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 December 31, 1998
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-24650
INDEPENDENCE TAX CREDIT PLUS L.P. III
(Exact name of registrant as specified in its charter)
Delaware 13-3746339
(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
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
December 31, March 31,
1998 1998
<S> <C> <C>
ASSETS
Property and equipment - at cost,
less accumulated depreciation
of $5,320,923 and $3,800,117,
respectively $63,647,981 $65,105,052
Construction in progress 12,661,647 5,419,271
Cash and cash equivalents 5,626,845 7,157,348
Cash held in escrow 4,663,003 5,331,779
Deferred costs, less accumulated
amortization of $320,381
and $243,170, respectively 990,023 1,076,148
Other assets 841,162 987,717
Total assets $88,430,661 $85,077,315
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $32,982,484 $29,673,823
Construction loan payable 10,480,720 7,080,766
Accounts payable and other
liabilities 2,992,843 3,322,397
Due to local general partners and
affiliates 4,290,703 5,986,326
Due to general partner and
affiliates 872,654 614,979
Total liabilities 51,619,404 46,678,291
Minority interest 3,549,505 3,511,585
Commitments and contingencies (Note 3)
Partners' capital:
Limited partners (43,440 BACs
issued and outstanding) 33,315,262 34,924,692
General partner (53,510) (37,253)
Total partners' capital 33,261,752 34,887,439
Total liabilities and
partners' capital $88,430,661 $85,077,315
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1998 1997* 1998 1997*
<S> <C> <C> <C> <C>
Revenues
Rental income $1,170,508 $ 882,770 $ 3,653,751 $ 2,537,137
Other income 129,482 107,301 325,781 350,556
Total revenues 1,299,990 990,071 3,979,532 2,887,693
Expenses
General and
administrative 313,125 282,704 1,040,545 915,147
General and
administrative-
related parties
(Note 2) 205,771 83,270 571,357 277,656
Repairs and
maintenance 180,495 179,109 533,357 379,670
Operating 137,903 85,130 465,767 327,867
Taxes 52,478 41,989 170,485 99,188
Insurance 90,972 74,532 255,536 176,343
Financial, principally
interest 301,614 240,076 922,855 685,046
Depreciation and
amortization 553,930 404,725 1,598,017 1,200,605
Total expenses 1,836,288 1,391,535 5,557,919 4,061,522
Net loss before
minority
interest (536,298) (401,464) (1,578,387) (1,173,829)
Minority interest in
(income)
loss of subsidiary
partnerships (19,829) 2,604 (47,300) 4,143
Net loss $ (556,121) $ (398,860) $ (1,625,687) $(1,169,686)
Net loss -limited
partners $ (550,566) $ (394,871) $(1,609,430) $(1,157,989)
Number of BACs
outstanding 43,440 43,440 43,440 43,440
Net loss per BAC $ (12.67) $ (9.09) $ (37.05) $ (26.66)
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Unaudited)
<CAPTION>
Limited General
Total Partners Partner
<S> <C> <C> <C>
Partners' capital -
April 1, 1998 $34,887,439 $34,924,692 $(37,253)
Net loss (1,625,687) (1,609,430) (16,257)
Partners' capital -
December 31,
1998 $33,261,752 $33,315,262 $(53,510)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Nine Months Ended
December 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,625,687) $(1,169,686)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 1,598,017 1,200,605
Minority interest in income
(loss) of subsidiaries 47,300 (4,143)
Increase in accounts
payable and other liabilities 189,147 308,125
Increase in cash held in escrow (367,888) (702,559)
Decrease (increase) in other assets 146,555 (18,708)
Increase in due to local general
partners and affiliates 50,211 2,750
Decrease in due to local general
partners and affiliates (90,759) (32,083)
Increase (decrease) due to
general partner and affiliates 257,675 (149,340)
Total adjustments 1,830,258 604,647
Net cash provided by (used in)
operating activities 204,571 (565,039)
Cash flows from investing activities:
Increase in property and equipment (63,735) (571,507)
Decrease in investments
available for sale 0 4,000,000
Increase in construction in progress (7,242,376) (11,242,960)
Decrease in cash held in escrow 1,036,664 675,510
Decrease in deferred costs 0 16,122
Decrease in accounts payable
and other liabilities (518,701) (376,355)
