UNITED STATES
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 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-19217
American Tax Credit Properties III L.P.
(Exact name of Registrant as specified in its charter)
Delaware 13-3545006
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Richman Tax Credit Properties III L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut
06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
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 filing requirements
for the past 90 days.
Yes X No __.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Table of Contents Page
----
Balance Sheets........................................................3
Statements of Operations..............................................4
Statements of Cash Flows..............................................5
Notes to Financial Statements.........................................7
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
BALANCE SHEETS
(UNAUDITED)
September 29, March 30,
Notes 2000 2000
----- ---- ----
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 249,902 $ 873,709
Investments in bonds 2 3,103,428 2,452,950
Investment in local partnerships 3 3,881,374 4,236,668
Interest receivable 31,217 16,628
------------- -------------
$ 7,265,921 $ 7,579,955
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,165,224 $ 1,181,877
Payable to general partner 1,420,228 1,246,404
Other 2,200 6,950
------------- -------------
2,587,652 2,435,231
------------- -------------
Partners' equity (deficit)
General partner (267,762) (262,775)
Limited partners (35,883 units of limited partnership
interest outstanding) 5,021,165 5,514,902
Accumulated other comprehensive loss, net 2 (75,134) (107,403)
------------- -------------
4,678,269 5,144,724
------------- -------------
$ 7,265,921 $ 7,579,955
============= =============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Six Months Three Months Six Months
Ended September Ended September Ended September Ended September
Notes 29, 2000 29, 2000 29, 1999 29, 1999
----- -------- -------- -------- --------
REVENUE
<S> <C> <C> <C> <C> <C>
Interest $ 58,398 $ 115,576 $ 55,843 $ 112,609
Other income from local partnerships 3 1,580 1,580 2,587 6,759
---------- ----------- ---------- ------------
TOTAL REVENUE 59,978 117,156 58,430 119,368
---------- ----------- ---------- ------------
EXPENSES
Administration fees 57,643 115,286 57,642 115,285
Management fees 57,643 115,286 57,642 115,285
Professional fees 12,818 22,989 14,316 20,671
Printing, postage and other 5,828 10,284 3,950 9,858
---------- ----------- ---------- ------------
TOTAL EXPENSES 133,932 263,845 133,550 261,099
---------- ----------- ---------- ------------
Loss from operations (73,954) (146,689) (75,120) (141,731)
Equity in loss of investment in local
partnerships 3 (145,784) (352,035) (466,503) (873,797)
---------- ----------- ---------- ------------
NET LOSS (219,738) (498,724) (541,623) (1,015,528)
Other comprehensive income (loss) 2 25,253 32,269 (36,062) (117,359)
---------- ----------- ---------- ------------
COMPREHENSIVE LOSS $(194,485) $ (466,455) $ (577,685) $(1,132,887)
========= =========== ========== ===========
NET LOSS ATTRIBUTABLE TO
General partner $ (2,198) $ (4,987) $ (5,416) $ (10,155)
Limited partners (217,540) (493,737) (536,207) (1,005,373)
---------- ----------- ---------- ------------
$(219,738) $ (498,724) $ (541,623) $(1,015,528)
========= =========== ========== ===========
NET LOSS per unit of limited partnership
interest (35,883 units of limited
partnership interest) $ (6.06) $ (13.76) $ (14.95) $ (28.02)
========= =========== ========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 29, 2000 AND 1999
(UNAUDITED)
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Interest received $ 76,906 $ 80,507
Cash used for local partnerships for deferred expenses (4,750)
Cash paid for
administration fees (6,748) (50,000)
management fees (50,000) (50,000)
professional fees (43,331) (44,829)
printing, postage and other expenses (6,595) (556)
---------- ---------
Net cash used in operating activities (34,518) (64,878)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in bonds (including accrued interest of $14,838) (610,910)
Cash distributions and other income from local partnerships 4,839 20,167
Maturities/redemptions of bonds 16,782 248,764
---------- ---------
Net cash provided by (used in) investing activities (589,289) 268,931
---------- ---------
Net increase (decrease) in cash and cash equivalents (623,807) 204,053
Cash and cash equivalents at beginning of period 873,709 567,613
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 249,902 $ 771,666
========= =========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds, net $ 32,269 $(117,359)
========= =========
======================================================================================
See reconciliation of net loss to net cash used in operating activities on page 6.
