to an unaffiliated
institutional buyer. The Managing General Partner and Local General Partner
continue to participate in workout discussions with the new lender. The
Partnership's ability to retain its interest in the property will depend on the
ability of the Local General Partner and Partnership affiliates to negotiate a
satisfactory workout agreement with the new lender. 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 March 31, 2000, was 97%.
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. In
addition, 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.
The Partnership has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. The investments are
analyzed by real estate experts 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.
Inflation and Other Economic Factors
Inflation had no material impact on the Partnership's operations or financial
condition for the years ended March 31, 2000 and 1999.
As some Properties benefit from some form of government assistance, the
Partnership is subject to the risks inherent in that area including decreased
subsidies, difficulties in finding suitable tenants and obtaining permission for
rent increases. In addition, the Tax Credits allocated to investors with respect
to a Property are subject to recapture to the extent that a Property or any
portion thereof ceases to qualify for Tax Credits.
Some of the Properties listed in this report are located in areas suffering from
poor economic conditions. Such conditions could have an adverse effect on the
rent or occupancy levels at such Properties. Nevertheless, the Managing General
Partner believes that the generally high demand for below market rate housing
will tend to negate such factors. However, no assurance can be given in this
regard.
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, acquired The Boston Financial
Group Limited Partnership ("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).
Item 7. Financial Statements and Supplementary Data
Information required under this Item is submitted as a separate section of this
Report. See Index on page F-1 hereof.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors and Executive Officers of the Registrant
The Managing General Partner of the Partnership is Arch Street III, Inc., a
Massachusetts corporation (the "Managing General Partner" or "Arch Street III,
Inc."), an affiliate of Lend Lease Estate Investments, Inc. ("Lend Lease"). The
Managing General Partner was incorporated in August 1988. Randolph G. Hawthorne
is the Chief Operating Officer of the Managing General Partner and had the
primary responsibility for evaluating, selecting and negotiating investments for
the Partnership. The Investment Committee of the Managing General Partner
approved all investments. The names and positions of the principal officers and
the directors of the Managing General Partner are set forth below.
Name Position
Jenny Netzer President, Managing Director
Michael H. Gladstone Vice President, Managing Director
Randolph G. Hawthorne Vice President, Managing Director
Paul F. Coughlan Vice President
William E. Haynsworth Vice President
The other General Partner of the Partnership is Arch Street III Limited
Partnership, a Massachusetts limited partnership ("Arch Street III L.P.") that
was organized in August 1988. The General Partner of Arch Street III L.P. is
Arch Street III, Inc.
The Managing General Partner provides day-to-day management of the Partnership.
Compensation is discussed in Item 10 of this report. Such day-to-day management
does not include the management of the Properties.
The business experience of each of the persons listed above is described below.
There is no family relationship between any of the persons listed in this
section.
Jenny Netzer, age 44, Principal, Head of Housing and Community Investing -
Responsible for tax credit investment programs to institutional clients. Joined
Lend Lease through its 1999 acquisition of Boston Financial, started with Boston
Financial in 1987. Previously, led Boston Financial's new business initiatives
and managed firm's Asset Management division, responsible for performance of 750
properties and providing service to 35,000 investors. Prior to joining Boston
Financial, served as Deputy Budget Director for Commonwealth of Massachusetts,
responsible for Commonwealth's health care and public pension program's budgets,
served as Assistant Controller at Yale University and former member of Watertown
Zoning Board of Appeals Officer of Affordable Housing Tax Credit Coalition and
frequent speaker on affordable housing and tax credit industry issues, BA
Harvard University; Master's in Public Policy Harvard's Kennedy School of
Government.
Michael H. Gladstone, age 43, Principal, Legal - Responsible for legal work in
the areas of affordable and conventional housing and investment products and
services. Joined Lend Lease through its 1999 acquisition of Boston Financial,
started with Boston Financial in 1985; served as firm's General Counsel. Prior
to joining Boston Financial, associated with law firm of Herrick & Smith, served
on advisory board of Housing and Development Reporter. Lectured at Harvard
University on affordable housing matters, Member, The National Realty Committee,
Cornell Real Estate Council, National Association of Real Estate Investment
Managers and Massachusetts Bar, BA Emory University; JD & MBA Cornell
University.
Randolph G. Hawthorne, age 50, Principal, Housing and Community Investing -
Responsible for structuring and acquiring real estate investments. Joined Lend
Lease through its 1999 acquisition of Boston Financial, started with Boston
Financial in 1973. Previously, served as Boston Financial's Treasurer, Past
Chairman of the Board of the National Multi Housing Council, having served on
the board since 1989, Past President of the National Housing and Rehabilitation
Association, Member, Multifamily Council of the Urban Land Institute, Frequent
speaker at industry conferences. Serves on the Editorial Advisory Boards of the
Tax Credit Advisor and Multi-Housing News, BS Massachusetts Institute of
Technology; MBA Harvard Graduate School of Business. Board of Directors National
Housing Conference. Graduated MIT 1971, HBS 1973.