Increase in due to local general
partners and affiliates 20,000 2,678,723
Decrease in due to local general
partners and affiliates (1,641,618) (545,338)
Decrease in due from local general
partners and affiliates 0 317,056
Net cash used in investing
activities (8,409,766) (5,048,749)
Cash flows from financing activities:
Proceeds from mortgage notes 3,401,977 1,170,346
Repayments of mortgage notes (93,316) (344,515)
Proceeds from construction loans 3,399,954 3,176,768
Decrease in due to local general
partners and affiliates (33,457) 0
Decrease (increase) in deferred costs 8,914 (34,355)
(Decrease) increase in capitalization
of consolidated subsidiaries
attributable to minority
interest (9,380) 89,519
Net cash provided by financing
activities 6,674,692 4,057,763
Net decrease in cash and
cash equivalents (1,530,503) (1,556,025)
Cash and cash equivalents at
beginning of period 7,157,348 7,573,213
Cash and cash equivalents at
end of period $5,626,845 $6,017,188
Supplemental disclosures of noncash
investing and financing activities:
Capitalization of deferred
acquisition costs 0 $ 547,625
Conversion of construction notes
payable to mortgage notes payable 0 1,450,000
Property and equipment reclassified
from construction in process 0 4,508,671
Consolidation of investment in
subsidiary partnership:*
Decrease in property and
equipment 0 907,865
Increase in construction in
progress 0 (907,865)
*Prior to consolidation, investments in subsidiary partnerships are
included in property and equipment.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
(Unaudited)
Note 1 - General
Independence Tax Credit Plus L.P. III (a Delaware limited part-
nership) (the "Partnership") was organized on December 23, 1993,
and commenced its public offering on June 7, 1994. The general
partner of the Partnership is Related Independence Associates III
L.P., a Delaware limited partnership (the "General Partner").
The Partnership's business is to invest in other partnerships ("Lo-
cal Partnerships", "subsidiaries" or "subsidiary partnerships")
owning apartment complexes that are eligible for the low-income
housing tax credit ("Housing Tax Credit") enacted in the Tax Re-
form Act of 1986, some of which complexes were also eligible for
the historic rehabilitation tax credit ("Historic Tax Credit"; together
with Housing Tax Credits, "Tax Credits").
As of December 31, 1998, the Partnership has acquired limited
partnership interests in twenty subsidiary partnerships. Through
the rights of the Partnership and/or an affiliate of the General
Partner, which affiliate has a contractual obligation to act on be-
half of the Partnership, to remove the general partner of the sub-
sidiary partnerships 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 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.
The Partnership's fiscal quarter ends December 31 in order to al-
low adequate time for the subsidiaries financial statements to be
prepared and consolidated.
All intercompany accounts and transactions with the subsidiary
partnerships 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 $3,900 and
$1,200 and $10,100 and $6,700 for the three and nine months
ended December 31, 1998 and 1997, respectively. The Partner-
ship's investment in each subsidiary is 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.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally ac-
cepted accounting principles have been omitted or condensed.
These condensed 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, 1998.
The books and records of the Partnership are maintained on the
accrual basis of accounting in accordance with generally accepted
accounting principles. In the opinion of the General Partner of the
Partnership, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring ad-
justments) necessary to present fairly the financial position of the
Partnership as of December 31, 1998, the results of operations for
the three and nine months ended December 31, 1998 and 1997 and
cash flows for the nine months ended December 31, 1998 and
1997. However, the operating results for the nine months ended
December 31, 1998 may not be indicative of the results for the
year.