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS - (Continued)
SIX MONTHS ENDED SEPTEMBER 29, 2000 AND 1999
(UNAUDITED)
2000 1999
---- ----
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(498,724) $(1,015,528)
Adjustments to reconcile net loss to net cash used in operating activities
Equity in loss of investment in local partnerships 352,035 873,797
Distributions from local partnerships classified as other income (1,580) (6,759)
Amortization of net premium on investments in bonds 4,445 6,577
Accretion of zero coupon bonds (43,364) (43,364)
Decrease in interest receivable 249 4,685
Increase (decrease) in accounts payable and accrued expenses (16,653) 50,429
(4,750)
Decrease in other liabilities
Increase in payable to general partner 173,824 65,285
--------- -----------
NET CASH USED IN OPERATING ACTIVITIES $ (34,518) $ (64,878)
========= ===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 29, 2000
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations are impacted significantly by the
combined results of operations of the Local Partnerships, which are
provided by the Local Partnerships on an unaudited basis during interim
periods. Accordingly, the accompanying financial statements are dependent
on such unaudited information. In the opinion of the General Partner, the
financial statements include all adjustments necessary to present fairly
the financial position as of September 29, 2000 and the results of
operations and cash flows for the interim periods presented. All
adjustments are of a normal recurring nature. The results of operations for
the three and six month periods ended September 29, 2000 are not
necessarily indicative of the results that may be expected for the entire
year.
2. Investments in Bonds
As of September 29, 2000, certain information concerning investments in
bonds is as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair value
------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C> <C>
Corporate debt securities
Within one year $ 151,112 $ -- $ (109) $ 151,003
After one year through five years 898,340 319 (1,592) 897,067
After five years through ten years 703,982 4,033 (20,738) 687,277
After ten years 203,982 -- (6,000) 197,982
-------------- ------------- ------------- -------------
1,957,416 4,352 (28,439) 1,933,329
-------------- ------------- ------------- -------------
U.S. Treasury debt securities
After five years through ten years 1,221,146 -- (51,047) 1,170,099
-------------- ------------- ------------- -------------
$ 3,178,562 $ 4,352 $ (79,486) $ 3,103,428
============== ============= ============= =============
</TABLE>
7
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership owns limited partnership interests in forty-three Local
Partnerships representing capital contributions in the aggregate amount of
$29,264,476. As of June 30, 2000, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $85,487,000 and accrued
interest payable on such loans totaling approximately $3,022,000, which are
secured by security interests and liens common to mortgage loans on the
Local Partnerships' real property and other assets.
For the six months ended September 29, 2000, the investment in local
partnerships activity consists of the following:
Investment in local partnerships as of March 30, 2000 $4,236,668
Equity in loss of investment in local partnerships (352,035)*
Cash distributions received from Local Partnerships (4,839)
Cash distributions from Local Partnerships classified
as other income 1,580
----------
Investment in local partnerships as of
September 29, 2000 $3,881,374
==========
* Equity in loss of investment in local partnerships is limited to the
Partnership's investment balance in each Local Partnership; any excess is
applied to other partners' capital in any such Local Partnership. The
amount of such excess losses applied to other partners' capital was
$1,271,669 for the six months ended June 30, 2000 as reflected in the
combined statement of operations of the Local Partnerships reflected
herein Note 3.
The combined unaudited balance sheets of the Local Partnerships as of June
30, 2000 and December 31, 1999 and the combined unaudited statements of
operations of the Local Partnerships for the three and six month periods
ended June 30, 2000 and 1999 are reflected on pages 9 and 10, respectively.
