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, 1999
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,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment - at cost,
less accumulated depreciation
of $8,258,565 and $6,254,823,
respectively $70,889,957 $72,827,630
Construction in progress 6,864,531 6,267,185
Cash and cash equivalents 4,614,737 3,802,808
Investments available-for-sale 0 1,700,000
Cash held in escrow 3,638,794 3,808,330
Deferred costs, less accumulated
amortization of $255,206
and $322,481, respectively 815,686 982,440
Other assets 569,375 924,311
Total assets $87,393,080 $90,312,704
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $32,394,025 $32,422,677
Construction loan payable 12,283,486 12,043,984
Accounts payable and other
liabilities 4,661,574 5,311,397
Due to local general partners and
affiliates 3,880,404 4,474,016
Due to general partner and affiliates 1,436,613 1,067,876
Total liabilities 54,656,102 55,319,950
Minority interest 3,371,017 3,192,313
Commitments and contingencies (Note 3)
Partners' capital (deficit):
Limited partners (43,440 BACs
issued and outstanding) 29,458,429 31,868,564
General partner (92,468) (68,123)
Total partners' capital (deficit) 29,365,961 31,800,441
Total liabilities and partners' capital $87,393,080 $90,312,704
(deficit)
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,
1999 1998* 1999 1998*
<S> <C> <C> <C> <C>
Revenues
Rental income $1,364,329 $1,170,508 $3,918,711 $3,653,751
Other income 107,663 129,482 315,407 325,781
Total revenues 1,471,992 1,299,990 4,234,118 3,979,532
Expenses
General and
administrative 365,264 287,232 971,595 965,878
General and
administrative-
related parties
(Note 2) 219,203 211,024 633,830 587,893
Repairs and
maintenance 275,004 201,135 722,167 591,488
Operating 150,350 137,903 471,529 465,767
Taxes 106,124 52,478 247,484 170,485
Insurance 57,423 90,972 223,572 255,536
Financial,
principally
interest 399,168 301,614 1,192,843 922,855
Depreciation and
amortization 676,598 553,930 2,039,441 1,598,017
Total expenses 2,249,134 1,836,288 6,502,461 5,557,919
Net loss before
minority interest
and extraordinary
item (777,142) (536,298) (2,268,343) (1,578,387)
Minority interest
in loss (income) of
subsidiary
partnerships 954 (19,829) (26,657) (47,300)
Loss before
extraordinary
item (776,188) (556,127) (2,295,000) (1,625,687)
Extraordinary item -
cumulative
effect of a change
in accounting
principle -
amortization of
organization costs 0 0 (139,480) 0
Net loss $ (776,188) $ (556,127) $(2,434,480) $(1,625,687)
Limited Partners
Share:
Loss before
extraordinary
item $(768,426) $(550,566) $(2,272,050) $(1,609,430)
Extraordinary
item 0 0 (138,085) 0
Net loss -limited
partners $(768,426) $(550,566) $(2,410,135) $(1,609,430)
Number of BACs
outstanding 43,440 43,440 43,440 43,440
Loss before
extraordinary
item per limited
partner unit $ (17.69) $ (12.67) $ (52.30) $ (37.05)
Extraordinary item
per limited
partner unit 0 0 (3.18) 0
Net loss per BAC $ (17.69) $ (12.67) $ (55.48) $ (37.05)
*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
(Deficit)
(Unaudited)
<CAPTION>
Limited General
Total Partners Partner
<S> <C> <C> <C>
Partners' capital -
(deficit)
April 1, 1999 $31,800,441 $31,868,564 $(68,123)
Net loss - nine
months ended
December 31, 1999 (2,434,480) (2,410,135) (24,345)
Partners' capital -
(deficit)
December 31, 1999 $29,365,961 $29,458,429 $(92,468)
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,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,434,480) $(1,625,687)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 2,039,441 1,598,017
Extraordinary item-cumulative
effect of a change in accounting
principal-amortization of organization
costs 139,480 0
Minority interest in income
of subsidiaries 26,657 47,300
Increase in accounts
payable and other liabilities 350,467 189,147
Decrease (increase) in cash held
in escrow 73,924 (367,888)
Decrease in other assets 354,936 146,555
Increase in due to local general
partners and affiliates 102,098 50,211
Decrease in due to local general
partners and affiliates (100,963) (90,759)
Increase due to general partner
and affiliates 368,737 257,675
Total adjustments 3,354,777 1,830,258
Net cash provided by
operating activities 920,297 204,571
Cash flows from investing activities:
Increase in property and equipment (66,069) (63,735)
Decrease in investments
available for sale 1,700,000 0
Increase in construction in progress (597,346) (7,242,376)
