SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-24656
LIBERTY TAX CREDIT PLUS III L.P.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3491408
- - ------------------------------------------ -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
- - ------------------------------------------ ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, March 31,
1996 1996
-------------- --------------
<S> <C> <C>
Property and equipment at cost, net of accumulated depreciation
of $64,561,191 and $61,814,023, respectively $268,051,261 $270,715,006
Cash and cash equivalents 8,509,557 8,420,959
Cash held in escrow 17,248,947 16,832,443
Deferred costs, net of accumulated amortization of $1,895,496
and $1,826,439, respectively 3,776,669 3,845,726
Other assets 2,407,997 2,307,734
------------ ------------
Total assets $299,994,431 $302,121,868
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $201,182,306 $201,604,094
Due to debt guarantor 19,867,512 18,971,667
Accounts payable and other liabilities 22,753,349 21,196,194
Due to local general partners and affiliates 12,520,548 13,117,342
Due to general partners and affiliates 2,498,660 2,316,069
------------ ------------
Total liabilities 258,822,375 257,205,366
------------ ------------
Minority interest 1,570,192 1,763,731
------------ ------------
Commitments and contingencies (Note 3)
Partners' capital:
Limited partners (139,101.5) BACs issued and outstanding 40,441,302 43,956,700
General Partners (839,438) (803,929)
------------ ------------
Total partners' capital 39,601,864 43,152,771
------------ ------------
Total liabilities and partners' capital $299,994,431 $302,121,868
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-2-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
--------------------------------
1996 1995*
------------- ------------
Revenues
Rentals income $ 7,729,452 $ 7,565,129
Other 490,966 426,403
------------ ------------
8,220,418 7,991,532
------------ ------------
Expenses
General and administrative 1,521,687 1,505,683
General and administrative-
related parties (Note 2) 665,000 654,877
Operating and other 1,014,795 944,858
Repairs and maintenance 912,769 887,014
Real estate taxes 496,096 475,041
Insurance 368,473 390,112
Interest 4,013,265 3,963,136
Depreciation and amortization 2,816,225 2,981,288
------------ ------------
11,808,310 11,802,009
------------ ------------
Minority interest in loss of subsidiaries 36,985 38,798
------------ ------------
Net loss $ (3,550,907) $ (3,771,679)
============ ============
Net loss per BAC $ (25.26) $ (26.84)
============ ============
*Reclassified for comparative purposes
See accompanying notes to consolidated financial statements
-3-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Total Limited Partners General Partners
----------- ---------------- ----------------
Partners' capital - April 1, 1996 $43,152,771 $43,956,700 $ (803,929)
Net loss (3,550,907) (3,515,398) (35,509)
----------- ----------- -----------
Partners' capital - June 30, 1996 $39,601,864 $40,441,302 $ (839,438)
=========== =========== ===========
See accompanying notes to consolidated financial statements
-4-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,550,907) $(3,771,679)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 2,816,225 2,981,288
Minority interest in loss of subsidiaries (36,985) (38,798)
Increase in accounts payable and other liabilities 1,557,155 728,277
Increase in cash held in escrow (416,504) (28,989)
Increase in other assets (100,263) (59,439)
Increase in due to general partners and affiliates 182,591 130,396
Increase in due to local general partners and affiliates 169,665 70,982
Decrease in due to local general partners and affiliates (766,459) (80,567)
Increase in due to debt guarantor 895,845 984,969
----------- -----------
Net cash provided by operating activities 750,363 916,440
----------- -----------
Cash flows provided by (used in) investing activities:
Acquisition of property and equipment (83,423) (47,413)
Decrease in cash held in escrow 0 305,702
----------- -----------
Net cash provided by (used in) investing activities (83,423) 258,289
----------- -----------
Cash flows used in financing activities:
Principal payments of mortgage notes payable (421,788) (409,093)
Decrease in capitalization of consolidated subsidiaries
attributable to minority interest (156,554) (188,326)
----------- -----------
Net cash used in financing activities (578,342) (597,419)
----------- -----------
Net increase in cash and cash equivalents 88,598 577,310
Cash and cash equivalents at beginning of period 8,420,959 9,046,621
----------- -----------
Cash and cash equivalents at end of period $ 8,509,557 $ 9,623,931
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 1 - General
The consolidated financial statements include the accounts of
Liberty Tax Credit Plus III L.P. (the "Partnership") and 61 subsidiary
partnerships (the "subsidiary partnerships" or "Local Partnerships") in which
the Partnership holds a 98% limited partnership interest and 1 subsidiary
partnership in which the Partnership holds a 27% limited partnership interest
(the other 71% limited partnership interest is owned by an affiliate of the
Partnership, with the same management).