8
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of June 30, 2000
and December 31, 1999 are as follows:
June 30, December 31,
2000 1999
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,240,829 $ 1,515,733
Rents receivable 378,007 415,459
Escrow deposits and reserves 4,855,302 4,772,669
Land 3,910,215 3,910,215
Buildings and improvements (net of accumulated depreciation
of $37,034,061 and $35,035,895) 76,526,084 78,393,812
Intangible assets (net of accumulated amortization of
$502,070 and $490,393)
649,923 670,822
Other 1,134,492 845,257
------------ ------------
$ 88,694,852 $ 90,523,967
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 928,014 $ 599,251
Due to related parties 4,913,651 5,028,110
Mortgage loans 85,486,237 85,793,473
Notes payable 14,553 16,893
Accrued interest 3,021,845 2,826,511
Other 669,696 866,170
------------ ------------
95,033,996 95,130,408
------------ ------------
Partners' equity (deficit)
American Tax Credit Properties III L.P.
Capital contributions, net of distributions 28,940,289 28,965,604
Cumulative loss (24,867,317) (24,515,282)
------------ ------------
4,072,972 4,450,322
------------ ------------
General partners and other limited partners, including ATCP II
Capital contributions, net of distributions (236,651) (199,479)
Cumulative loss (10,175,465) (8,857,284)
------------ ------------
(10,412,116) (9,056,763)
------------ ------------
(6,339,144) (4,606,441)
------------ ------------
$ 88,694,852 $ 90,523,967
============ ============
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
three and six month periods ended June 30, 2000 and 1999 are as follows:
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 2000 1999 1999
---- ---- ---- ----
REVENUE
<S> <C> <C> <C> <C>
Rental $ 2,748,447 $ 5,409,340 $ 2,647,066 $ 5,341,777
Interest and other 176,814 250,899 79,217 156,361
----------- ----------- ----------- -----------
Total Revenue 2,925,261 5,660,239 2,726,283 5,498,138
----------- ----------- ----------- -----------
EXPENSES
Administrative 601,869 1,167,320 538,111 1,035,871
Utilities 272,495 591,411 243,980 549,911
Operating, maintenance and other 578,871 1,287,258 732,981 1,322,589
Taxes and insurance 310,598 628,214 307,508 628,286
Financial (including amortization of $10,358,
$20,899, $11,446 and $22,894) 831,938 1,658,086 839,031 1,678,897
Depreciation 999,351 1,998,166 1,006,085 2,006,509
----------- ----------- ----------- -----------
Total Expenses 3,595,122 7,330,455 3,667,696 7,222,063
----------- ----------- ----------- -----------
NET LOSS $ (669,861) $(1,670,216) $ (941,413) $(1,723,925)
=========== =========== =========== ===========
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties III L.P. $ (145,784) $ (352,035) $ (466,503) $ (873,797)
General partners and other limited
partners, including ATCP II, which
includes $537,995, $1,271,669, $401,694
and $727,932 of Partnership loss in
excess of investment (524,077) (1,318,181) (474,910) (850,128)
----------- ----------- ----------- -----------
$ (669,861) $(1,670,216) $ (941,413) $(1,723,925)
=========== =========== =========== ===========
</TABLE>
The combined results of operations of the Local Partnerships for the three
and six month periods ended June 30, 2000 are not necessarily indicative of
the results that may be expected for an entire operating period.
4. Additional Information
Additional information, including the audited March 30, 2000 Financial
Statements and the Organization, Purpose and Summary of Significant
Accounting Policies, is included in the Partnership's Annual Report on Form
10-K for the fiscal year ended March 30, 2000 on file with the Securities
and Exchange Commission.
10
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
As of September 29, 2000, American Tax Credit Properties III L.P. (the
"Registrant") has not experienced a significant change in financial condition as
compared to March 30, 2000. Principal changes in assets are comprised of
periodic transactions and adjustments and anticipated equity in loss from
operations of the local partnerships (the "Local Partnerships") which own
low-income multifamily residential complexes (the "Properties") which qualify
for the low-income tax credit in accordance with Section 42 of the Internal
Revenue Code (the "Low-income Tax Credit"). During the six months ended
September 29, 2000, Registrant received cash from interest revenue,
maturities/redemptions of bonds and distributions from local partnerships and
utilized cash for operating expenses and investments in bonds. Cash and cash
equivalents and investments in bonds increased, in the aggregate, by
approximately $27,000 during the six months ended September 29, 2000 (which
includes a net unrealized gain on investments in bonds of approximately $32,000,
the amortization of net premium on investments in bonds of approximately $4,000
and the accretion of zero coupon bonds of approximately $43,000).