Paul F. Coughlan, age 56, Principal, Housing and Community Investing -
Responsible for marketing and sales of institutional tax credit investments.
Joined Lend Lease through its 1999 acquisition of Boston Financial, started with
Boston Financial in 1975. Previously, served as sales manager for Boston
Financial's retail tax credit fund, AB Brown University.
William E. Haynsworth, age 60, Principal, Housing and Community Investing -
Responsible for the structuring of real estate investments and the acquisition
of property interests. Joined Lend Lease through its 1999 acquisition of Boston
Financial, started with Boston Financial in 1977. Prior to joining Boston
Financial, Acting Executive Director and General Counsel of the Massachusetts
Housing Finance Agency. Served as Director of Non-Residential Development of the
Boston Redevelopment Authority and Associate of Goodwin, Proctor & Hoar, Past
President and current Chairman of the Board of Directors of Affordable Housing
Tax Credit Coalition, BA Dartmouth College; LLB and LLM Harvard Law School.
Item 10. Management Remuneration
Neither the directors nor officers of Arch Street III, Inc., the partners of
Arch Street III L.P. nor any other individual with significant involvement in
the business of the Partnership receives any current or proposed remuneration
from the Partnership.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of March 31, 2000, the following is the only entity known to the Partnership
to be the beneficial owner of more than 5% of the total number of Units
outstanding:
Amount
Title of Name and Address of Beneficially Percent
Class Beneficial Owner Owned of Class
Limited AMP, Incorporated 10,000 Units 10%
Partner P.O. Box 3608
Harrisburg, PA
The equity securities registered by the Partnership under Section 12(g) of the
Act consist of 100,000 Units, all of which have been sold to the public as of
March 31, 2000. Holders of Units are permitted to vote on matters affecting the
Partnership only in certain unusual circumstances and do not generally have the
right to vote on the operation or management of the Partnership.
Arch Street III L.P. owns five (unregistered) Units not included in the 100,000
units sold to the public.
Except as described in the preceding paragraph, neither Arch Street III, Inc.,
Arch Street III L.P., Lend Lease nor any of their executive officers, directors,
partners or affiliates is the beneficial owner of any Units. None of the
foregoing persons possesses a right to acquire beneficial ownership of Units.
The Partnership does not know of any existing arrangement that might at a later
date result in a change in control of the Partnership.
Item 12. Certain Relationships and Related Transactions
The Partnership was required to pay certain fees to and reimburse certain
expenses of the Managing General Partner or its affiliates in connection with
the organization of the Partnership and the offering of Units. The Partnership
was also required to pay certain fees to and reimburse certain expenses of the
Managing General Partner or its affiliates in connection with the administration
of the Partnership and its acquisition and disposition of investments in Local
Limited Partnerships. In addition, the General Partners are entitled to certain
Partnership distributions under the terms of the Partnership Agreement. Also, an
affiliate of the General Partners will receive up to $10,000 from the sale or
refinancing proceeds of each Local Limited Partnership, if it is still a limited
partner at the time of such transaction. All such fees and distributions are
more fully described in the sections entitled "Estimated Use of Proceeds",
"Management Compensation and Fees" and "Profits and Losses for Tax Purposes, Tax
Credits and Cash Distributions" of the Prospectus. Such sections are
incorporated herein by reference. In addition, an affiliate of the Managing
General Partner serves as property management agent for Willow Lake, The Kyle,
Breckenridge and Westwood Manor.
The Partnership is permitted to enter into transactions involving affiliates of
the Managing General Partner, subject to certain limitations established in the
Partnership Agreement.
Information regarding the fees paid and expense reimbursements made in the two
years ended March 31, 2000 is presented below.
Organizational fees and expenses
In accordance with the Partnership Agreement, affiliates of the General Partners
were to be reimbursed by the Partnership for organizational, offering and
selling expenses advanced on behalf of the Partnership by its affiliates and for
salaries and direct expenses of certain employees of the Managing General
Partner and its affiliates in connection with the registration and organization
of the Partnership. Such expenses include printing expenses and legal,
accounting, escrow agent and depository fees and expenses. Such expenses also
include a non-accountable expense allowance for marketing expenses equal to 1%
of gross offering proceeds. $11,832,395 of organization fees and expenses and
selling expenses incurred on behalf of the Partnership were paid and reimbursed
to an affiliate of the Managing General Partner. Total organization and offering
expenses did not exceed 5.5% of the gross offering proceeds.
There were no organization fees and offering expenses paid in the two years
ended March 31, 2000.
Acquisition fees and expenses
In accordance with the Partnership Agreement, the Partnership is required to pay
acquisition fees to and reimburse acquisition expenses of the Managing General
Partner or its affiliates for selecting, evaluating, structuring, negotiating
and closing the Partnership's investments in Local Limited Partnerships.
