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, 1997
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
incorporation or organization) Identification No.)
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)
============= =============
June 30, March 31,
1997 1997
------------- -------------
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $66,248,659 and $63,453,107,
respectively $ 237,684,752 $ 240,343,013
Cash and cash equivalents 5,702,769 6,518,662
Cash held in escrow 16,304,334 15,777,598
Deferred costs, net of accumulated
amortization of $2,022,453
and $1,931,076, respectively 3,386,907 3,478,284
Other assets 2,914,453 2,753,083
------------- -------------
Total assets $ 265,993,215 $ 268,870,640
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 200,440,978 $ 200,800,132
Due to debt guarantor 24,401,957 23,814,448
Accounts payable and other
liabilities 22,328,921 20,885,235
Due to local general partners and
affiliates 10,581,693 10,941,243
Due to general partners and
affiliates 2,463,865 2,305,530
------------- -------------
Total liabilities 260,217,414 258,746,588
------------- -------------
Minority interest 1,863,257 2,257,054
------------- -------------
Commitments and contingencies (Note 3)
Partners' capital:
Limited partners (139,101.5) BACs
issued and outstanding 5,108,876 9,023,785
General Partners (1,196,332) (1,156,787)
------------- -------------
Total partners' capital 3,912,544 7,866,998
------------- -------------
Total liabilities and partners' capital $ 265,993,215 $ 268,870,640
============= =============
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,
-------------------------------
1997 1996*
------------ ------------
Revenues
Rentals income $ 7,963,752 $ 7,729,452
Other 474,395 490,966
------------ ------------
8,438,147 8,220,418
------------ ------------
Expenses
General and administrative 1,711,710 1,516,007
General and administrative-
related parties (Note 2) 1,013,315 670,680
Operating 949,899 1,014,795
Repairs and maintenance 1,035,197 912,769
Real estate taxes 510,172 496,096
Insurance 380,023 368,473
Interest 3,939,459 4,013,265
Depreciation and amortization 2,886,929 2,816,225
------------ ------------
12,426,704 11,808,310
------------ ------------
Minority interest in loss
of subsidiaries 34,103 36,985
------------ ------------
Net loss $ (3,954,454) $ (3,550,907)
============ ============
Net loss per BAC $ (28.14) $ (25.26)
============ ============
*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)
===============================================
Limited General
Total Partners Partners
-----------------------------------------------
Partners' capital -
April 1, 1997 $ 7,866,998 $ 9,023,785 $(1,156,787)
Net loss (3,954,454) (3,914,909) (39,545)
----------- ----------- -----------
Partners' capital -
June 30, 1997 $ 3,912,544 $ 5,108,876 $(1,196,332)
=========== =========== ===========
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)
============================
Three Months Ended
June 30,
1997 1996
----------- -----------
Cash flows from operating activities:
Net loss $(3,954,454) $(3,550,907)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 2,886,929 2,816,225
Minority interest in loss of
subsidiaries (34,103) (36,985)
Increase in accounts payable and
other liabilities 1,443,686 1,557,155
Increase in cash held in escrow (526,736) (416,504)
Increase in other assets (161,370) (100,263)
Increase in due to general partners
and affiliates 158,335 182,591
Increase in due to local general
partners and affiliates 202,061 169,665
Decrease in due to local general
partners and affiliates (561,611) (766,459)
Increase in due to debt guarantor 587,509 895,845
----------- -----------
Net cash provided by operating
activities 40,246 750,363
----------- -----------
Cash flows from investing activities:
Improvements to property and
equipment (137,291) (83,423)
----------- -----------
Net cash used in
investing activities (137,291) (83,423)
----------- -----------
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(continued)
(Unaudited)
============================
Three Months Ended
June 30,
1997 1996
----------- -----------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (359,154) (421,788)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (359,694) (156,554)
----------- -----------
Net cash used in financing activities (718,848) (578,342)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (815,893) 88,598
Cash and cash equivalents at
beginning of period 6,518,662 8,420,959
----------- -----------
Cash and cash equivalents at
end of period $ 5,702,769 $ 8,509,557
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(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). Through the rights of the Partnership and/or an affiliate of a
General Partner, which affiliate has a contractual obligation to act on behalf
of the Partnership, to remove the general partner of the subsidiary local
partnerships and to approve certain major operating and financial decisions, the
Partnership has a controlling financial interest in the subsidiary partnerships.