Notwithstanding circumstances that may arise in connection with the Properties,
Registrant does not expect to realize significant gains or losses on its
investments in bonds, if any. During the six months ended September 29, 2000,
the investment in local partnerships decreased as a result of Registrant's
equity in the Local Partnerships' net loss for the six months ended June 30,
2000 of $352,035 and cash distributions received from Local Partnerships of
$4,839 (exclusive of distributions from Local Partnerships of $1,580 classified
as other income from local partnerships). Accounts payable and accrued expenses
includes deferred administration fees of $1,136,673 and payable to general
partner represents deferred management and administration fees in the
accompanying balance sheet as of September 29, 2000.
Results of Operations
Registrant's operating results are dependent upon the operating results of the
Local Partnerships and are significantly impacted by the Local Partnerships'
policies. In addition, the operating results herein are not necessarily the same
for tax reporting. Registrant accounts for its investment in local partnerships
in accordance with the equity method of accounting. Accordingly, the investment
is carried at cost, which includes capital contributions payable, and is
adjusted for Registrant's share of each Local Partnership's results of
operations and by cash distributions received. Equity in loss of each investment
in Local Partnership allocated to Registrant is recognized to the extent of
Registrant's investment balance in each Local Partnership. Equity in loss in
excess of Registrant's investment balance in a Local Partnership is allocated to
other partners' capital in any such Local Partnership. As a result, the reported
equity in loss of investment in local partnerships is expected to decrease as
Registrant's investment balances in the respective Local Partnerships become
zero. The combined statements of operations of the Local Partnerships reflected
in Note 3 to Registrant's financial statements include the operating results of
all Local Partnerships, irrespective of Registrant's investment balances.
Cumulative losses and cash distributions in excess of investment in local
partnerships may result from a variety of circumstances, including a Local
Partnership's accounting policies, subsidy structure, debt structure and
operating deficits, among other things. Accordingly, cumulative losses and cash
distributions in excess of the investment are not necessarily indicative of
adverse operating results of a Local Partnership. See discussion below under
Local Partnership Matters regarding certain Local Partnerships currently
operating below economic break even levels.
Registrant's operations for the three months ended September 29, 2000 and 1999
resulted in net losses of $219,738 and $541,623, respectively. The decrease in
net loss is primarily attributable to a decrease in equity in loss of investment
in local partnerships, which decrease of approximately $321,000 is primarily the
result of (i) a decrease in the net operating losses of certain Local
Partnerships and (ii) an increase in the nonrecognition of losses in excess of
Registrant's investment in local partnerships in accordance with the equity
method of accounting. Other comprehensive income (loss) for the three months
ended September 29, 2000 and 1999 resulted from a net unrealized gain (loss) on
investments in bonds of $25,253 and $(36,062), respectively.
11
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The Local Partnerships' net loss of approximately $670,000 for the three months
ended June 30, 2000 was attributable to rental and other revenue of
approximately $2,925,000, exceeded by operating and interest expense (including
interest on non-mandatory debt) of approximately $2,585,000 and approximately
$1,010,000 of depreciation and amortization expense. The Local Partnerships' net
loss of approximately $941,000 for the three months ended June 30, 1999 was
attributable to rental and other revenue of approximately $2,726,000, exceeded
by operating and interest expense (including interest on non-mandatory debt) of
approximately $2,650,000 and approximately $1,017,000 of depreciation and
amortization expense. The results of operations of the Local Partnerships for
the three months ended June 30, 2000 are not necessarily indicative of the
results that may be expected in future periods.
Registrant's operations for the six months ended September 29, 2000 and 1999
resulted in net losses of $498,724 and $1,015,528, respectively. The decrease in
net loss is primarily attributable to a decrease in equity in loss of investment
in local partnerships, which decrease of approximately $522,000 is primarily the
result of (i) a decrease in the net operating losses of certain Local
Partnerships and (ii) an increase in the nonrecognition of losses in excess of
Registrant's investment in local partnerships in accordance with the equity
method of accounting. Other comprehensive income (loss) for the six months ended
September 29, 2000 and 1999 resulted from a net unrealized gain (loss) on
investments in bonds of $32,269 and $(117,359), respectively.