Acquisition fees totaled 7.5% of the gross offering proceeds. Acquisition
expenses, which include such expenses as legal fees and expenses, travel and
communications expenses, costs of appraisals, accounting fees and expenses did
not exceed 2% of the gross offering proceeds. Acquisition fees totaling
$7,500,000 for the closing of the Partnership's Local Limited Partnership
Investments have been paid to an affiliate of the Managing General Partner.
Acquisition expenses totaling $1,587,834 were incurred and have been reimbursed
to an affiliate of the Managing General Partner. There were no acquisition fees
or expenses paid in the two years ended March 31, 2000.
In accordance with the Partnership Agreement, 15% of the acquisition fees
payable to an affiliate of the Managing General Partner is the "Deferred
Acquisition Fees". The Deferred Acquisition Fees were deposited in an interest
bearing account and were paid annually, with interest, at the rate of 10% per
year over 10 years. Installments began on the second anniversary of the
Prospectus, November 23, 1990. As of March 31, 2000, all deferred acquisition
fees have been paid. $112,500 of Deferred Acquisition Fees were paid in each of
the two years ended March 31, 2000.
Asset Management Fees
In accordance with the Partnership Agreement, an affiliate of the Managing
General Partner is paid an annual fee for services in connection with the
administration of the affairs of the Partnership. The affiliate currently
receives $7,241 (as adjusted by the CPI factor) per Local Limited Partnership
annually as the Asset Management Fee. Asset Management Fees incurred in each of
the two years ended March 31, 2000 are as follows:
2000 1999
-------------- ---------
Asset Management Fees $ 382,512 $ 385,702
Salaries and benefits expense reimbursements
An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries and benefits expenses. The reimbursements are based upon
the size and complexity of the Partnership's operations. Reimbursements paid or
payable in each of the two years ended March 31, 2000 are as follows:
2000 1999
----------- -------
Salaries and benefits expense
reimbursements $ 142,324 $ 140,069
Property Management Fees
Affiliates of the Managing General Partners are management agents for four Local
Limited Partnerships. Fees charged in each of the two years ended December 31,
1999 are as follows:
1999 1998
----------- -------
Property Management Fees $ 150,066 $ 154,952
Cash distributions paid to the General Partners
In accordance with the Partnership Agreement, the General Partners of the
Partnership, Arch Street III, Inc. and Arch Street III Limited Partnership,
receive 1% of cash distributions paid to partners. No cash distributions were
paid to the General Partners in the two years ended March 31, 2000.
Additional information concerning cash distributions and other fees paid or
payable to the Managing General Partner and its affiliates and the reimbursement
of expenses paid or payable to Lend Lease and its affiliates for the years ended
March 31, 2000 is presented in Note 5 to the Financial Statements.
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) (1) and (a) (2) Documents filed as a part of this Report.
In response to this portion of Item 13, the financial statements and the
auditors' report relating thereto are submitted as a separate section of this
Report. See Index to the Financial Statements on page F-1 hereof.
The reports of auditors of the Local Limited Partnerships relating to the audits
of the financial statements of such Local Limited Partnerships appear in Exhibit
28.1 of this report.
All other financial statement schedules and exhibits for which provision is made
in the applicable accounting regulations of the Securities and Exchange
Commission are not required under related instructions or are inapplicable and
therefore have been omitted.
(a)(3) See Exhibit Index contained herein.
(a)(3)(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the year ended March 31,
2000.
(a)(3)(c) Exhibits
Number and Description in Accordance with
Item 601 of Regulation S-K
18. Letter on Change in Accounting Principle
27. Financial Data Schedule
28. Additional Exhibits
(a) 28.1 Reports of Other Independent Auditors
(a)(3)(d) None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
By: Arch Street III, Inc.
its Managing General Partner
By: /s/Randolph G. Hawthorne Date: June 29 , 2000
------------------------------ --------------
Randolph G. Hawthorne,
Managing Director, Vice President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Managing General
Partner of the Partnership and in the capacities and on the dates indicated:
By: /s/Randolph G. Hawthorne Date: June 29 , 2000
------------------------------ ----------------
Randolph G. Hawthorne,
Managing Director, Vice President and
Chief Operating Officer
By: /s/Michael H. Gladstone Date: June 29, 2000
--------------------------------- ------------------
Michael H. Gladstone
Managing Director, Vice President
<PAGE>
Item 8. Financial Statements and Supplementary Data
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
Annual Report on Form 10-KSB
For the Year Ended March 31, 2000
Index
Page No.