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 from 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 $66,000 and $64,000 for the three months ended June 30,
1997 and 1996, 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.
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
Partner-
7
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 1 - General (continued)
ship as of June 30, 1997 and the results of operations and cash flows for the
three months ended June 30, 1997 and 1996, respectively. However, the operating
results for the three months ended June 30, 1997 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,
1997.
Note 2 - Related Party Transactions
Liberty Associates IV L.P. ("Liberty Associates"), an affiliate of the General
Partners, has a 1% and .998% interest as a Special Limited Partner in 61 and 1
of the Local Partnerships, respectively. Affiliates of the General Partners also
have a minority interest in certain Local Partnerships.
The costs incurred to related parties for the three months ended June 30, 1997
and 1996 were as follows:
Three Months Ended
June 30,
---------------------------
1997 1996
---------------------------
Partnership management fees (a) $ 358,500 $ 187,500
Expense reimbursement (b) 125,280 49,047
Property management fees (c) 501,535 409,133
Local administrative fee (d) 28,000 25,000
---------- ----------
$1,013,315 $ 670,680
========== ==========
(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
8
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 2 - Related Party Transactions (continued)
equal to their original capital contributions plus a 10% priority return thereon
(to the extent not theretofore paid out of cash flow). Partnership management
fees owed to the General Partners amounting to approximately $1,774,000 were
accrued and unpaid at both June 30, 1997 and March 31, 1997.
(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 Related General Partner 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
$582,480 and $506,874 for the three months ended June 30, 1997 and 1996,
respectively, of which $501,535 and $409,133, respectively, were incurred to
affiliates of the subsidiary partnerships' general partners. Included in amounts
incurred to affiliates of the subsidiary partnerships' general partners were
$38,975 and $18,938 for the three months ended June 30, 1997 and 1996,
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, 1997 (see Note 4 for a
discussion of the resolution of the contingency regarding Williamsburg
Residential II, L.P.).
9
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 3 - Commitments and Contingencies (continued)
West 132nd Development Partnership
West 132nd Development Partnership ("West 132nd") has received notification of
default on its mortgages due to its arrears on the mortgage debt and related
escrow accounts. As of March 31, 1997, West 132nd owed approximately $48,000
toward its prior monthly installments, inclusive of principal, interest and
escrows. However, as of August 1, 1997, these payments have been made and the
mortgages are current.
10
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 4 - Subsequent Event
Williamsburg Residential II, L.P.
In November 1996, the general partner of Williamsburg Residential II, L.P.
("Williamsburg II") stopped making the mortgage note payments which constituted
an event of default. The general partner also communicated to the limited
partners its desire to withdraw as general partner and property manager in an
effort to eliminate the need for it to further secure loans from its affiliated
entities to keep the project going. The limited partners retained a national
property management firm to operate the property effective January 1, 1997 and
replaced the general partner effective January 16, 1997.
The new general partner, which is an affiliate of the Related General Partner,
has been in contact with the lender, Federal National Mortgage Association
("FNMA"), shortly after the default. Williamsburg II entered into a Forbearance
Agreement with FNMA on January 27, 1997. The agreement called for back payments
to be made and provided Williamsburg II 60 days to work out a loan agreement. A
subsequent extension of the forbearance agreement ran through July 25, 1997 at
which time the loan was modified. The general framework of the loan modification
agreement calls for: 1. Williamsburg II to deposit an amount equal to $110,000
into a debt service escrow fund to be utilized as needed; 2. Payments of
interest only on the loan for 36 months; 3. The waiving of replacement reserve
escrow payments during 1997; 4. Excess net operating income to be turned over to
the loan servicer monthly. FNMA's standard modification documentation was used
and FNMA will not exercise further remedies relating to the default.
11
<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, 1997 the Partnership has invested all of the net proceeds in 62
Local Partnerships. Approximately $1,313,000 of the purchase price remains to be
paid (which includes approximately $1,072,000 held in escrow). During the three
months ended June 30, 1997, approximately $48,000 was paid to the Local
Partnerships, none of which was released from escrow.