Decrease in cash held in escrow 95,612 1,036,664
Decrease in accounts payable
and other liabilities (1,000,290) (518,701)
Increase in due to local general
partners and affiliates 0 20,000
Decrease in due to local general
partners and affiliates (555,901) (1,641,618)
Net cash used in investing activities (423,994) (8,409,766)
Cash flows from financing activities:
Proceeds from mortgage notes 88,200 3,401,977
Repayments of mortgage notes (116,852) (93,316)
Proceeds from construction loans 239,502 3,399,954
Decrease in due to local general
partners and affiliates (38,846) (33,457)
(Increase) decrease in deferred costs (8,425) 8,914
Increase (decrease) in capitalization
of consolidated subsidiaries
attributable to minority interest 152,047 (9,380)
Net cash provided by financing
activities 315,626 6,674,692
Net increase (decrease) in cash and
cash equivalents 811,929 (1,530,503)
Cash and cash equivalents at
beginning of period 3,802,808 7,157,348
Cash and cash equivalents at
end of period $4,614,737 $5,626,845
</TABLE>
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of
Independence Tax Credit Plus L.P. III (the "Partnership") and 20
other limited partnerships ("subsidiary partnerships", "subsidiar-
ies" or "Local Partnerships") owning apartment complexes that are
eligible for the low-income housing tax credit. Some of such
apartment complexes may also be eligible for the rehabilitation
investment credit for certified historic structures. The general
partner of the Partnership is Related Independence Associates III
L.P., a Delaware limited partnership (the "General Partner").
Through the rights of the Partnership and/or an affiliate of the
General Partner, which affiliate has a contractual obligation to act
on behalf of the Partnership, to remove the general partner of the
subsidiary local partnerships and to approve certain major oper-
ating 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 $8,000 and
$4,000 and $53,000 and $10,000 for the three and nine months
ended December 31, 1999 and 1998, 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.
In April of 1998, the Financial Accounting Standards Board issued
Statement of Position 98-5 ("SOP 98-5") "Reporting on the Costs of
Start-Up Activities". This statement provides guidance on the
financial reporting of start-up costs and organization costs. This
statement is effective for all fiscal quarters of fiscal years beginning
after December 15, 1998. Such change in accounting principle
amounted to $139,480 for the quarter ended December 31, 1999.
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, 1999.
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, 1999, the results of operations for
the three and nine months ended December 31, 1999 and 1998 and
cash flows for the nine months ended December 31, 1999 and
1998. However, the operating results for the nine months ended
December 31, 1999 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.
<TABLE>
The costs incurred to related parties for the three and nine months
ended December 31, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1999 1998* 1999 1998*
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $ 94,033 $ 95,000 $282,099 $280,000
Expense reimburse-
ment (b) 46,881 34,340 111,319 93,779
Local administra-
tive fee (c) 12,000 11,000 38,000 33,000
Total general and
administrative-
General Partner 152,914 140,340 431,418 406,779
Property manage-
ment fees
incurred to
affiliates of the
subsidiary
partnerships'
general
partners (d) 66,289 70,684 202,412 181,114
Total general and
administrative-
related parties $219,203 $211,024 $633,830 $587,893
*Reclassified for comparative purposes.
</TABLE>
(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 only to the extent of
available funds after the Partnership has made 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 Partner amounting to ap-
proximately $809,000 and $527,000 were accrued and unpaid as of
December 31, 1999 and March 31, 1999, respectively. Without the
General Partner's continued allowance of accrual without pay-
ment of certain fees and expense reimbursements, the Partnership
will not be in a position to meet its obligations. The General Part-
ner has continued allowing the accrual without payment of these
amounts but is under no obligation to continue do so.
(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) 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.
