<PAGE>
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, 2000
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)
<TABLE>
<CAPTION>
============= =============
September 30, March 31,
2000 2000
------------- -------------
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $102,825,468 and $97,610,640,
respectively $204,708,606 $209,626,152
Cash and cash equivalents 5,064,345 5,124,712
Cash held in escrow 15,193,725 14,457,567
Deferred costs, net of accumulated
amortization of $1,838,414
and $1,742,585, respectively 3,657,040 3,257,295
Other assets 2,294,953 2,665,601
------------ ------------
Total assets $230,918,669 $235,131,327
============ ============
</TABLE>
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<TABLE>
<CAPTION>
============= =============
September 30, March 31,
2000 2000
------------- -------------
<S> <C> <C>
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $193,392,728 $194,516,380
Due to debt guarantor 36,918,936 34,817,045
Accounts payable and other
liabilities 24,717,882 22,395,278
Due to local general partners and
affiliates 14,915,644 15,489,515
Due to general partners and
affiliates 5,944,961 5,305,410
------------ ------------
Total liabilities 275,890,151 272,523,628
------------ ------------
Minority interest 750,637 1,226,088
------------ ------------
Commitments and contingencies
(Note 3)
Partners' deficit:
Limited partners (139,101.5 BACs
issued and outstanding) (44,029,441) (36,996,748)
General Partners (1,692,678) (1,621,641)
------------ ------------
Total partners' deficit (45,722,119) (38,618,389)
------------ ------------
Total liabilities and partners'
deficit $230,918,669 $235,131,327
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
=========================== ==========================
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2000 1999* 2000 1999*
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 8,360,100 $ 8,283,674 $16,768,136 $16,473,648
Other 742,641 586,959 1,229,611 1,064,961
------------ ------------ ----------- -----------
Total revenue 9,102,741 8,870,633 17,997,747 17,538,609
------------ ------------ ----------- -----------
Expenses
General and
administrative 1,760,149 1,553,832 3,692,909 3,367,550
General and
administrative-
related parties
(Note 2) 995,065 935,446 1,924,616 1,852,345
Operating 842,076 827,577 1,837,680 1,841,085
Repairs and
maintenance 1,466,313 1,335,770 2,675,104 2,551,911
Real estate taxes 595,646 564,254 1,182,052 1,151,643
Insurance 317,309 329,284 635,177 647,199
Interest 4,110,718 4,021,156 7,943,667 7,976,557
Depreciation and
amortization 2,705,784 2,663,681 5,310,657 5,292,810
------------ ------------ ----------- -----------
Total expenses 12,793,060 12,231,000 25,201,862 24,681,100
------------ ------------ ----------- -----------
Loss before
minority interest (3,690,319) (3,360,367) (7,204,115) (7,142,491)
Minority interest
in losses of
subsidiary
partnerships 66,717 65,434 100,385 131,018
------------ ------------ ----------- -----------
Net loss $ (3,623,602) $(3,294,933) $ (7,103,730) $(7,011,473)
============ =========== ============ ===========
Net loss - limited
partners $ (3,587,336) $(3,261,983) $ (7,032,693) $(6,941,358)
============ =========== ============ ===========
Number of BACs
outstanding 139,101.5 139,101.5 139,101.5 139,101.5
============ =========== ============ ===========
Net loss per BAC $ (25.79) $ (23.45) $ (50.56) $ (49.90)
============ =========== ============ ===========
</TABLE>
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
<TABLE>
<CAPTION>
==================================================
Limited General
Total Partners Partners
--------------------------------------------------
<S> <C> <C> <C>
Partners' deficit -
April 1, 2000 $(38,618,389) $(36,996,748) $(1,621,641)
Net loss (7,103,730) (7,032,693) (71,037)
------------ ------------ -----------
Partners' deficit -
September 30, 2000 $(45,722,119) $(44,029,441) $(1,692,678)
=========== =========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
=============================
Six Months Ended
September 30,
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(7,103,730) $(7,011,473)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 5,310,657 5,292,810
Minority interest in loss of
subsidiaries (100,385) (131,018)
Increase in accounts
payable and other liabilities 2,322,604 1,980,590
Increase in cash held in escrow (736,158) (737,038)
Decrease (increase) in other assets 370,648 (224,321)
Increase in due to general partners
and affiliates 639,551 780,418
Increase in due to local
general partners and affiliates 73,750 1,190,691
Decrease in due to local general
partners and affiliates (647,621) (1,200,909)
Increase in due to debt guarantor 2,101,891 2,056,879
---------- ---------
Net cash provided by operating
activities 2,231,207 1,996,629
---------- ---------
Cash flows from investing activities:
Acquisitions of property
and equipment (297,282) (656,210)
---------- ----------
Net cash used in investing activities (297,282) (656,210)