------------
Report of Independent Accountants
For the years ended March 31, 2000 and 1999 F-2
Financial Statements
Balance Sheet - March 31, 2000 F-3
Statements of Operations - For the Years Ended
March 31, 2000 and 1999 F-4
Statements of Changes in Partners' Equity
(Deficiency) - For the Years Ended March 31, 2000 and 1999 F-5
Statements of Cash Flows - For the Years Ended
March 31, 2000 and 1999 F-6
Notes to the Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. III
(A Limited Partnership):
In our opinion, based on our audits and the reports of other auditors, the
financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of Boston Financial Qualified Housing
Tax Credits L.P. III (the "Partnership") at March 31, 2000 and the results of
its operations and its cash flows for each of the two years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements of certain local limited partnerships for which $49,183,552 of
cumulative equity in losses are included in the balance sheet as of March 31,
2000 and for which net losses of $2,217,700 and $5,052,573, are included in the
accompanying financial statements for the years ended March 31, 2000 and 1999,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for the Local Limited Partnerships, is
based solely on the reports of the other auditors. We conducted our audits
of these financial statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits and the reports of other auditors provide a reasonable
basis for the opinions expressed above.
As discussed in Note 2 to the financial statements, in 2000 the Partnership
changed the basis of presentation of its financial statements from a combined
basis to a stand-alone basis. The 1999 financial statements have been restated
to show the effects of this change in reporting entity.
/S/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
June 22, 2000
Boston, Massachusetts
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
BALANCE SHEET
March 31, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 172,793
Marketable securities, at fair value (Note 3) 403,235
Investments in Local Limited Partnerships, net (Note 4) 13,498,237
Interest receivable 7,350
Note receivable (Note 7) 1,345,345
-------------
Total Assets $ 15,426,960
=============
Liabilities and Partners' Equity
Accounts payable to affiliates (Note 5) $ 2,371,098
Accounts payable and accrued expenses 310,379
Note payable, affiliate (Note 5) 514,968
-------------
Total Liabilities 3,196,445
General, Initial and Investor Limited Partners' Equity 12,231,514
Net unrealized losses on marketable securities (999)
Total Partners' Equity 12,230,515
-------------
Total Liabilities and Partners' Equity $ 15,426,960
=============
</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
For the Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
1999
2000 (Restated)
Revenue:
<S> <C> <C>
Investment $ 36,967 $ 35,638
Recovery of bad debt 27,002 30,148
Other 148,809 493,048
------------ -----------
Total Revenue 212,778 558,834
------------ -----------
Expenses:
Asset management fees, related party (Note 5) 382,512 385,702
General and administrative (includes reimbursements
to affiliates of $142,324 and $140,069, respectively) (Note 5) 365,743 361,002
Provision for valuation of investments in
Local Limited Partnerships 2,661,103 165,810
Interest 6,000 6,000
Amortization 125,801 143,259
------------ -----------
Total Expenses 3,541,159 1,061,773
------------ -----------
Loss before equity in losses of Local Limited Partnerships and gain (loss) on
liquidation of interests in Local Limited
Partnerships (3,328,381) (502,939)
Equity in losses of Local Limited
Partnerships (Note 4) (2,556,821) (5,091,128)
Gain (loss) on liquidation of interests
in Local Limited Partnerships (Note 6) (785,948) 152,830
------------ ------------
Net Loss $ (6,671,150) $ (5,441,237)
============ ============
Net Loss Allocated:
General Partners $ (66,711) $ (54,412)
Limited Partners (6,604,439) (5,386,825)
------------ ------------
$ (6,671,150) $ (5,441,237)
============ ============
Net Loss per Limited Partnership Unit (100,000 Units) $ (66.04) $ (53.87)
============ ===========
</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 CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
For the Years Ended March 31, 2000 and 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, 1998 (restated) $ (632,406) $ 5,000 $ 24,971,307 $ 764 $ 24,344,665
---------- -------- ------------- ----------- -------------
Comprehensive Loss:
Change in unrealized gains
on marketable securities
available for sale - - - (527) (527)
Net Loss (54,412) - (5,386,825) - (5,441,237)
----------- -------- ------------- ----------- -------------
Comprehensive Loss (54,412) - (5,386,825) (527) (5,441,764)
----------- -------- ------------- ----------- -------------
Balance at March 31, 1999 (restated) (686,818) 5,000 19,584,482 237 18,902,901
----------- -------- ------------- ----------- -------------
Comprehensive Loss:
Change in unrealized gains
on marketable securities
available for sale - - - (1,236) (1,236)
Net Loss (66,711) - (6,604,439) - (6,671,150)
----------- -------- ------------- ----------- -------------
Comprehensive Loss (66,711) - (6,604,439) (1,236) (6,672,386)
----------- -------- ------------- ----------- -------------
Balance at March 31, 2000 $ (753,529) $ 5,000 $ 12,980,043 $ (999) $ 12,230,515
=========== ======== ============= =========== =============
</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 Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
1999
2000 (Restated)
Cash flows from operating activities:
<S> <C> <C>
Net Loss $ (6,671,150) $ (5,441,237)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Equity in losses of Local Limited Partnerships 2,556,821 5,091,128
(Gain) loss on liquidation of interests in Local