Note 2 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special
limited partner, in each of the Local Partnerships.
A) Other Related Party Expenses
<TABLE>
The costs incurred to related parties for the three and nine months
ended December 31, 1998 and 1997 were as follows:
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1998 1997* 1998 1997*
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $ 95,000 $12,500 $280,000 $ 37,500
Expense reimburse-
ment (b) 34,340 21,500 93,779 94,478
Local administra-
tive fee (d) 11,000 6,000 33,000 19,000
Total general and
administrative-
General Partner 140,340 40,000 406,779 150,978
Property manage-
ment fees incurred
to affiliates of
the subsidiary
partnerships'
general partners (c) 65,431 43,270 164,578 126,678
Total general and
administrative-
related parties $205,771 $83,270 $571,357 $277,656
</TABLE>
*Reclassified for comparative purposes.
(a) The General Partner is entitled to receive a partnership man-
agement 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. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its
sole discretion based upon its review of the Partnership's invest-
ments. Unpaid partnership management fees for any year will be
accrued without interest and will be payable from working capital
reserves or to the extent of available funds after the Partnership
has made distributions to the limited partners of sale or refinanc-
ing 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
Partner amounting to approximately $430,000 and $200,000 were
accrued and unpaid as of December 31, 1998 and March 31, 1998,
respectively.
(b) The Partnership reimburses the General Partner and its affili-
ates for actual Partnership operating expenses incurred by the
General Partner and its 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 Partner performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.
(c) Property management fees incurred by Local Partnerships
amounted to $98,857 and $64,046 and $272,903 and $176,894 for
the three and nine months ended December 31, 1998 and 1997,
respectively. Of these fees $65,431 and $43,270 and $164,578 and
$126,678 were incurred to affiliates of the subsidiary partnerships'
general partners.
(d) Independence SLP III L.P., a special limited partner of the
subsidiary partnerships, is entitled to receive a local administra-
tive fee of up to $5,000 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, 1998.
<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) interest
earned on Gross Proceeds which are invested in tax-exempt
money market instruments pending final payments to Local Part-
nerships and (ii) working capital reserves and interest earned
thereon. All these sources of funds are available to meet obliga-
tions of the Partnership.
As of December 31, 1998, the Partnership has invested approxi-
mately $35,000,000 (including approximately $3,142,000 classified
as loans repayable from sale/refinancing proceeds in accordance
with the Local Partnership Contribution Agreements and not in-
cluding acquisition fees of approximately $2,510,000) of net pro-
ceeds in twenty Local Partnerships of which approximately
$2,707,000 remains to be paid to the Local Partnerships (not in-
cluding approximately $2,000,000 being held in escrow) as certain
benchmarks, such as occupancy level, must be attained prior to
the release of the funds. The Partnership does not intend to ac-
quire additional properties. During the nine months ended De-
cember 31, 1998, approximately $1,932,000 was paid to Local Part-
nerships, including purchase price adjustments (of which ap-
proximately $399,000 was released from escrow). Although the
Partnership will not be acquiring additional properties, the Part-
nership may be required to fund potential purchase price adjust-
ments based on tax credit adjustor clauses. Such adjustments
resulted in a net increase in purchase price of approximately
$140,000 during the nine months ended December 31, 1998.
For the nine months ended December 31, 1998, cash and cash
equivalents of the Partnership and its twenty consolidated Local
Partnerships decreased approximately $1,531,000 primarily due to
an increase in construction in progress ($7,242,000), a net decrease
in due to local general partners and affiliates relating to investing
and financing activities ($1,655,000) an increase in property and
equipment ($64,000) and a decrease in accounts payable and other
liabilities relating to investing activities ($519,000) which exceeded
cash provided by operating activities ($205,000), net proceeds
from mortgage and construction loans ($6,709,000) and a decrease
in cash held in escrow relating to investing activities ($1,037,000).
Included in the adjustments to reconcile the net loss to cash pro-
vided by operating activities is depreciation and amortization in
the amount of approximately $1,598,000.