During the three months ended June 30, 1997, cash and cash equivalents of the
Partnership and its 62 consolidated Local Partnerships decreased by
approximately $816,000. This decrease was attributable to improvements to
property and equipment (137,000), mortgage principal payments ($359,000) and a
decrease in capitalization of consolidated subsidiaries attributable to minority
interest ($360,000) which exceeded cash provided by operating activities
($40,000). Included in the adjustments to reconcile the net loss to cash
provided by operating activities is depreciation and amortization in the amount
$2,887,000 and an increase in due to debt guarantor of $588,000.
The Partnership has a working capital reserve in the original amount of 3.5% of
gross equity raised of which approximately $2,141,000 and $2,548,000 remained
unused at June 30, 1997 and March 31, 1997, 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, 1997 and
1996, the amounts received from operations of the Local Partnerships
approximated $155,000 and $62,000, respectively.
For a discussion of contingencies affecting certain Local Partnerships, see Note
3 to the financial statements. 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.
However, the
12
<PAGE>
Partnership's loss of its investment in a Local Partnership will eliminate the
ability to generate future tax credits from such Local Partnership and may also
result in recapture of tax credits if the investment is lost before the
expiration of the compliance period.
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 such ten year period.
If the General Partner determined that a sale of a property is warranted, the
remaining tax credits would transfer to the new owner, thereby adding value to
the property on the market, which are not included in the financial statement
carrying amount.
Results of Operations
Results of operations for the three months ended June 30, 1997 and 1996 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 Local Partnerships for the three
months ended June 30, 1997 continues to be in the form of rental income with
corresponding expenses divided among operations, depreciation and mortgage
interest.
Rental income increased approximately 3% for the three months ended June 30,
1997 as compared to the corresponding period in 1996 primarily due to rental
rate increases.
Total expenses, excluding general and administrative, general and
administrative-related parties and repairs and maintenance expenses remained
fairly consistent with a decrease of less than 1% for the three months ended
June 30, 1997 as compared to the corresponding period in 1996.
13
<PAGE>
General and administrative increased approximately $196,000 for the three months
ended June 30, 1997 as compared to the corresponding period in 1996 primarily
due to an increase in legal expenses and an adjustment in 1996 for the
overpayment of legal fees in 1995 at one Local Partnership.
General and administrative-related parties increased approximately $343,000 for
the three months ended June 30, 1997 as compared to the corresponding period in
1996 primarily due to an increase in partnership management fees and expense
reimbursements payable to the General Partners and an increase in property
management fees resulting from an increase in an incentive management fee at one
Local Partnership and the change at two other Local Partnerships from an
unaffiliated property manager to one which is an affiliate.
Repairs and maintenance increased approximately $122,000 for the three months
ended June 30, 1997 as compared to the corresponding period in 1996 primarily
due to increases at four Local Partnerships. There was an increase at one Local
Partnership due to the painting of the exterior of the buildings. The increase
at the second Local Partnership was due to the painting of apartments as a
result of tenant turnover and an underaccrual of a parking maintenance contract
in 1996. There was an increase at a third Local Partnership was due to roof
repairs caused by rain damage, painting of apartments and repairs to stoves and
refrigerators. The increase at the fourth Local Partnership was due to painting
of apartments as a result of tenant turnover, landscape improvements and repairs
to the building.
14
<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 8K -
No reports on Form 8-K were filed during the quarter.
<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.,
General Partner
Date: August 13, 1997
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: August 13, 1997
By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo,
Treasurer
(principal accounting officer)
By: LIBERTY G.P. III INC.,
a General Partner
Date: August 13, 1997
By: /s/ Paul L. Abbott
------------------
Paul L. Abbott,
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial Officer and Director
17
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,702,769
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,218,787
<PP&E> 303,933,411
<DEPRECIATION> 66,248,659
<TOTAL-ASSETS> 265,993,215
<CURRENT-LIABILITIES> 59,776,436
<BONDS> 200,440,978
0
0
<COMMON> 0
<OTHER-SE> 3,912,544
<TOTAL-LIABILITY-AND-EQUITY> 265,993,215
<SALES> 0
<TOTAL-REVENUES> 8,438,147
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,487,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,939,459
<INCOME-PRETAX> (3,988,557)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,988,557)
<EPS-PRIMARY> (28.14)
<EPS-DILUTED> 0
</TABLE>