Limited Partnerships 785,948 (152,830)
Provision for valuation of investment in Local Limited Partnership 2,634,101 135,662
Cash distribution income included in cash distributions received
from Local Limited Partnerships (46,800) (68,949)
Amortization 125,801 143,259
Gain on sales and maturities of
marketable securities (202) (386)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Interest receivable 1,274 4,674
Prepaid expenses 2,240 591
Accounts payable to affiliates 393,342 389,282
Accounts payable and accrued expenses 55,591 32,778
------------ ------------
Net cash provided by (used for) operating activities (163,034) 133,972
------------ ------------
Cash flows from investing activities:
Investment in Local Limited Partnership (85,000) -
Advances to Local Limited Partnerships (547,969) (156,482)
Purchases of marketable securities (279,748) (1,094,449)
Proceeds from sales and maturities of
marketable securities 597,267 647,907
Cash distributions received from Local
Limited Partnerships 268,591 578,263
Decrease in deferred acquisition fee escrow 112,500 112,500
Payment of deferred acquisition fees (112,500) (112,500)
Repayment of notes receivable from affiliate 43,693 17,213
------------ ------------
Net cash used for investing activities (3,166) (7,548)
------------ ------------
Net increase (decrease) in cash and
cash equivalents (166,200) 126,424
Cash and cash equivalents, beginning of year 338,993 212,569
------------ ------------
Cash and cash equivalents, end of year $ 172,793 $ 338,993
============ ============
Supplemental Disclosure:
Cash paid for interest $ 6,000 $ 6,000
============ ============
</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
1. Organization
Boston Financial Qualified Housing Tax Credits L.P. III (the "Partnership") was
formed on August 9, 1988 under the laws of the State of Delaware for the primary
purpose of investing, as a limited partner, in other limited partnerships
("Local Limited Partnerships"), most of which own and operate apartment
complexes, most of which benefit from some form of federal, state or local
assistance program and each of which qualify for low-income housing tax credits.
The Partnership's objectives are to: (i) provide current tax benefits in the
form of tax credits which qualified investors may use to offset their federal
income tax liability; ii) preserve and protect the Partnership's capital; iii)
provide limited cash distributions which are not expected to constitute taxable
income during Partnership operations; and iv) provide cash distributions from
sale or refinancing transactions. The General Partners of the Partnership are
Arch Street III, Inc., which serves as the Managing General Partner, and Arch
Street III L.P., which also serves as the Initial Limited Partner. Both of the
General Partners are affiliates of Lend Lease Real Estate Investments, Inc.
("Lend Lease"). The fiscal year of the Partnership ends on March 31.
The Certificate and Agreement of Limited Partnership ("Partnership Agreement")
authorized the sale of up to 100,000 units of Limited Partnership Interest
("Units") at $1,000 per Unit, adjusted for certain discounts. The Partnership
raised $99,610,000 ("Gross Proceeds"), net of discounts of $390,000, through the
sale of 100,000 Units. Such amounts exclude five unregistered Units previously
acquired for $5,000 by the Initial Limited Partner, which is also one of the
General Partners. The offering of Units terminated on May 30, 1989. No further
sale of Units is expected.
Generally, profits, losses, tax credits and cash flow from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments.
Under the terms of the Partnership Agreement, the Partnership initially
designated 3% of the Gross Proceeds from the sale of Units as a Reserve for
working capital of the Partnership and contingencies related to ownership of
Local Limited Partnership interests. During the year ended March 31, 1993, the
Managing General Partner decided to increase the reserve level to 3.75%. At
March 31, 2000, the Managing General Partner has designated approximately
$480,000 of cash, cash equivalents and marketable securities as such Reserve.
2. Significant Accounting Policies
Basis of Presentation
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting because the Partnership does not have control
over the major operating and financial policies of the Local Limited
Partnerships in which it invests. Under the equity method, the investment is
carried at cost, adjusted for the Partnership's share of income or loss of the
Local Limited Partnerships, additional investments in and cash distributions
from the Local Limited Partnerships. Equity in income or loss of the Local
Limited Partnerships is included in the Partnership's operations. The
Partnership has no obligation to fund liabilities of the Local Limited
Partnerships beyond its investment and therefore a Local Limited Partnership's
investment will not be carried below zero. To the extent that equity losses are
incurred when a Local Limited Partnership's respective investment balance has
been reduced to zero, the losses will be suspended to be used against future
income. Distributions received from Local Limited Partnerships whose respective
investment value has been reduced to zero are included in income.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Basis of Presentation (continued)
Excess investment costs over the underlying net assets acquired have arisen from
acquisition fees paid and expenses reimbursed to an affiliate of the
Partnership. These fees and expenses are included in the Partnership's
Investment in Local Limited Partnerships and are being amortized on a
straight-line basis over 35 years.
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 December 31, 1999 and 1998.
