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 December 31, 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
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)
==============================
December 31, March 31,
1996 1996
------------ ------------
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $70,551,796 and $61,814,023,
respectively ............................ $262,551,893 $270,715,006
Cash and cash equivalents .................. 8,663,048 8,420,959
Cash held in escrow ........................ 16,181,954 16,832,443
Deferred costs, net of accumulated
amortization of $2,039,824
and $1,826,439, respectively ............ 3,676,331 3,845,726
Other assets ............................... 2,842,174 2,307,734
------------ ------------
Total assets ............................ $293,915,400 $302,121,868
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable .................. $200,580,457 $201,604,094
Due to debt guarantor ................... 21,633,681 18,971,667
Accounts payable and other
liabilities ............................ 23,506,838 21,196,194
Due to local general partners and
affiliates ............................. 12,481,968 13,117,342
Due to general partners and
affiliates ............................. 2,341,232 2,316,069
------------ ------------
Total liabilities ....................... 260,544,176 257,205,366
------------ ------------
Minority interest .......................... 1,436,458 1,763,731
------------ ------------
Commitments and contingencies (Note 4)
Partners' capital:
Limited partners (139,101.5) BACs
issued and outstanding ................. 32,850,875 43,956,700
General Partners ........................ (916,109) (803,929)
------------ ------------
Total partners' capital ................. 31,934,766 43,152,771
------------ ------------
Total liabilities and partners' capital .... $293,915,400 $302,121,868
============ ============
See Accompanying Notes to Consolidated Financial Statements
2
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LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
========================== ============================
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- ----------------------------
1996 1995* 1996 1995*
-------------------------- ----------------------------
Revenues
Rental income ... $ 7,922,093 $ 7,589,959 $ 23,415,227 $ 22,731,306
Other ........... 460,421 363,630 1,588,487 1,347,495
--------- --------- ---------- ----------
8,382,514 7,953,589 25,003,714 24,078,801
--------- --------- ---------- ----------
Expenses
General and
administrative . 1,774,768 1,483,651 4,971,631 4,837,959
General and
administrative-
related parties 669,768 654,860 2,002,260 1,964,321
Operating and
other .......... 914,939 841,877 2,775,326 2,543,208
Repairs and
maintenance .... 1,103,634 989,815 3,111,625 2,899,184
Real estate taxes 498,915 460,478 1,492,376 1,388,877
Insurance ....... 409,857 378,612 1,140,516 1,149,154
Interest ........ 3,973,944 3,893,527 11,890,515 11,762,992
Depreciation and
amortization ... 2,985,067 2,946,535 8,951,158 8,930,041
--------- --------- ---------- ----------
12,330,892 11,649,355 36,335,407 35,475,736
---------- ---------- ---------- ----------
Minority interest
in loss of
subsidiaries .... 36,072 37,114 113,688 108,061
---------- --------- ---------- ----------
Net loss ......... $(3,912,306) $(3,658,652) $(11,218,005) $(11,288,874)
========= ========= ========== ==========
Net loss per
BAC ............. $ (27.84) $ (26.04) $ (79.84) $ (80.34)
========= ========== ========== ==========
*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, 1996 .... $ 43,152,771 $ 43,956,700 $ (803,929)
Net loss .......... (11,218,005) (11,105,825) (112,180)
------------ ------------ -----------
Partners' capital -
December 31,
1996 $ 31,934,766 $ 32,850,875 $ (916,109)
============ ============ ===========
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase in Cash and Cash Equivalents
(Unaudited)
============================
Nine Months Ended
December 31,
----------------------------
1996 1995
----------------------------
Cash flows from operating activities:
Net loss ................................ $(11,218,005) $(11,288,874)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization ........... 8,951,158 8,930,041
Minority interest in loss of
subsidiaries ........................... (113,688) (108,061)
Increase in accounts payable
and other liabilities .................. 2,310,644 2,086,710
(Decrease) increase in cash held
in escrow .............................. 22,489 (932,566)
Increase in other assets ................ (534,440) (639,862)
Increase in due to general partners
and affiliates ......................... 25,163 533,128
Increase in due to local general
partners and affiliates ................ 260,390 361,441
Decrease in due to local general
partners and affiliates ................ (895,764) (580,758)
Increase in due to debt guarantor ....... 2,662,014 2,587,199