---------- ----------
</TABLE>
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(continued)
<TABLE>
<CAPTION>
=============================
Six Months Ended
September 30,
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
Cash flows from financing activities:
Principal payments of mortgage
notes payable (30,033,652) (1,142,844)
Borrowings on mortgage notes 28,910,000 0
Increase in deferred costs (495,574) 0
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (375,066) (230,811)
---------- ----------
Net cash used in financing activities (1,994,292) (1,373,655)
---------- ----------
Net decrease in cash and
cash equivalents (60,367) (33,236)
Cash and cash equivalents at
beginning of period 5,124,712 4,261,662
---------- ----------
Cash and cash equivalents at
end of period $ 5,064,345 $ 4,228,426
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-7-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(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", "Local Partnerships" 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 affiliate 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 intercompany 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
prepared and consolidated.
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 $60,000 and $55,000 and $119,000 and $115,000 for the
three and six months ended September 30, 2000 and 1999, respectively. The
Partnership's investment in each subsidiary is generally equal to the respective
-8-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
subsidiary 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 ("GAAP"). 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 September 30, 2000, the results of operations for the three
and six months ended September 30, 2000 and 1999 and its cash flows for the six
months ended September 30, 2000 and 1999. However, the operating results for the
six months ended September 30, 2000 may not be indicative of the results for the
year.
Certain information and note disclosure normally included in financial
statements prepared in accordance with GAAP 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, 2000.
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
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 and six months ended
September 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -------------------------
2000 1999 2000 1999
----------------------- -------------------------
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $358,500 $ 358,500 $ 717,000 $ 717,000
Expense reimburse-
ment (b) 73,937 60,040 123,270 101,572
Property manage-
ment fees incurred
to affiliates of the
General Partners (c) 45,619 45,423 92,537 90,579
Local administrative
fee (d) 33,000 49,000 66,000 98,000
-------- --------- ---------- ----------
Total general and
administrative-
General Partners 511,056 512,963 998,807 1,007,151
-------- --------- ---------- ----------
Property management
fees incurred
to affiliates of the
subsidiary
partnerships'
general
partners (c) 484,009 422,483 925,809 845,194
-------- --------- ---------- ----------
Total general and
administrative-
related parties $995,065 $ 935,446 $1,924,616 $1,852,345
======== ========= ========== ==========
</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 foregoing
limitation, will be determined by the General Partners in
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<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
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 $4,884,000 and $4,192,000 were accrued and unpaid at September 30,
2000 and March 31, 2000, respectively. Without the General Partners' continued
accrual without 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 Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.
(c) The subsidiary partnerships incurred property management fees amounting to
$610,678 and $542,494 and $1,186,689 and $1,093,355 for the three and six months
ended September 30, 2000 and 1999, respectively, of which $529,628 and $467,906
and $1,018,346 and $935,773 for the three and six months ended September 30,
2000 and 1999, respectively, were incurred to affiliates of the Local General
Partners. Included in amounts incurred to affiliates of the Local General
Partners were $45,619 and $45,423 and $92,537 and $90,579 for the three and six
months ended September 30, 2000 and 1999, 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 administrative fee of up to
$2,500 per year from each subsidiary partnership.
-11-
<PAGE>
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
Note 3 - Mortgage Note Payable
R.P.P. LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED PARTNERSHIP ("RIVER PLACE")
On May 18, 2000, River Place refinanced its existing indebtedness with the
issuance of new bonds with a face value of $28,910,000 from the Michigan State
Housing Development Authority (MSHDA) to provide funds to pay off the
outstanding balances on the two prior bond issues ($17,205,000 and $11,705,000).