The working capital reserve at December 31, 1998 and March 31,
1998 was approximately $178,000 and $792,000, respectively,
which includes amounts which may be required for potential pur-
chase price adjustments based on tax credit adjustor clauses.
During nine months ended December 31, 1998 and 1997, the Part-
nership received cash flow distributions from operations of the
Local Partnerships amounting to approximately $9,000 and $4,000,
respectively. Management anticipates continuing to receive distri-
butions in the future, although not to a level sufficient to permit
providing cash distributions to the BACs holders. These distribu-
tions as well as the working capital reserves will be used to meet
the operating expenses of the Partnership.
Partnership management fees owed to the General Partner
amounting to approximately $430,000 and $200,000 were accrued
and unpaid as of December 31, 1998 and March 31, 1998, respec-
tively (see Note 2). Without the General Partner's continued ac-
crual without payment of certain fees and expense reimburse-
ments, the Partnership will not be in a position to meet its obliga-
tions. The General Partner has continued allowing the accrual
without payment of these amounts but is under no obligation to
continue do so.
The Partnership has negotiated development deficit guarantees
with the Local Partnerships in which it has invested. The Local
General Partners have agreed to fund development deficits
through the breakeven dates of each of the Local Partnerships.
The Partnership has negotiated Operating Deficit Guaranty
Agreements with all Local Partnerships by which the general
partners of the Local Partnerships have agreed to fund operating
deficits for a specified period of time. The terms of the Operating
Deficit Guaranty Agreements vary for each Local Partnership,
with maximum dollar amounts to be funded for a specified period
of time, generally three years, commencing on the break-even
date. As of December 31, 1998 and March 31, 1998, the gross
amount of the Operating Deficit Guarantees aggregates approxi-
mately $5,254,000 and $4,597,000, respectively.
The Partnership has also negotiated rent-up guaranty agreements
in which the Local General Partners agreed to pay a liquidated
damage if predetermined occupancy rates are not achieved.
The development deficit, operating deficit and the rent-up guar-
anty agreements were negotiated to protect the Partnership's in-
terest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.
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 subsidiary partnerships, the resolution of the existing
contingencies is not anticipated to impact future results of opera-
tions, 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 compliance period.
Management is not aware of any trends or events, commitments
or uncertainties which have not otherwise been disclosed that will
or are likely to impact liquidity in a material way. Management
believes the only impact would be from 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 invested the proceeds of its offering in twenty
Local Partnerships, all of which fully have their tax credits in
place. The tax credits are attached to the project for a period of ten
years, and are transferable with the property during the remainder
of such ten year period. If the General Partner determined that a
sale of a property is warranted, the remaining tax credits would
transfer to the new owner, thereby adding value to the property
on the market, which are not included in the financial statement
carrying amount.
Results of Operations
As of December 31, 1998 and 1997, the Partnership had acquired
an interest in twenty and twenty Local Partnerships, twenty and
eighteen of which were consolidated, respectively. The Partner-
ship does not intend to acquire additional interests in Local Part-
nerships.
The Partnership's results of operations for the three and nine
months ended December 31, 1998 and 1997 consisted primarily of
(1) approximately $25,000 and $67,000 and $97,000 and $249,000,
respectively, of tax-exempt interest income earned on funds not
currently invested in Local Partnerships and (2) the results of the
Partnership's investment in twenty of twenty and seventeen of
eighteen consolidated Local Partnerships, respectively.
For the three and nine months ended December 31, 1998 as com-
pared to 1997, rental income and all categories of expenses in-
creased and the results of operations are not comparable due to
the continued construction and rent up of properties, and are not
reflective of future operations of the Partnership due to uncom-
pleted property construction and rent up of properties. In addi-
tion, interest income will decrease in future periods since a sub-
stantial portion of the proceeds from the Offering are invested in
Local Partnerships. Other income increased approximately
$22,000 and decreased approximately $25,000 for the three and
nine months ended December 31, 1998 as compared to 1997. The
increase for the three months is primarily due to an increase in
interest income on escrow balances at one Local Partnership. The
decrease for the nine months is primarily due to a decrease in
interest income as a result of the acquisition of and the release of
proceeds to the Local Partnerships.