------------ ------------
Net cash provided by
operating activities ................... 1,469,961 948,398
------------ ------------
Cash flows provided by investing activities:
Acquisition of property and
equipment .............................. (574,660) (383,840)
Decrease in cash held in escrow ......... 628,000 978,302
------------ ------------
Net cash provided by investing
activities ............................. 53,340 594,462
------------ ------------
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase in Cash and Cash Equivalents
(continued)
(Unaudited)
============================
Nine Months Ended
December 31,
----------------------------
1996 1995
----------------------------
Cash flows used in financing activities:
Principal payments of mortgage
notes payable ...................... (1,023,637) (1,177,587)
Increase in deferred costs .......... (43,990) 0
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest .. (213,585) (151,159)
----------- -----------
Net cash used in financing
activities ......................... (1,281,212) (1,328,746)
----------- -----------
Net increase in cash and
cash equivalents .................... 242,089 214,114
Cash and cash equivalents at
beginning of period ................. 8,420,959 9,046,621
----------- -----------
Cash and cash equivalents at
end of period ....................... $ 8,663,048 $ 9,260,735
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 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). Through the rights of the Partnership and/or the General Partner,
which General Partner 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 local partnerships.
The Partnership's fiscal quarter ends December 31. All subsidiaries have fiscal
quarters ending September 30. Accounts of the subsidiaries have been adjusted
for intercompany transactions from October 1 through December 31.
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 $76,000 and $64,000 and $206,000 and $203,000 for the
three and nine months ended December 31, 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
7
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 1 - General (continued)
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 December
31, 1996, the Partnership has not recorded any provisions for loss on 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 December 31, 1996, the results of operations for the three and
nine months ended December 31, 1996 and 1995 and cash flows for the nine months
ended December 31, 1996 and 1995, respectively. However, the operating results
for the nine months ended December 31, 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.
8
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
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 and nine months ended December 31, 1996 and
1995 are as follows:
========================== ============================
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- ----------------------------
1996 1995* 1996 1995*
-------------------------- ----------------------------
Partnership
management
fees (a) ...... $187,500 $187,500 $ 562,500 $ 562,500
Expense
reimburse-
ment (b) ...... 69,068 50,305 141,192 139,791
Property manage-
ment fees (c) . 388,200 388,055 1,223,568 1,175,030
Local adminis-
trative fee (d) 25,000 29,000 75,000 87,000
-------- -------- ---------- ----------
$669,768 $654,860 $2,002,260 $1,964,321
======== ======== ========== ==========
*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). Partnership management fees owed
to the General Partners amounting to approximately $1,774,000 were accrued and
unpaid at both December 31, 1996 and March 31, 1996.
9
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 2 - Related Party Transactions (continued)
(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
$484,266 and $484,273 and $1,516,534 and $1,468,606 for the three and nine
months ended December 31, 1996 and 1995, respectively, of which $388,200 and
$388,055, and $1,223,568 and 1,175,030 for the three and nine months ended
December 31, 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 $18,307 and
$19,440 and $56,505 and $57,012 for the three and nine months ended December 31,
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 - Mortgage Notes Payable
As of December 31, 1995 Stop 22 Limited Partnership ("Stop 22") had nine months
interest in arrears, totaling $540,000. This constituted an event under which
the lender may have declared the mortgage obligation in default. During April
1996, Stop 22 completed a modification of its mortgage debt, effective November
1, 1995, which reduced the stated rate from 10% to 8% and the pay rate from 9%
to 7% resulting in a reduction of the monthly interest only payments from
$60,000 to $46,666. The interest rate on the accrued but unpaid interest (1%),
which had been at 10% was reduced to 8%. In connection with the modification the
interest in arrears was paid.