The Local Partnerships' net loss of approximately $1,670,000 for the six months
ended June 30, 2000 was attributable to rental and other revenue of
approximately $5,660,000, exceeded by operating and interest expense (including
interest on non-mandatory debt) of approximately $5,311,000 and approximately
$2,019,000 of depreciation and amortization expense. The Local Partnerships' net
loss of approximately $1,724,000 for the six months ended June 30, 1999 was
attributable to rental and other revenue of approximately $5,498,000, exceeded
by operating and interest expense (including interest on non-mandatory debt) of
approximately $5,193,000 and approximately $2,029,000 of depreciation and
amortization expense. The results of operations of the Local Partnerships for
the six months ended June 30, 2000 are not necessarily indicative of the results
that may be expected in future periods.
Local Partnership Matters
Registrant's primary objective is to provide Low-income Tax Credits to limited
partners generally over a ten year period. The relevant state tax credit agency
has allocated each of Registrant's Local Partnerships an amount of Low-income
Tax Credits, which are generally available for a ten year period from the year
the Property is placed in service (the "Ten Year Credit Period"). The Ten Year
Credit Period is expected to be fully exhausted by the Local Partnerships as of
December 31, 2003. The required holding period of each Property, in order to
avoid Low-income Tax Credit recapture, is fifteen years from the year in which
the Low-income Tax Credits commence on the last building of the Property (the
"Compliance Period"). In addition, certain of the Local Partnerships have
entered into agreements with the relevant state tax credit agencies whereby the
Local Partnerships must maintain the low-income nature of the Properties for a
period which exceeds the Compliance Period, regardless of any sale of the
Properties by the Local Partnerships after the Compliance Period. The Properties
must satisfy various requirements including rent restrictions and tenant income
limitations (the "Low-income Tax Credit Requirements") in order to maintain
eligibility for the recognition of the Low-income Tax Credit at all times during
the Compliance Period. Once a Local Partnership has become eligible for the
Low-income Tax Credit, it may lose such eligibility and suffer an event of
recapture if its Property fails to remain in compliance with the Low-income Tax
Credit Requirements. Through December 31, 1999, none of the Local Partnerships
have suffered an event of recapture of Low-income Tax Credits.
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. Many of the Local Partnerships receive rental subsidy payments,
including payments under Section 8 of Title II of the Housing and Community
Development Act of 1974 ("Section 8"). The subsidy agreements expire at various
times during and after the Compliance Periods of the Local Partnerships. Since
October 1997, the United States Department of Housing and Urban Development
("HUD") has issued a series of directives related to project based Section 8
contracts that define owners' notification responsibilities, advise owners of
project based Section 8 properties of what their options are regarding the
renewal of Section 8 contracts, provide guidance and procedures to owners,
management agents, contract administrators and HUD staff concerning renewal of
Section 8 contracts, provide policies and procedures on setting renewal rents
and handling renewal rent adjustments and provide the requirements and
procedures for opting-out of a Section 8 project based contract. Registrant
cannot reasonably predict legislative initiatives and governmental
12
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
budget negotiations, the outcome of which could result in a reduction in funds
available for the various federal and state administered housing programs
including the Section 8 program. Such changes could adversely affect the future
net operating income and debt structure of any or all Local Partnerships
currently receiving such subsidy or similar subsidies. One Local Partnership's
Section 8 contracts are currently subject to renewal under applicable HUD
guidelines.
The Local Partnerships have various financing structures which include (i)
required debt service payments ("Mandatory Debt Service") and (ii) debt service
payments which are payable only from available cash flow subject to the terms
and conditions of the notes, which may be subject to specific laws, regulations
and agreements with appropriate federal and state agencies ("Non-Mandatory Debt
Service or Interest"). During the six months ended June 30, 2000, revenue from
operations of the Local Partnerships have generally been sufficient to cover
operating expenses and Mandatory Debt Service. Substantially all of the Local
Partnerships are effectively operating at or near break even levels, although
certain Local Partnerships' operating information reflects operating deficits
that do not represent cash deficits due to their mortgage and financing
structure and the required deferral of property management fees. However, as
discussed below, certain Local Partnerships' operating information indicates
below break even operations after taking into account their mortgage and
financing structure and any required deferral of property management fees.
