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 September 30, 1999
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 Securi-
ties 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>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
September 30, March 31,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $90,799,065 and $85,609,050,
respectively $215,728,624 $220,262,429
Cash and cash equivalents 4,228,426 4,261,662
Cash held in escrow 15,907,777 15,170,739
Deferred costs, net of accumulated
amortization of $2,317,874
and $2,215,079, respectively 3,312,899 3,415,694
Other assets 2,448,844 2,224,523
Total assets $241,626,570 $245,335,047
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $195,360,726 $196,503,570
Due to debt guarantor 32,912,745 30,855,866
Accounts payable and other
liabilities 23,542,527 21,561,937
Due to local general partners and
affiliates 13,721,422 13,731,640
Due to general partners and
affiliates 4,461,588 3,681,170
Total liabilities 269,999,008 266,334,183
Minority interest 1,310,850 1,672,679
Commitments and contingencies
(Note 3)
Partners' deficit:
Limited partners (139,101.5 BACs
issued and outstanding) (28,150,998) (21,209,640)
General Partners (1,532,290) (1,462,175)
Total partners' deficit (29,683,288) (22,671,815)
Total liabilities and partners'
deficit $241,626,570 $245,335,047
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues
Rental income $8,283,674 $ 8,133,345 $16,473,648 $16,217,513
Other 586,959 608,218 1,064,961 1,112,190
Total revenue 8,870,633 8,741,563 17,538,609 17,329,703
Expenses
General and
administrative 1,541,514 1,563,222 3,342,914 3,284,031
General and
administrative-
related parties
(Note 2) 935,446 927,042 1,852,345 1,873,874
Operating 827,577 836,434 1,841,085 1,795,511
Repairs and
maintenance 1,348,088 1,297,454 2,576,547 2,492,590
Real estate taxes 564,254 522,423 1,151,643 1,076,724
Insurance 329,284 357,424 647,199 706,431
Interest 4,021,156 3,935,228 7,976,557 7,907,845
Depreciation and
amortization 2,663,681 2,749,752 5,292,810 5,484,433
Total expenses 12,231,000 12,188,979 24,681,100 24,621,439
Loss before
minority
interest (3,360,367) (3,447,416) (7,142,491) (7,291,736)
Minority interest
in losses of
subsidiary
partnerships 65,434 39,922 131,018 81,266
Net loss $(3,294,933) $(3,407,494) $(7,011,473) $(7,210,470)
Net loss -
limited
partners $(3,261,983) $(3,373,419) $(6,941,358) $(7,138,365)
Number of BACs
outstanding 139,101.5 139,101.5 139,101.5 139,101.5
Net loss per BAC $ (23.45) $ (24.25) $ (49.90) $ (51.32)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
<CAPTION>
Limited General
Total Partners Partner
<S> <C> <C> <C>
Partners' deficit -
April 1, 1999 $(22,671,815) $(21,209,640) $(1,462,175)
Net loss (7,011,473) (6,941,358) (70,115)
Partners' deficit -
September 30,
1999 $(29,683,288) $(28,150,998) $(1,532,290)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended
September 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(7,011,473) $(7,210,470)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 5,292,810 5,484,433
Minority interest in loss of
subsidiaries (131,018) (81,266)
Increase in accounts
payable and other liabilities 1,980,590 2,543,815
Increase in cash held in escrow (737,038) (1,074,150)
(Increase) decrease in other assets (224,321) 164,128
Increase in due to general partners
and affiliates 780,418 720,833
Increase in due to local
general partners and affiliates 1,190,691 84,804
Decrease in due to local general
partners and affiliates (1,200,909) (947,079)
Increase in due to debt guarantor 2,056,879 1,820,276
Net cash provided by operating
activities 1,996,629 1,505,324
Cash flows from investing activities:
Acquisitions of property
and equipment (656,210) (374,553)
Decrease in cash held in escrow 0 2,500
Net cash used in investing activities (656,210) (372,053)
Cash flows from financing activities:
Principal payments of mortgage
notes payable (1,142,844) (962,943)
Decrease in deferred costs 0 365
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (230,811) (230,496)
Net cash used in financing activities (1,373,655) (1,193,074)
Net decrease in cash and cash
equivalents (33,236) (59,803)
Cash and cash equivalents at
beginning of period 4,261,662 4,294,917
Cash and cash equivalents at
end of period $ 4,228,426 $ 4,235,114
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of
Liberty Tax Credit Plus III L.P. (the "Partnership") and 61 subsidi-
ary partnerships (the "subsidiary partnerships", "Local Partner-
ships" or "subsidiaries") 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 Related Credit Properties III
L.P. and Liberty G.P. III Inc., (the "General Partners"), which affili-
ate has a contractual obligation to act on behalf of the Partnership,
to remove the general partner of the subsidiary partnerships (each
a "Local General Partner") and to approve certain major operating
and financial decisions, the Partnership has a controlling financial
interest in the subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter
ends September 30. All subsidiaries have fiscal quarters ending
June 30. Accounts of the subsidiaries have been adjusted for inter-
company transactions from July 1 through September 30. The
Partnership's fiscal quarter ends September 30 in order to allow
adequate time for the subsidiaries financial statements to be pre-
pared and consolidated.