For the three months ended December 31, 1998 and 1997, zero and
two of the Partnership's twenty and eighteen consolidated proper-
ties, respectively, completed construction, and were in various
stages of rent up. In addition, zero and zero of the properties,
respectively, had completed construction in a previous fiscal quar-
ter, but were in various stages of rent up for the three months.
Also, for the three months ended December 31, 1998 and 1997,
seventeen and fourteen of the properties had completed construc-
tion and were rented up in a previous fiscal quarter. For the nine
months ended December 31, 1998 and 1997, zero and two of the
Partnership's twenty and eighteen consolidated properties, respec-
tively, completed construction, and were in various stages of rent
up. In addition, zero and two of the properties, respectively, had
completed construction in a previous fiscal quarter, but were in
various stages of rent up for the nine months. Also, for the nine
months ended December 31, 1998 and 1997, seventeen and twelve
of the properties had completed construction and were rented up
in a previous fiscal quarter. As of the end of the nine months
ended December 31, 1998 and 1997, three and two of the Partner-
ship's twenty and eighteen consolidated properties, respectively,
were still under construction and three and four of the properties,
respectively, had construction loans with commitments for per-
manent financing.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the
General Partner. The affiliate of the General Partner is in the proc-
ess of upgrading its computer information systems to be year 2000
compliant and beyond. The Year 2000 compliance issue concerns
the inability of a computerized system to accurately record dates
after 1999. The affiliate of the General Partner recently underwent
a conversion of its financial systems applications and is in the
process of upgrading and testing the in house software and hard-
ware inventory. The workstations that experienced problems
from this process were corrected with an upgrade patch. The costs
incurred by the General Partner are not being charged to the Part-
nership. In regard to third parties, the Partnership's General Part-
ner is 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 of third
party readiness was sent to material third parties in the fourth
quarter of 1998. The results of the surveys will be compiled in
early 1999. No estimate can be made at this time as to the impact
of the readiness of such third parties. The Partnership's General
Partner plans to have these issues fully assessed by early 1999, at
which time the risks will be addressed and a contingency plan will
be implemented if necessary.
<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
As set forth in Schedule 13D filed by Lehigh Tax Credit
Partners III L.L.C. ("Lehigh III") and Lehigh Tax Credit Partners,
Inc., (the "Managing Member") on January 25, 1999 with the Secu-
rities and Exchange Commission (the "Commission"), Lehigh III
acquired 3,185.94 BACs pursuant to a tender offer on Schedule
14D-1, commenced on October 9, 1998 (the "Tender Offer"). Le-
high III previously owned 57 BACs which brought the total BACs
owned by Lehigh III following the Tender Offer to 3,242.94 BACs.
Lehigh III and the Managing Member are affiliates of the General
Partner.
Pursuant to a letter agreement dated October 6, 1998
among the Partnership, Lehigh III and the General Partner (the
"Standstill Agreement"), Lehigh III agreed that, prior to October 6,
2008 (the "Standstill Expiration Date"), it will not and it will cause
certain affiliates not to (i) seek to propose to enter into, directly or
indirectly, any merger, consolidation, business combination, sale
or acquisition of assets, liquidation, dissolution or other similar
transaction involving the Partnership; (ii) form, join or otherwise
participate in a "group" (within the meaning of Section 13(d)(3) of
the Securities and Exchange Act of 1934) with respect to any vot-
ing securities of the Partnership, except that those affiliates bound
by the Standstill Agreement will not be deemed to have violated it
and formed a "group" solely by acting in accordance with the
Standstill Agreement; (iii) disclose in writing to any third party
any intention, plan or arrangement inconsistent with the terms of
the Standstill Agreement, or (iv) loan money to, advise, assist or
encourage any person in connection with any action inconsistent
with the terms of the Standstill Agreement. By the terms of the
Standstill Agreement, Lehigh III also agreed to vote its BACs in
the same manner as a majority of all voting BACs holders; pro-
vided, however, Lehigh III is entitled to vote its BACs as it deter-
mines with regard to any proposal (i) to remove the General Part-
ner as a general partner of the Partnership or (ii) concerning the
reduction of any fees, profits, distributions or allocations for the
benefit of the General Partner or its affiliates.