During June 1996, Las Camelias Limited Partnership completed a modification of
its mortgage debt, effective July 1, 1996, which reduced the stated rate from
10% to 8.25%, the pay rate from 9% to 7.25%, and extended the maturity date from
October 1, 2021 to
10
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 3 - Mortgage Notes Payable (continued)
June 1, 2026. The monthly payment which had been interest only in the
amount of $45,000 was reduced to a payment of principal and interest in the
amount of $40,931. The interest rate on the accrued but unpaid interest (1%),
which had been at 10% was reduced to 8.25%.
Note 4 - Commitments and Contingencies
The following disclosures include 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. See Note 3 for a
discussion of the resolution of the contingency regarding Stop 22.
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. The IRS commenced the examination on August 13, 1996 and completed its
field work in early September however, as of February 13, 1997, Wade D. Mertz
has not received notice that the IRS has concluded its audit.
R.P.P. Limited Dividend Housing Association Limited Partnership
- - ---------------------------------------------------------------
During the 1995, 1994 and 1993 Fiscal Years, R.P.P. Limited Dividend Housing
Association Limited Partnership ("River Place"), experienced significant losses
from operations.
River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Development Authority (the "Authority") whereby
the Authority issued Limited Obligation Revenue Bonds and loaned the proceeds to
River Place. The loans are nonrecourse and are collateralized by mortgages (the
"Mortgages") on River Place's properties (the "Properties"). The General
Retirement System of the City of Detroit ("GRS") has committed to purchase the
loans from the Authority if certain events occur. As of July 1, 1996, the
partnership agreement for River Place was amended and restated. Pursuant to that
agreement, a new general partner, GRS RP General Corp. (the "New GP"), which is
controlled by the GRS, was admitted to River Place and the prior general
partner, River Place Plaza, became an additional limited partner. The
Partnership's interest in profits and losses and tax credits of River Place was
not affected by that
11
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 4 - Commitments and Contingencies (continued)
agreement. At the same time, the GRS executed a letter agreement which provides
that it will not enter into foreclosure proceedings on the Mortgages prior to
February 1, 2006, so long as the New GP does not meet with any interference in
connection with operation of the Properties or management of River Place. In
addition, the revised partnership agreement of River Place provides that the New
GP can only cause River Place to sell the Properties prior to February 1, 2006
to an unrelated third party on an arms-length basis. Any other transfer of the
Properties prior to that date requires the consent of the Special Limited
Partner. At any time after February 1, 2006, the New GP can make a capital call
on the Partnership in an amount up to the Partnership's share of any outstanding
indebtedness of River Place. The obligation to meet such capital call is without
recourse to the Partnership, with the sole remedy for failure to comply being
seizure of the Partnership's interest in River Place. The Partial Guaranty of
Payment dated August 1, 1988 in connection with the issuance of the Junior Bonds
was fully and completely discharged and River Place Holdings, Inc. ("Guarantor")
and all of its shareholders, directors, officers, agents and employees were
fully and completely released from any liability arising out of or in connection
with the Guaranty. In the event of foreclosure there would be substantial
forgiveness of indebtness income since the carrying value of the property is
less than the carrying value of the mortgage and amount due to debt guarantor.
In addition there would be no effect on liquidity since the mortgage is
nonrecourse to River Place.
River Place was unable to make certain required debt service payments during the
nine months ended December 31, 1996 and the 1995, 1994 and 1993 Fiscal Years and
as a result was declared in default under its obligation and was required to
appoint, MIG Management Services, Inc. ("MMS"), an agent of GRS as manager of
the apartments. It is anticipated that the subsidiary partner-
ship will be unable to make the required debt service payments in 1997.
Unpaid principal and interest for the nine months ended December 31, 1996 and
the 1995, 1994 and 1993 fiscal years was paid by the GRS on behalf of River
Place and is included in the Partnership's Consolidated Balance Sheets under the
caption Due to Debt Guarantor. River Place accrues interest on the amounts paid
by GRS at a rate of 15%. River Place also did not pay certain fees owed to GRS
totaling $2,052,912 and $1,740,950 at December 31, 1996 and March 31, 1996,
respectively which are included in accounts payable.