(d) Property management fees incurred by Local Partnerships
amounted to $95,352 and $98,857 and $286,597 and $272,903 for
the three and nine months ended December 31, 1999 and 1998,
respectively. Of these fees $66,289 and $70,684 and $202,412 and
$181,114 were incurred to affiliates of the subsidiary partnerships'
general partners.
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 interest earned
on Gross Proceeds which are invested in tax-exempt money mar-
ket instruments pending final payments to Local Partnerships,
interest earned on working capital reserves and distributions re-
ceived from Local Partnerships. All these sources of funds are
available to meet obligations of the Partnership.
As of December 31, 1999, the Partnership has invested all of its net
proceeds in twenty Local Partnerships of which approximately
$2,598,000 remains to be paid to the Local Partnerships (not in-
cluding approximately $1,042,000 being held in escrow). During
the nine months ended December 31, 1999, approximately
$465,000 was paid to Local Partnerships, including purchase price
adjustments (of which all was released from escrow).
For the nine months ended December 31, 1999, cash and cash
equivalents of the Partnership and its twenty consolidated Local
Partnerships increased approximately $812,000 due to cash pro-
vided by operating activities ($920,000), a decrease in investments
available for sale ($1,700,000), a decrease in cash held in escrow
($96,000), net proceeds from mortgage and construction ($211,000)
and an increase in capitalization of consolidated subsidiaries at-
tributable to minority interest ($152,000) which exceeded the in-
crease in property and equipment ($66,000), an increase in de-
ferred cost ($8,000), an increase in construction in progress
($597,000), a net decrease in due to local general partners and
affiliates relating to investing and financing activities ($595,000)
and a decrease in accounts payable and other liabilities relating to
investing activities ($1,000,000). Included in the adjustments to
reconcile the net loss to cash provided by operating activities is
depreciation and amortization in the amount of approximately
$2,039,000.
During nine months ended December 31, 1999, the Partnership
received no cash flow distributions from operations of the Local
Partnerships. Management anticipates receiving distributions in
the future, although not to a level sufficient to permit providing
cash distributions to the BACs holders. These distributions will be
set aside as working capital reserves and although not sufficient to
cover all Partnership expenses, will be used to meet the operating
expenses of the Partnership.
Partnership management fees owed to the General Partner
amounting to approximately $809,000 and $527,000 were accrued
and unpaid as of December 31, 1999 and March 31, 1999, 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.
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
The Partnership's results of operations for the three and nine
months ended December 31, 1999 and 1998 consisted primarily of
the results of the Partnership's investment in twenty consolidated
Local Partnerships. The majority of Local Partnership income
continues to be in the form of rental income with the correspond-
ing expenses being divided among operations, depreciation and
mortgage interest.
For the three and nine months ended December 31, 1999 as com-
pared to 1998, rental income and all categories of expenses in-
creased except for insurance and the results of operations are not
comparable due to the continued rent up of properties, and are not
reflective of future operations of the Partnership due to rent up of
properties. In addition, interest income will decrease in future
periods since a substantial portion of the proceeds from the Of-
fering are invested in Local Partnerships.
Insurance expenses decreased approximately $34,000 and $32,000
for the three and nine months ended December 31, 1999 as com-
pared to 1998 primarily due to an overaccrual at one Local Part-
nership in 1998.
Extraordinary item - amortization of organization costs increased
by approximately $139,000 for the nine months ended December
31, 1999 as compared to the corresponding period in 1998 due to
the adoption of SOP 98-5, pursuant to which the Partnership is
required to charge all unamortized organization costs as of Janu-
ary 1, 1999.
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 and Use of Proceeds - 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
(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 1, 2000
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: February 1, 2000
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-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,253,531
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 569,375
<PP&E> 86,013,053
<DEPRECIATION> 8,258,565
<TOTAL-ASSETS> 87,393,080
<CURRENT-LIABILITIES> 9,978,591
<BONDS> 44,677,511
0
0
<COMMON> 0
<OTHER-SE> 32,736,978
<TOTAL-LIABILITY-AND-EQUITY> 87,393,080
<SALES> 0
<TOTAL-REVENUES> 4,234,118
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,309,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,192,843
<INCOME-PRETAX> (2,434,480)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (139,480)
<CHANGES> 0
<NET-INCOME> (2,434,480)
<EPS-BASIC> (55.48)
<EPS-DILUTED> 0
</TABLE>