The proceeds were used to pay the principal balance of $11,705,000 for the 1988
bonds on June 1, 2000. The sinking fund payment of $160,000 and accrued interest
of $326,288 was paid at the same time from funds provided by The General
Retirement System of the City of Detroit (GRS), as a loan to River Place. On
June 23, 2000, $17,205,000 was used to pay the outstanding principal balance of
the 1986 bonds. At the same time, $209,519 in accrued interest, also a loan from
GRS, was paid.
The new bonds bear interest at a weekly variable rate determined by the
remarketing agent, Merrill Lynch. Applicable interest rates have ranged from
3.85% to 5.05%. The bonds mature on June 1, 2018. Sinking fund payments in
various increasing amounts ranging from $500,000 to $1,200,000 are due on
December 1 and June 1 of each year until maturity with the first payment of
$500,000 due December 1, 2000.
Note 4 - 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, 2000.
-12-
<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
and (ii) cash distributions from the operations of the Local Partnerships.
As of September 30, 2000 the Partnership has invested all of the net proceeds in
62 Local Partnerships. Approximately $306,000 of the purchase price remains to
be paid (which includes approximately $282,000 held in escrow).
During the six months ended September 30, 2000, cash and cash equivalents of the
Partnership and its 62 consolidated Local Partnerships decreased approximately
$60,000. This decrease was attributable to acquisitions of property and
equipment ($297,000), principal payments of mortgage notes payable
($30,034,000), increase in deferred costs ($496,000) and a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
($375,000) which exceeded cash provided by operating activities ($2,231,000) and
borrowings on mortgage notes ($28,910,000). Included in the adjustments to
reconcile the net loss to cash provided by operating activities is depreciation
and amortization ($5,311,000) and an increase in due to debt guarantor of
($2,102,000).
The Partnership has a working capital reserve of approximately $422,000 at
September 30, 2000.
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,
2000, the amounts received from operations of the Local Partnerships
approximated $214,000.
Partnership management fees owed to the General Partners amounting to
approximately $4,884,000 and $4,192,000 were accrued and unpaid at September 30,
2000 and March 31, 2000, respectively. Without the General Partners' continued
accrual without payment of certain fees and expense reimbursements, the
Partnership will not be in a position to meet its obligations. The
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<PAGE>
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 Mortgage Notes Payable, see Note 3 to the financial
statements.
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 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. 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
diversification 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 balance of such ten year period.
If the General Partners determine 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 September 30, 2000 and
1999 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 benchmarks,
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<PAGE>
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, 2000 continues to be in the form of rental income
with corresponding expenses divided among operations, depreciation and mortgage
interest.
Rental income increased approximately 1% and 2% for the three and six months
ended September 30, 2000 as compared to the corresponding periods in 1999
primarily due to rental rate increases.
Total expenses, excluding general and administrative, remained fairly consistent
with increases of approximately 3% and 1% for the three and six months ended
September 30, 2000 as compared to the corresponding periods in 1999.
Other income increased approximately $156,000 and $165,000 for the three and six
months ended September 30, 2000 as compared to the corresponding periods in 1999
primarily due to a tax rebate received for real estate taxes for 1997, 1998, and
1999 at one Local Partnership and receipt of insurance proceeds for defective
siding at a second Local Partnership.
General and administrative expenses increased approximately $206,000 and
$325,000 for the three and six months ended September 30, 2000 as compared to
the corresponding periods in 1999 primarily due to the write-off of rent
receivables deemed to be uncollectable at one Local Partnership, the hiring of
additional personnel at a second Local Partnership and an increase in printing
costs at the Partnership level.
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
None.
-15-
<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.
-16-
<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 26, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Chief Executive Officer
(principal executive and financial officer)
Date: October 26, 2000
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
By: LIBERTY GP III INC.,
a General Partner
Date: October 26, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Chief Executive Officer
(principal executive and financial officer)
Date: October 26, 2000
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
<PAGE>
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 26, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Chief Executive Officer
(principal executive and financial officer)
Date: October 26, 2000
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