The Partnership's fiscal quarter ends June 30. All subsidiaries have
fiscal quarters ending March 31. Accounts of the subsidiaries have been adjusted
for intercompany transactions from April 1 through June 30.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increases (decreases in the capitalization of consolidated
subsidiaries attributable to minority interest arise from cash contributions and
cash distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority
interests' investment in a subsidiary have been charged to the Partnership. Such
losses aggregated approximately $64,000 and $66,000 for the three months ended
June 30, 1996 and 1995, respectively. The Partnership's investment in each
subsidiary is generally equal to the respective subsidiary's partners' equity
less minority interest capital, if any. In consolidation, all subsidiary
partnership losses are included in the Partnership's capital account except for
losses allocated to minority interest capital.
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Asset and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.
Property and equipment are carried at the lower of depreciated cost
or estimated amounts recoverable through future operations and ultimate
disposition of the property. Cost includes the purchase price, acquisition fees
and expenses, and any other costs incurred in acquiring the properties. As
required by SFAS 121, a provision for loss on impairment of assets is recorded
when estimated amounts recoverable through future operations and sale of the
property on an undiscounted basis are below depreciated cost. However,
depreciated cost, adjusted for such reductions in value, if any, may be greater
than the fair value. Property investments themselves are reduced to estimated
fair value (generally using discounted cash flows) when the property is
considered to be impaired and the depreciated cost exceeds estimated fair value.
Through April 1, 1996, the Partnership has not recorded any provisions for loss
in impairment of assets or reduction to estimated fair value.
The books and records of the Partnership are maintained on the
accrual basis in accordance with generally accepted accounting principles. In
the opinion of the General Partners of the Partnership, the accompanying
unaudited financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
of the Partnership as of June 30, 1996 and the results
-6-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 1 - General (continued)
of operations and cash flows for the three months ended June 30, 1996 and 1995,
respectively. However, the operating results for the three months ended June 30,
1996 may not be indicative of the results for the year.
Certain information and note disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed. These consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K for the period
ended March 31, 1996.
NOTE 2 - Related Party Transactions
An affiliate of the General Partners has a 1% interest as a special
limited partner, in each of the Local Partnerships. An affiliate of the General
Partners also has a minority interest in certain Local Partnerships.
The General Partners and their affiliates perform services for the
Partnership. The costs incurred for the three months ended June 30, 1996 and
1995 are as follows:
Three Months Ended
June 30,
---------------------------
1996 1995*
--------- ----------
Partnership management
fees (a) $ 187,500 $ 187,500
Expense reimbursement (b) 49,047 49,977
Property management fees (c) 403,453 388,400
Local administrative fee (d) 25,000 29,000
--------- ----------
$ 665,000 $ 654,877
========= =========
*Reclassified for comparative purposes
(a) The General Partners are entitled to receive a partnership
management fee after payment of all Partnership expenses, which together with
the annual local administrative fees will not exceed a maximum of 0.5% per annum
of invested assets (as defined in the Partnership Agreement), for administering
the affairs of the Partnership. The partnership management fee subject to the
foregoing limitation, will be determined by the General Partners in their sole
discretion based upon their review of the Partnership's investments. Unpaid
partnership management fees for any year will be accrued without interest and
will be payable only to the extent of available funds after the Partnership has
made the distributions to the limited partners of sale or refinancing proceeds
equal to their original capital contributions plus a 10% priority return thereon
(to the extent not theretofore paid out of cash flow).