The general partners of 241 Pine Street Associates, L.P., Willow Lake Partners
II, L.P., The Temple-Kyle L.P., Breckenridge Creste Apartments, L.P. and 13
Local Limited Partnerships in Texas (the "Combined Entities") and the General
Partner of the Partnership are affiliated entities. In prior periods, the
Partnership combined its financial statements with those of the Combined
Entities. During 2000, the General Partner concluded that the presentation of
the financial position and results of operations of the Partnership, with the
Combined Entities accounted for using the equity method, resulted in a more
meaningful presentation. All prior period financial data has been restated to
show the effects of this change in reporting entity.
The Partnership recognizes a decline in the carrying value of its investments in
Local Limited Partnerships when there is evidence of a non-temporary decline in
the recoverable amount of the investment. There is the possibility that the
estimates relating to reserves for non-temporary declines in the carrying value
of investments in Local Limited Partnerships may be subject to material near
term adjustments.
The Partnership, as a limited partner in the Local Limited Partnerships, is
subject to risks inherent in the ownership of property which are beyond its
control, such as fluctuations in occupancy rates and operating expenses,
variations in rental schedules, proper maintenance of facilities and continued
eligibility of tax credits. If the cost of operating a property exceeds the
rental income earned thereon, the Partnership may deem it in its best interest
to voluntarily provide funds in order to protect its investment.
Cash Equivalents
Cash equivalents consist of short-term money market instruments with maturities
when purchased of ninety days or less.
Marketable Securities
Marketable securities consist primarily of U.S. Treasury instruments and various
asset-backed investment vehicles. The Partnership's marketable securities are
classified as "Available for Sale" securities and reported at fair value as
reported by the brokerage firm at which the securities are held. All marketable
securities have fixed maturities. Realized gains and losses from the sales of
securities are based on the specific identification method. Unrealized gains and
losses are excluded from earnings and reported as a separate component of
partners' equity.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statements of Financial Accounting Standards No. 107 ("SFAS No. 107"),
Disclosures About Fair Value of Financial Instruments, requires disclosure for
the fair value of most on- and off-balance sheet financial instruments for which
it is practicable to estimate that value. The scope of SFAS No. 107 excludes
certain financial instruments, such as trade receivables and payables when the
carrying value approximates the fair value and investments accounted for under
the equity method, and all nonfinancial assets, such as real property. Unless
otherwise described, the fair values of the Partnership's assets and liabilities
which qualify as financial instruments under SFAS No. 107 approximate their
carrying amounts in the accompanying balance sheets.
Income Taxes
No provision for income taxes has been made as the liability for such taxes is
the obligation of the partners of the Partnership.
Reclassifications
Certain reclassifications have been made to prior year financial statements to
conform to the current year presentation.
3. Marketable Securities
<TABLE>
<CAPTION>
A summary of marketable securities is as follows:
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities issued by
the US Treasury and other
US government corporations
<S> <C> <C> <C> <C>
and agencies $ 404,234 $ 66 $ (1,065) $ 403,235
----------- ----------- -------- -----------
Marketable Securities
at March 31, 2000 $ 404,234 $ 66 $ (1,065) $ 403,235
=========== =========== ======== ===========
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. Marketable Securities (continued)
<TABLE>
<CAPTION>
The contractual maturities at March 31, 2000 are as follows:
Fair
Cost Value
<S> <C> <C>
Due in less than one year $ 304,736 $ 304,641
Due in one to five years 99,498 98,594
----------- -----------
$ 404,234 $ 403,235
=========== ===========
</TABLE>
Actual maturities for asset backed securities may differ from contractual
maturities because some borrowers have the right to call or prepay obligations.
Proceeds from the sales of marketable securities were approximately $25,000
during the fiscal year ended March 31, 2000; during the year ended March 31,
1999 there were no proceeds from sales of marketable securities. Proceeds from
the maturities of marketable securities were approximately $572,000, and
$648,000 during the years ended March 31, 2000 and 1999, respectively. Included
in investment income are gross gains of $229 and $421, and gross losses of $27
and $35 that were realized on the sales during the years ended March 31, 2000
and 1999, respectively.