The terms of the partnership agreement of Westminster require the Local General
Partner to advance funds to cover operating deficits through 2009. As of June
30, 2000, Westminster is nineteen months in arrears on its mortgage and twenty
three to twenty five months in arrears on its replacement reserve and escrow
requirements. Although the Local General Partner has been conducting discussions
with the lender, the lender recently issued a notice of default. Current
proposals include the potential utilization of replacement reserves to reduce
the arrearages. There can be no assurance that the Local General Partner will be
successful in its negotiations with the lender. Westminster incurred an
operating deficit of approximately $31,000 for the six months ended June 30,
2000, which amount includes a provision for mandatory debt service and
replacement reserve deposits of $6,245 and $1,184 per month, respectively.
Registrant's investment balance in Westminster, after cumulative equity losses,
became zero during the year ended March 30, 1999. Of Registrant's total annual
Low-income Tax Credits, approximately 4% is allocated from Westminster.
Fulton Street Houses Limited Partnership ("Fulton Street") has an escrow of
approximately $299,000 as of June 30, 2000 to cover operating deficits and there
are no Mandatory Debt Service payments or real estate taxes required during the
Compliance Period. Fulton Street reported an operating deficit of approximately
$19,000 for the six months ended June 30, 2000. Of Registrant's total annual
Low-income Tax Credits, approximately 8% is allocated from Fulton Street.
Year 2000 Compliance
Registrant successfully completed a program to ensure Year 2000 readiness. As a
result, Registrant had no Year 2000 problems that affected its business, results
of operations or financial condition.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Registrant has invested a significant portion of its working capital reserves in
corporate bonds and U.S. Treasury instruments. The market value of such
investments is subject to fluctuation based upon changes in interest rates
relative to each investment's maturity date. Since Registrant's investments in
bonds have various maturity dates through 2023, the value of such investments
may be adversely impacted in an environment of rising interest rates in the
event Registrant decides to liquidate any such investment prior to its maturity.
Although Registrant may utilize reserves to assist an under performing Property,
it otherwise intends to hold such investments to their respective maturities.
Therefore, Registrant does not anticipate any material adverse impact in
connection with such investments.
13
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Registrant was a defendant in a complaint brought in connection with
the alleged wrongful interference with economic advantage resulting
from the delay of Registrant in providing a list of Unit holders to
facilitate a tender offer by plaintiff. The plaintiff sought
compensatory damages of approximately $246,000 and unspecified
punitive damages. Registrant filed a motion to dismiss which was
granted May 2000. THE PLAINTIFF AND REGISTRANT HAVE AGREED TO A
SETTLEMENT WHEREBY REGISTRANT AGREED TO PROVIDE PLAINTIFF WITH A LIST
OF LIMITED PARTNERS AND PLAINTIFF AGREED TO WAIVE ITS RIGHT TO APPEAL
THE SUMMARY JUDGMENT. EACH OF THE PARTIES PAID ITS OWN LEGAL FEES
ARISING OUT OF THE LITIGATION.
Registrant is not aware of any other material legal proceedings.
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
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the local general
partner of Westminster Apartments Limited Partnership ("Westminster")
reports that Westminster is nineteen months in arrears on its first
mortgage obligation as of June 30, 2000. Although the local general
partner is conducting discussions with the lender, the lender recently
issued a notice of default.
Item 6. Exhibits and Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES III L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties III
L.P.,
General Partner
by: Richman Housing Credits Inc.,
general partner
Dated: November 13, 2000 /s/ Richard Paul Richman
------------------------------------
by: Richard Paul Richman
President, Chief Executive
Officer and Director of the
general partner of the
General Partner
Dated: November 13, 2000 /s/ Neal Ludeke
---------------------------------------
by: Neal Ludeke
Vice President and
Treasurer of the general partner
of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
15