(b) The Partnership reimburses the General Partners and their
affiliates for actual Partnership operating expenses incurred by the General
Partners and their affiliates on the Partnership's behalf. The amount of
reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. Another affiliate of the General Partners performs asset
monitoring for the Partnership. These services include site visits and
evaluations of the subsidiary partnerships' performance.
(c) The subsidiary partnerships incurred property management fees
amounting to $501,194 and
-7-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 2 - Related Party Transactions (continued)
$488,157 for the three months ended June 30, 1996 and 1995, respectively, of
which $403,453 and $388,400, for the three months ended June 30, 1996 and 1995,
respectively, were incurred to affiliates of the subsidiary partnerships'
general partners. Included in amounts incurred to affiliates of the subsidiary
partnerships' general partners were $18,938 and $18,498 for the three months
ended June 30, 1996 and 1995, respectively, which were also incurred to
affiliates of the Related General Partner.
(d) Liberty Associates IV L.P., a special limited partner of the
subsidiary partnerships, is entitled to receive a local administrative fee of up
to $2,500 per year from each subsidiary partnership.
NOTE 3 - Commitments and Contingencies
The following disclosure includes changes and/or additions to
disclosures regarding the subsidiary partnerships which were included in the
Partnership's Annual report on Form 10-K for the period ended March 31, 1996.
Wade D. Mertz Elderly Housing Associates
----------------------------------------
On July 29, 1996, Wade D. Mertz Elderly Housing Associates ("Wade D.
Mertz") received a notice from the Internal Revenue Service ("IRS") that they
will be examining Wade D. Mertz's federal income tax return for the year ended
December 31, 1994. On August 13, 1996 the IRS commenced the examination.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- - -------------------------------
The Partnership's primary source of funds include (i) working
capital reserves in the original amount of 3.5% of gross equity raised and (ii)
cash distributions from the operations of the Local Partnerships.
As of June 30, 1996 the Partnership has invested all of the net
proceeds in 62 Local Partnerships. Approximately $2,176,000 of the purchase
price remains to be paid (which includes approximately $1,887,000 held in
escrow).
During the three months ended June 30, 1996, cash and cash
equivalents of the Partnership and its 62 consolidated subsidiary partnerships
increased by approximately $89,000. This increase is primarily attributable to
cash flow from operations of $750,000, which exceeded mortgage principal
payments of $422,000, distributions to minority interest of $157,000 and capital
improvements of $83,000. Included in the adjustments to reconcile the net loss
to cash flow from operations is depreciation and amortization in the amount of
$2,816,000 and an increase in due to debt guarantor of $896,000 as well as
management fees of $188,000 due to the general partners and affiliates.
The Partnership has a working capital reserve in the original amount
of 3.5% of gross equity raised of which approximately $4,174,000 and $4,203,000
remain unused at June 30, 1996 and March 31, 1996, respectively.
Cash distributions received from the Local Partnerships remain
relatively immaterial. These distributions, as well as the working capital
reserves referred to in the preceding paragraph will be used to meet the future
operating expenses of the Partnership. During the three months ended June 30,
1996 and 1995, the amounts received from operations of the Local Partnerships
approximated $62,000 and $45,000, respectively.
For discussion of contingencies affecting certain Local
Partnerships, see Note 3. Since the maximum loss the Partnership would be liable
for is its net investment in the respective Local Partnerships, the resolution
of the existing contingencies is not anticipated to impact future results of
operations, liquidity or financial condition in a material way.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed, that will or are likely
to impact liquidity in a material way. Management believes the only impact would
be for laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining properties in
the portfolio may be experiencing upswings. However, the geographic
diversifications of the portfolio may not protect against a general downturn in
the national economy. The Partnership has fully invested the proceeds of its
offering in 62 Local Partnerships, all of which fully have their tax credits in
place. The tax credits are attached to the project for a period of ten years and
are transferable with the property during the remainder of the ten year period.