4. 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 March
31, 2000:
<TABLE>
<CAPTION>
Capital contributions and advances paid to Local Limited Partnerships and
purchase price paid to withdrawing partners
<S> <C>
of Local Limited Partnerships $ 68,111,077
Cumulative equity in losses of Local Limited Partnerships
(excluding cumulative unrecognized losses of $52,059,725) (51,933,149)
Cumulative cash distributions received from
Local Limited Partnerships (2,889,520)
Investments in Local Limited Partnerships before adjustment 13,288,408
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 6,220,170
Accumulated amortization of acquisition fees and expenses (1,631,170)
-------------
Investments in Local Limited Partnerships 17,877,408
Reserve for valuation of investments in
Local Limited Partnerships (4,379,171)
$ 13,498,237
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
Summarized financial information as of December 31, 1999 and 1998 (due to the
Partnership's policy of reporting the financial information of its Local Limited
Partnership interests on a 90 day lag basis) of all Local Limited Partnerships
in which the Partnership has invested is as follows:
Summarized Balance Sheets - as of December 31,
<TABLE>
<CAPTION>
1998
1999 (Restated)
Assets:
<S> <C> <C>
Investment property, net $ 145,617,505 $ 153,678,734
Other assets, net 12,608,323 13,869,096
Current assets 8,241,042 5,989,968
-------------- ---------------
Total assets $ 166,466,870 $ 173,537,798
============== ===============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 179,734,723 $ 164,246,214
Other liabilities 20,247,921 18,863,957
Current liabilities (includes current
portion of mortgages payable) 7,738,031 23,695,744
-------------- ---------------
Total liabilities 207,720,675 206,805,915
-------------- ---------------
Partners' Equity:
Partnership's deficiency (41,704,113) (33,777,377)
Other partners' equity (deficiency) 450,308 509,260
-------------- ---------------
Total partners' deficiency (41,253,805) (33,268,117)
-------------- ---------------
Total liabilities and partners' deficiency $ 166,466,870 $ 173,537,798
================= ==============
Summarized Income Statements - For
the year ended December 31,
1998
1999 (Restated)
Rental and other income $ 32,934,213 $ 32,545,316
------------- --------------
Expenses:
Operating expenses 18,574,722 18,378,470
Interest expense 14,023,088 14,466,301
Depreciation and amortization 7,531,771 7,841,261
Provision for valuation of real estate 853,176 18,133,029
------------- --------------
Total expenses 40,982,757 58,819,061
------------- --------------
Net Loss $ (8,048,544) $ (26,273,745)
============= ==============
Partnership's share of Net Loss $ (7,508,507) $ (25,568,964)
============= ==============
Other partners' share of Net Loss $ (540,037) $ (704,781)
============= ==============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
For the years ended March 31, 2000 and 1999, the Partnership has not recognized
$5,445,087 and $21,073,132 respectively, 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 $493,401 and $595,296 of previously
unrecognized losses in the years ended March 31, 2000 and 1999, respectively.
The Partnership's deficiency as reflected by the Local Limited Partnerships of
$41,704,113 differs from the Partnership's Investments in Local Limited
Partnerships before adjustment of $13,288,408 primarily because the Partnership
has not recognized $52,059,725 of equity losses relating to Local Limited
Partnerships whose cumulative equity in losses exceeded their total investments
and the Partnership has included advances of approximately $1,417,000 in
investments in Local Limited Partnerships which are included in liabilities in
the balance sheet of the Local Limited Partnerships.
5. Transactions with Affiliates
In accordance with the Partnership Agreement, 15% of the acquisition fees
payable to an affiliate of the Managing General Partner is the Deferred
Acquisition Fees. The Deferred Acquisition Fees were deposited in an interest
bearing account and were paid annually, with interest, at the rate of 10% per
year over 10 years. Installments began on the second anniversary of the
Prospectus, November 23, 1990. As of March 31, 2000, all deferred acquisition
fees have been paid.
An affiliate of the Managing General Partner currently receives $7,241 (as
adjusted by the CPI factor) per Local Limited Partnership annually as the Asset
Management Fee for administering the affairs of the Partnership. Included in the
Statements of Operations are Asset Management Fees of $382,512 and $385,702 for
the years ended March 31, 2000 and 1999, respectively. Payables to affiliates of
the Managing General Partner relating to the aforementioned fees equaled
$2,332,960 at March 31, 2000.
An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries and benefits expenses. Included in general and
administrative expenses for the years ended March 31, 2000 and 1999 is $142,324
and $140,069, respectively, that the Partnership has paid or will pay as
reimbursement for salaries and benefits.
Affiliates of the Managing General Partner are management agents for four Local
Limited Partnerships. Included in operating expenses in the summarized income
statements in Note 4 to the Financial Statements is $150,066 and $154,952 of
fees earned by these affiliates for the years ended December 31, 1999 and 1998,
respectively.
An affiliate of the Managing General Partner advanced the Partnership amounts to
cover operating deficits and, in return, a non-interest bearing note was
executed. As of March 31, 2000, $514,968 is due to an affiliate of the Managing
General Partner for this note.
This affiliate of the Managing General Partner has made a commitment to defer
collection of past or future Asset Management Fees, reimbursement of operating
expenses and to defer collection of the $514,968 note described above, to the
extent necessary to cover operating deficits of the Partnership.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
6. Liquidation of Interests in Local Limited Partnerships
For financial reporting purposes, a loss on liquidation of interests in Local
Limited Partnerships of $592,065 and $193,883 were recognized in the year ended
March 31, 2000 as a result of the transfer of 241 Pine Street and Boulevard
Commons II, respectively.
For financial reporting purposes, a loss on liquidation of interests in Local
Limited Partnerships of $4,882 was recognized in the year ended March 31, 1999
as a result of the transfer of Willowick.