12
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 4 - Commitments and Contingencies (continued)
The financial statements of River Place have been prepared assuming that River
Place will continue as a going concern. River Place's difficulties in generating
sufficient cash flow to sustain operations and repay indebtedness raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. The Partnership's investment in River Place has
been written down to zero by prior years' losses and the minority interest
balance was zero at both December 31, 1996 and March 31, 1996. River Place's net
loss after minority interest amounted to approximately $1,362,000 and $1,078,000
and $3,435,000 and $3,309,000 for the three and nine months ended December 31,
1996 and 1995, respectively.
Williamsburg Residential II, L.P.
- - ---------------------------------
In January 1997 the underlying mortgage note of Williamsburg Residential II,
L.P. ("Williamsburg II") was accelerated by the lender due to the non-payment of
the required monthly installments due for November 1996 through January 1997 and
the transfer of the general partnership interest which constituted events of
default. On January 27, 1997, Williamsburg II entered into a forbearance
agreement with the lender to temporarily forestall or postpone the further
exercising of the lender's remedies while Williamsburg II negotiates a workout
agreement. The forbearance agreement which expires March 27, 1997 required a
payment of $74,674 upon execution and requires payment by the fifteenth of
February and the fifteenth of March of all net operating income for the
preceding month (with certified rent rolls and certified operating statements
sent to the lender) which will be applied to amounts due and owing under the
loan documents. At the end of the forbearance period if Williamsburg II has not
paid in full all amounts due and owing under the loan documents or entered into
a written workout agreement with the lender, the lender may proceed with
lender's remedies without any notice or demand to Williamsburg II. The
Partnership's investment in Williamsburg II at December 31, 1996
and March 31, 1996 was approximately $796,000 and $849,000, respectively, and
the minority interest balance was zero at each date. Williamsburg II's net
income (loss) after minority interest amounted to approximately ($30,000) and
$8,000 and ($53,000) and ($5,000) for the three and nine months ended December
31, 1996 and 1995, respectively.
13
<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 December 31, 1996 the Partnership has invested all of the net proceeds in
62 Local Partnerships. Approximately $1,548,000 of the purchase price remains to
be paid (which includes approximately $1,259,000 held in escrow). During the
nine months ended December 31, 1996, approximately $628,000 was paid to the
Local Partnerships, all of which was released from escrow.
During the nine months ended December 31, 1996, cash and cash equivalents of the
Partnership and its 62 consolidated Local Partnerships increased by
approximately $242,000. This increase was primarily attributable to cash flow
from operations ($1,470,000) and a decrease in cash held in escrow ($628,000)
which exceeded mortgage principal payments ($1,024,000), a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
($214,000), capital improvements ($575,000), and an increase in deferred costs
($44,000). Included in the adjustments to reconcile the net loss to cash flow
from operations is depreciation and amortization in the amount ($8,951,000) and
an increase in due to debt guarantor ($2,662,000).
The Partnership has a working capital reserve in the original amount of 3.5% of
gross equity raised of which approximately $3,514,000 and $4,203,000 remain
unused at December 31, 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 nine months ended December 31, 1996 and
1995, the amounts received from operations of the Local Partnerships
approximated $81,000 and $69,000, respectively.
As of December 31, 1995 Stop 22 Limited Partnership ("Stop 22") had nine months
interest in arrears, totaling $540,000. This constituted an event under which
the lender may have declared the mortgage obligation in default. During April
1996, Stop 22 completed a modification of its mortgage debt, effective November
1,
14
<PAGE>
1995, which reduced the stated rate from 10% to 8% and the pay rate from 9% to
7% resulting in a reduction of the monthly interest only payments from $60,000
to $46,666. The interest rate on the accrued but unpaid interest (1%), which had
been at 10% was reduced to 8%. In connection with the modification the interest
in arrears was paid.