If trends in the real estate market warranted the sale of a property, the
remaining tax credits would transfer to the new owner; thereby adding
significant value to the property on the market, which are not included in the
financial statement carrying amount.
Results of Operations
- - ---------------------
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Asset and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.
-9-
<PAGE>
Property and equipment are carried at the lower of depreciated cost
or estimated amounts recoverable through future operations and ultimate
disposition of the property. Cost includes the purchase price, acquisition fees
and expenses, and any other costs incurred in acquiring the properties. As
required by SFAS 121, a provision for loss on impairment of assets is recorded
when estimated amounts recoverable through future operations and sale of the
property on an undiscounted basis are below depreciated cost. However,
depreciated cost, adjusted for such reductions in value, if any, may be greater
than the fair value. Property investments themselves are reduced to estimated
fair value (generally using discounted cash flows) when the property is
considered to be impaired and the depreciated cost exceeds estimate fair value.
Through June 30, 1996, the Partnership has not recorded any provisions for loss
in impairment of assets or reduction to estimated fair value.
Results of operations for the three months ended June 30, 1996 and
1995 consists primarily of (i) the results of the Partnership's investment in
the consolidated Local Partnerships and (ii) interest income earned on the
working capital reserve and funds not fully invested in Local Partnerships as
certain benchmarks, such as occupancy levels, must be attained prior to the
Partnership paying the acquisition costs in full.
Results of operations of the consolidated subsidiary partnerships
for the three months ended June 30, 1996 continues to be in the form of rental
income with corresponding expenses divided among operations, depreciation and
mortgage interest.
Rental income increased 2% for the three months ended June 30, 1996
as compared to the corresponding period in 1995, primarily due to normal rental
rate increases.
Other income increased approximately $65,000 for the three months
ended June 30, 1996 as compared to the corresponding period in 1995 primarily
due to the receipt of funds from an insurance claim as a result of fire damage
at Brooklyn H.
Total expenses remained fairly consistent, with a 1% increase, for
the three months ended June 30, 1996 as compared to the corresponding period in
1995.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter.
-11-
<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.
LIBERTY TAX CREDIT PLUS III L.P.
--------------------------------
(Registrant)
By: RELATED CREDIT PROPERTIES III L.P.,
a General Partner
By: RELATED CREDIT PROPERTIES III INC.,
a General Partner
Date: August 13, 1996
By: /s/ Alan Hirmes
---------------
Alan Hirmes,
Vice President
Date: August 13, 1996
By: /s/ Lawrence J. Lipton
----------------------
Lawrence J. Lipton,
Treasurer
(Principal Financial and Accounting Officer)
and
By: LIBERTY G.P. III INC., a General Partner
Date: August 13, 1996
By: /s/ Paul L. Abbott
------------------
Paul L. Abbott,
President
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Liberty Tax Credit Plus III L.P.
and is qualified in its entirety by reference to
such financial statements
</LEGEND>
<CIK> 0000843076
<NAME> Liberty Tax Credit Plus III L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,509,557
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,433,613
<PP&E> 332,612,452
<DEPRECIATION> 64,561,191
<TOTAL-ASSETS> 299,994,431
<CURRENT-LIABILITIES> 57,640,069
<BONDS> 201,182,306
0
0
<COMMON> 0
<OTHER-SE> 41,172,056
<TOTAL-LIABILITY-AND-EQUITY> 299,994,431
<SALES> 0
<TOTAL-REVENUES> 8,220,418
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,795,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,013,265
<INCOME-PRETAX> (3,587,892)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,587,892)
<EPS-PRIMARY> 25.26
<EPS-DILUTED> 0
</TABLE>