As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were transferred to the lender on May 2, 1997 after prolonged operating
difficulties resulting from low occupancy, capital rehabilitation needs and a
depressed local economy. For the year ended March 31, 1999, the Partnership
recognized $157,712 of a gain on liquidation of interests in Local Limited
Partnerships relating to the transfer of these properties because cash
distributions of this amount were received from these Local Limited Partnerships
in 1999.
7. Note Receivable
The Partnership has a note receivable from The Temple Kyle. The note is due in
monthly installments of $17,600, including interest at prime plus 1.00 percent
(an effective rate of 9.50 and 8.85 percent in 1999 and 1998, respectively),
through its maturity date on June 1, 2005. The note is collateralized by all
properties of the Local Limited Partnership.
Minimum principal payments on the note receivable to maturity as of March 31,
2000, are as follows:
2000 $ 97,726
2001 151,420
2002 162,363
2003 174,103
2004 186,690
2005 and after 573,043
-------------
Total $ 1,345,345
=============
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (continued)
8. Federal Income Taxes
The following schedule reconciles the reported financial statement loss for the
fiscal years ended March 31, 2000 and 1999 to the loss reported on the Form
1065, U.S. Partnership Return of Income for the years ended December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999
2000 (Restated)
<S> <C> <C>
Net Loss per financial statements $ (6,671,150) $ (5,441,237)
Related party expenses not currently deductible
for tax purposes 1,700,961 379,660
Amortization of acquisition fees and expenses
not deductible for tax purposes 125,801 143,259
Adjustment to reflect March 31 fiscal year
end to December 31 tax year end 113,382 330,738
Equity in losses of Local Limited
Partnerships for financial reporting purposes
in excess of equity in losses for tax purposes 36,309 16,228,268
Adjustment for equity in losses of Local
Limited Partnerships not recognized for
financial reporting purposes (4,998,486) (20,546,785)
Cash distribution included in loss for financial
reporting purposes (117,751) (82,101)
Write-off of investment in Local Limited Partnership
for financial reporting purposes in excess of
write-off for tax purposes 789,200 (157,665)
Provision for valuation of investment in Local
Limited Partnership not deductible for tax purposes 1,327,528 -
------------- -------------
Net Loss per tax return $ (7,694,206) $ (9,145,863)
============= =============
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes and tax reporting purposes for the year ended March 31, 2000
are as follows:
<TABLE>
<CAPTION>
Financial Tax
Reporting Reporting
Purposes Purposes Differences
<S> <C> <C> <C>
Investments in Local Limited Partnerships $ 13,498,237 $ (18,414,819) $ 31,913,056
============ ============= ==============
Other assets $ 1,928,723 $ 15,173,316 $ (13,244,593)
============ ============= ==============
Liabilities $ 3,196,445 $ 820,310 $ 2,376,135
============ ============= ==============
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes are primarily attributable to: i) the cumulative equity in
losses from Local Limited Partnerships for tax reporting purposes is
approximately $38,205,000 greater than for financial reporting purposes,
including approximately $52,060,000 of losses the Partnership has not recognized
relating to thirty-three Local Limited Partnerships whose cumulative equity in
losses exceeded their total investments; ii) the Partnership has provided a
provision for valuation of approximately $4,380,000 against five of its
investments in Local Limited Partnerships for financial reporting purposes; iii)
the cumulative amortization of acquisition fees and expenses for financial
reporting purposes is approximately $1,637,000; and iv) organizational and
offering costs of approximately $11,832,000 that have been capitalized for tax
reporting purposes are charged to Limited Partners' equity for financial
reporting purposes.
<PAGE>
June 29, 2000
Boston Financial Qualified Housing Tax Credits L.P. III
101 Arch Street
Boston, MA 02110-1106
To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. III:
We are providing this letter to you for inclusion as an exhibit to your Form
10-K filing pursuant to Item 601 of Regulation S-K.
We have audited the financial statements included in Boston Financial Qualified
Housing Tax Credits L.P. III's (the "Partnership") Annual Report on Form 10-K
for the year ended March 31, 2000 and issued our report thereon dated June 22,
2000. Note 2 to the financial statements describes a change in reporting entity
from a combined basis presentation to a stand-alone basis presentation. It
should be understood that the preferability of one acceptable method of
presenting entities under common control over another has not been addressed in
any authoritative accounting literature, and in expressing our concurrence below
we have relied on management's determination that this change in reporting
entity is preferable. Based on our reading of management's stated reasons and
justification for this change in reporting entity in the Form 10-K, and our
discussions with management as to their judgment about the relevant business
planning and legal factors relating to the change, we concur with management
that such change represents, in the Partnership's circumstances, the adoption of
a preferable accounting principle in conformity with Accounting Principles Board
Opinion No. 20.
Very truly yours,
/S/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<PAGE>