All intercompany accounts and transactions have been eliminated
in consolidation.
Increases (decreases) in the capitalization of consolidated subsidi-
aries 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 $55,000 and
$56,000 and $115,000 and $119,000 for the three and six months
ended September 30, 1999 and 1998, respectively. The Partner-
ship's investment in each subsidiary is generally equal to the re-
spective subsidiary partners' equity less minority interest capital, if
any. In consolidation, all subsidiary partnership losses are in-
cluded in the Partnership's capital account except for losses allo-
cated 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 Partner-
ship, 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 September 30, 1999, the results of operations for the three
and six months ended September 30, 1999 and 1998 and its cash
flows for the six months ended September 30, 1999 and 1998.
However, the operating results for the six months ended Septem-
ber 30, 1999 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 ac-
cepted accounting principles have been omitted or condensed.
These consolidated financial statements should be read in conjunc-
tion with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the period
ended March 31, 1999.
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. Affili-
ates of the General Partners also have a minority interest in certain
Local Partnerships.
<TABLE>
The costs incurred to related parties for the three and six months
ended September 30, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $ 358,500 $ 358,500 $717,000 $ 717,000
Expense reimburse-
ment (b) 60,040 66,043 101,572 139,499
Property manage-
ment fees incurred
to affiliates of the
General Partners (c) 45,423 39,185 90,579 81,519
Local administrative
fee (d) 49,000 47,000 98,000 94,000
Total general and
administrative-
General Partners 512,963 510,728 1,007,151 1,032,018
Property management
fees incurred
to affiliates of the
subsidiary
partnerships'
general
partners (c) 422,483 416,314 845,194 841,856
Total general and
administrative-
related parties $ 935,446 $ 927,042 $1,852,345 $1,873,874
</TABLE>
(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 fore-
going 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 distri-
butions 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 $3,475,000 and $2,758,000 were ac-
crued and unpaid at September 30, 1999 and March 31, 1999, re-
spectively. Without the General Partners' continued accrual with-
out payment of certain fees and expense reimbursements, the
Partnership will not be in a position to meet its obligations. The
General Partners have continued allowing the accrual without
payment of these amounts but are under no obligation to continue
to do so.
(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 Partner-
ship. These services include site visits and evaluations of the sub-
sidiary partnerships' performance.
(c) The subsidiary partnerships incurred property management
fees amounting to $542,494 and $527,621 and $1,093,355 and
$1,074,975 for the three and six months ended September 30, 1999
and 1998, respectively, of which $467,906 and $455,499 and
$935,773 and $923,375 for the three and six months ended Sep-
tember 30, 1999 and 1998, respectively, were incurred to affiliates
of the Local General Partners. Included in amounts incurred to
affiliates of the Local General Partners were $45,423 and $39,185
and $90,579 and $81,519 for the three and six months ended Sep-
tember 30, 1999 and 1998, respectively, which were also incurred
to affiliates of the General Partners.
(d) Liberty Associates IV L.P., a special limited partner of the
subsidiary partnerships, is entitled to receive a local administra-
tive fee of up to $2,500 per year from each subsidiary partnership.
Note 3 - Commitments and Contingencies
There were no material 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, 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Con-
dition and Results of Operations
Liquidity and Capital Resources
The Partnership's primary source of funds include (i) working
capital reserves and (ii) cash distributions from the operations of
the Local Partnerships.
As of September 30, 1999 the Partnership has invested all of the
net proceeds in 62 Local Partnerships. Approximately $1,229,000
of the purchase price remains to be paid (which includes approxi-
mately $939,000 held in escrow).