During June 1996, Las Camelias Limited Partnership completed a modification of
its mortgage debt, effective July 1, 1996, which reduced the stated rate from
10% to 8.25%, the pay rate from 9% to 7.25%, and extended the maturity date from
October 1, 2021 to June 1, 2026. The monthly payment which had been interest
only in the amount of $45,000 was reduced to a payment of principal and interest
in the amount of $40,931. The interest rate on the accrued but unpaid interest
(1%), which had been at 10% was reduced to 8.25%.
For a discussion of contingencies affecting certain Local Partnerships, see Note
4 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 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 credit 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 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.
15
<PAGE>
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.
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 December
31, 1996, the Partnership has not recorded any provisions for loss on impairment
of assets or reduction to estimated fair value.
Results of operations for the three and nine months ended December 31, 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 Local Partnerships for the three and
nine months ended December 31, 1996 continues to be in the form of rental income
with corresponding expenses divided among operations, depreciation and mortgage
interest.
Rental income increased approximately 4% and 3% for the three and nine months
ended December 31, 1996 as compared to the corresponding periods in 1995,
primarily due to rental rate increases.
16
<PAGE>
Other income increased approximately $97,000 and $241,000 for the three and nine
months ended December 31, 1996 as compared to the corresponding periods in 1995.
The increase during the three months was primarily due to an overstatement of
such income at one Local Partnership in the second quarter of 1995 which was
corrected in the third quarter of 1995 and an under accrual of interest at
another Local Partnership in 1995. The increase during the nine months was
primarily due to increases at four Local Partnerships. There was an increase at
one Local Partnership due to interest earned for several years on an escrow
account which was recognized in the second quarter of 1996. Another Local
Partnership received a charitable contribution for the establishment of a summer
youth program. There was an increase at a third Local Partnership due to the
receipt of funds from an insurance claim as a result of fire damage in the first
quarter. The increase at the fourth Local Partnership was due to an under
accrual of interest in 1995.
Total expenses, excluding general and administrative and repairs and maintenance
expenses remained fairly consistent, with increases of approximately 3% and 2%
for the three and nine months ended December 31, 1996 as compared to the
corresponding periods in 1995.
General and administrative increased approximately $291,000 for the three months
ended December 31, 1996 as compared to the corresponding period in 1995
primarily due to an under accrual of a letter of credit fee at one Local
Partnership in 1995.
Repairs and maintenance increased approximately $114,000 for the three months
ended December 31, 1996 as compared to the corresponding period in 1995. This
increase was primarily due to increases at three Local Partnerships. There was
an increase at one Local Partnership due to the replacement of counter tops and
cabinet doors. The increase at the second Local Partnership was due to the
conversion of fourteen wood entry doors to steel doors, the addition of handicap
access ramps, and the upgrade of the hydroneumatic water pump system. The
increase at the third Local Partnership was due to the replacement of carpeting
with vinyl tile in high traffic areas, the repainting of hallways and doors and
the repair and repainting of ceilings and walls due to water damage caused by
high winds and heavy rains.
17
<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.
18
<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: February 13, 1997
By:/s/ Alan P. Hirmes
-------------------
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: February 13, 1997
By:/s/ Richard A. Palermo
-----------------------
Richard A. Palermo,
Treasurer
(principal accounting officer)
By: LIBERTY G.P. III INC.,
a General Partner
Date: February 13, 1997
By:/s/ Paul L. Abbott
------------------
Paul L. Abbott,
Chairman of the Board, President,
Chief Operating Officer and Director
19
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,663,048
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,700,459
<PP&E> 333,103,689
<DEPRECIATION> 70,551,796
<TOTAL-ASSETS> 293,915,400
<CURRENT-LIABILITIES> 59,963,719
<BONDS> 200,580,457
0
0
<COMMON> 0
<OTHER-SE> 33,371,224
<TOTAL-LIABILITY-AND-EQUITY> 293,915,400
<SALES> 0
<TOTAL-REVENUES> 25,003,714
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,444,892
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,890,515
<INCOME-PRETAX> (11,331,693)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,331,693)
<EPS-PRIMARY> (79.84)
<EPS-DILUTED> 0
</TABLE>