In connection with a tender offer commenced on April 10,
1997 by Lehigh Tax Credit Partners L.L.C. ("Lehigh I") and the
settlement of matters relating to such tender offer, Lehigh I en-
tered into any agreement with Everest Properties, Inc. ("Everest"),
dated April 23, 1997 (the "Everest Agreement"). Pursuant to the
Everest Agreement, Lehigh I granted to Everest, among other
things, an option to purchase up to 25% of the BACs tendered in
the Tender Offer (and other similar tender offers) on the same
terms and conditions as Lehigh I's purchase of BACs (the "Everest
Option"). The Everest Agreement and the Everest Option apply to
BACs obtained by affiliates of Lehigh I, including Lehigh III. Ev-
erest notified Lehigh III that it had elected to exercise the Everest
Option to purchase approximately 25% of the BACs tendered
pursuant to the Tender Offer and as a result acquired 1,061.98
BACs out of the 4,247.92 BACs tendered in the Tender Offer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3A) Agreement of Limited Partnership of Inde-
pendence Tax Credit Plus L.P. III as adopted on December 23,
1993*
(3B) Form of Amended and Restated Agreement of
Limited Partnership of Independence Tax Credit Plus L.P. III,
attached to the Prospectus as Exhibit A**
(3C) Certificate of Limited Partnership of Independ-
ence Tax Credit Plus L.P. III as filed on December 23, 1993*
(10A) Form of Subscription Agreement attached to
the Prospectus as Exhibit B**
(10B) Escrow Agreement between Independence Tax
Credit Plus L.P. III and Bankers Trust Company*
(10C) Form of Purchase and Sales Agreement per-
taining to the Partnership's acquisition of Local Partnership Inter-
ests*
(10D) Form of Amended and Restated Agreement of
Limited Partnership of Local Partnerships*
(27) Financial Data Schedule (filed herewith)
*Incorporated herein as an exhibit by reference to
exhibits filed with Post-Effective Amendment No. 4 to the Regis-
tration Statement on Form S-11 {Registration No. 33-37704}
**Incorporated herein as an exhibit by reference to
exhibits filed with Post-Effective Amendment No. 8 to the Regis-
tration Statement on Form S-11 {Registration No. 33-37704}
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during this 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.
INDEPENDENCE TAX CREDIT PLUS L.P. III
(Registrant)
By: RELATED INDEPENDENCE
ASSOCIATES III L.P., General Partner
By: RELATED INDEPENDENCE
ASSOCIATES III INC., General Partner
Date: February 2, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: February 2, 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 Independence Tax Credit Plus
L.P. III and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000924124
<NAME> Independence Tax Credit Plus L.P. III
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,289,848
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 841,162
<PP&E> 81,630,551
<DEPRECIATION> 5,320,923
<TOTAL-ASSETS> 88,430,661
<CURRENT-LIABILITIES> 8,156,200
<BONDS> 43,463,204
0
0
<COMMON> 0
<OTHER-SE> 36,811,257
<TOTAL-LIABILITY-AND-EQUITY> 88,430,661
<SALES> 0
<TOTAL-REVENUES> 3,979,532
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,635,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 922,855
<INCOME-PRETAX> (1,587,387)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,578,387)
<EPS-PRIMARY> (37.05)
<EPS-DILUTED> 0
</TABLE>