During the six months ended September 30, 1999, cash and cash
equivalents of the Partnership and its 62 consolidated Local Part-
nerships decreased by approximately $33,000. This decrease was
attributable to acquisitions of property and equipment ($656,000),
principal payments of mortgage notes payable ($1,143,000) and a
decrease in capitalization of consolidated subsidiaries attributable
to minority interest ($231,000) which exceeded cash flow provided
by operating activities ($1,997,000). Included in the adjustments to
reconcile the net loss to cash provided by operating activities is
depreciation and amortization ($5,293,000) and an increase in due
to debt guarantor of ($2,057,000).
The Partnership has a working capital reserve of approximately
$16,000 at September 30, 1999.
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 six months ended September 30, 1999, the amounts
received from operations of the Local Partnerships approximated
$103,000.
Partnership management fees owed to the General Partners
amounting to approximately $3,475,000 and $2,758,000 were ac-
crued and unpaid at September 30, 1999 and March 31, 1999, re-
spectively. Without the General Partners' continued accrual with-
out payment of certain fees and expense reimbursements, the
Partnership will not be in a position to meet its obligations. The
General Partners have continued allowing the accrual without
payment of these amounts but are under no obligation to continue
to do so.
For a discussion of contingencies affecting certain Local Partner-
ships, 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 con-
tingencies 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 prior to the end of the fifteenth anniversary after
the beginning of the tax 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. Manage-
ment 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 coun-
try is experiencing downturns in the economy, the remaining
properties in the portfolio may be experiencing upswings. How-
ever, the geographic diversification of the portfolio may not pro-
tect 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 balance of
such ten year period. If the General Partners 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 and six months ended Septem-
ber 30, 1999 and 1998 consisted 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 bench-
marks, 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 six months ended September 30, 1999 continues to
be in the form of rental income with corresponding expenses di-
vided among operations, depreciation and mortgage interest.
Rental income increased approximately 2% for both the three and
six months ended September 30, 1999 as compared to the corre-
sponding periods in 1998 primarily due to rental rate increases.
Total expenses remained fairly consistent with an increase of less
than 1% for both the three and six months ended September 30,
1999 as compared to the corresponding periods in 1998.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the
General Partners. The affiliate of the General Partners has up-
graded its computer information systems to be year 2000 compli-
ant. The most likely worst case scenario that the General Partners
face is that computer operations will be suspended for a few days
to a week commencing on January 1, 2000. The Partnership con-
tingency plan is to (i) have a complete backup done on December
31, 1999 and (ii) have both electronic and printed reports gener-
ated for all critical data up to and including December 31, 1999.
In regard to third parties, the General Partners are in the process
of evaluating the potential adverse impact that could result from
the failure of material service providers to be year 2000 compliant.
A detailed survey and assessment was sent to material third par-
ties in the fourth quarter of 1998. The Partnership has received
assurances from a majority of the material service providers with
which it interacts that they have addressed the year 2000 issues
and is evaluating these assurances for their adequacy and accu-
racy. In cases where the Partnership has not received assurances
from third parties, it is initiating further mail and/or phone corre-
spondence. The Partnership relies heavily on third parties and is
vulnerable to the failures of third parties to address their year 2000
issues. There can be no assurance given that the third parties will
adequately address their year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
None.
<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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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: October 21, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: October 21, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
By: LIBERTY GP III INC.,
a General Partner
Date: October 21, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: October 21, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
By: LIBERTY ASSOCIATES IV, L.P.,
a General Partner
By: Related Credit Properties III, L.P.,
its General Partner
By: Liberty GP III Inc.,
a General Partner
Date: October 21, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: October 21, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
<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 state-
ments
</LEGEND>
<CIK> 0000843076
<NAME> Liberty Tax Credit Plus III L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,228,426
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,356,621
<PP&E> 306,527,689
<DEPRECIATION> 90,799,065
<TOTAL-ASSETS> 241,626,570
<CURRENT-LIABILITIES> 74,638,282
<BONDS> 195,360,726
0
0
<COMMON> 0
<OTHER-SE> (28,372,438)
<TOTAL-LIABILITY-AND-EQUITY> 241,626,570
<SALES> 0
<TOTAL-REVENUES> 17,538,609
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,704,543
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,976,557
<INCOME-PRETAX> (7,142,491)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,011,473)
<EPS-BASIC> (49.90)
<EPS-DILUTED> 0
</TABLE>
