-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TiYd3LcU64PWjDtIhGsAErl8RG2BjrqMJGUivzq3Uz5j384/f+d9KsGqmwYNIl/K aMv30Q1Nf3qYy3ylujVSPw== 0000810663-07-000147.txt : 20071114 0000810663-07-000147.hdr.sgml : 20071114 20071114165011 ACCESSION NUMBER: 0000810663-07-000147 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071114 DATE AS OF CHANGE: 20071114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS LP III CENTRAL INDEX KEY: 0000839345 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 043032106 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18462 FILM NUMBER: 071245832 BUSINESS ADDRESS: STREET 1: 101 ARCH ST 16TH FL CITY: BOSTON STATE: MA ZIP: 02110-1106 BUSINESS PHONE: 6174393911 MAIL ADDRESS: STREET 1: 101 ARCH ST CITY: BOSTON STATE: MA ZIP: 02110 10QSB 1 qh3q207.txt QH3Q207 November 14, 2007 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC. 20549 Re: Boston Financial Qualified Housing Tax Credits L.P. III Report on Form 10-QSB for the Quarter Ended September 30, 2007 File Number 01-18462 Dear Sir/Madam: Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, filed herewith is one copy of subject report. Very truly yours, /s/Patricia Olsen-Goldberg Patricia Olsen-Goldberg Controller QH3-Q2.DOC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (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, 2007 -------------------------------------- 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 01-18462 Boston Financial Qualified Housing Tax Credits L.P. III - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-3032106 - ------------------------------------------- -------------- ------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 101 Arch Street, Boston, Massachusetts 02110-1106 - -------------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 439-3911 ----------------------- 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 . BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Financial Statements Balance Sheet (Unaudited) - September 30, 2007 1 Statements of Operations (Unaudited) - For the Three and Six Months Ended September 30, 2007 and 2006 2 Statement of Changes in Partners' Equity (Unaudited) - For the Six Months Ended September 30, 2007 3 Statements of Cash Flows (Unaudited) - For the Six Months Ended September 30, 2007 and 2006 4 Notes to the Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Controls and Procedures 13 PART II - OTHER INFORMATION Items 1-6 14 SIGNATURE 15 CERTIFICATIONS 16 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) BALANCE SHEET September 30, 2007 (Unaudited)
Assets Cash and cash equivalents $ 11,291,669 Investment in Local Limited Partnerships (Note 1) 1,006,391 --------------- Total Assets $ 12,298,060 =============== Liabilities and Partners' Equity Due to affiliate $ 100,420 Accrued expenses 44,412 --------------- Total Liabilities 144,832 General, Initial and Investor Limited Partners' Equity 12,153,228 --------------- Total Liabilities and Partners' Equity $ 12,298,060 ===============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) STATEMENTS OF OPERATIONS For the Three and Six Months Ended September 30, 2007 and 2006 (Unaudited)
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 2007 2006 2007 2006 ---------------- ---------------- --------------- ---------- Revenue Investment $ 396,771 $ 135,907 $ 407,423 $ 278,974 Other 895 - 895 - ---------------- ---------------- --------------- --------------- Total Revenue 397,666 135,907 408,318 278,974 ---------------- ---------------- --------------- --------------- Expenses: Asset management fees, affiliate 15,201 27,541 30,402 55,082 General and administrative (includes reimbursement to an affiliate in the amount of $35,658 and $73,645 for the six months ended September 30, 2007 and 2006, respectively) 68,230 93,353 121,472 (11,728) Amortization 540 540 1,079 1,079 ---------------- ---------------- --------------- --------------- Total Expenses 83,971 121,434 152,953 44,433 ---------------- ---------------- --------------- --------------- Income before equity in losses of Local Limited Partnerships and gain on disposal of investments in Local Limited Partnerships 313,695 14,473 255,365 234,541 Equity in losses of Local Limited Partnerships (Note 1) (95,186) (69,513) (151,139) (104,511) Gain on disposal of investments in Local Limited Partnerships - 541,594 - 2,046,454 ---------------- ---------------- --------------- --------------- Net Income $ 218,509 $ 486,554 $ 104,226 $ 2,176,484 ================ ================ =============== =============== Net Income allocated: General Partners $ 2,185 $ 4,862 $ 1,042 $ 21,765 Limited Partners 216,324 481,692 103,184 2,154,719 ---------------- ---------------- --------------- --------------- $ 218,509 $ 486,554 $ 104,226 $ 2,176,484 ================ ================ =============== =============== Net Income Per Limited Partner Unit (100,000 Units) $ 2.16 $ 4.82 $ 1.03 $ 21.55 ================ ================ =============== ===============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) STATEMENT OF CHANGES IN PARTNERS' EQUITY For the Six Months Ended September 30, 2007 (Unaudited)
Initial Investor General Limited Limited Partners Partners Partners Total Balance at March 31, 2007 $ 120,449 $ 5,000 $ 11,923,553 $ 12,049,002 Net Income 1,042 - 103,184 104,226 ------------- -------------- -------------- -------------- Balance at September 30, 2007 $ 121,491 $ 5,000 $ 12,026,737 $ 12,153,228 ============= ============== ============== ==============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) STATEMENTS OF CASH FLOWS For the Six Months Ended September 30, 2007 and 2006 (Unaudited)
2007 2006 ------------- --------- Net cash provided by operating activities $ 322,430 $ 632,157 Net cash provided by investing activities - 1,196,183 ------------- ------------- Net increase in cash and cash equivalents 322,430 1,828,340 Cash and cash equivalents, beginning 10,969,239 8,394,272 ------------- ------------- Cash and cash equivalents, ending $ 11,291,669 $ 10,222,612 ============= =============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included with the Partnership's Form 10-KSB for the year ended March 31, 2007. In the opinion of the Managing General Partner, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Partnership's financial position and results of operations. The results of operations for the period may not be indicative of the results to be expected for the year. The Managing General Partner of the Partnership has elected to report results of the Local Limited Partnerships in which the Partnership has a limited partnership interest on a 90-day lag basis because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information of the Local Limited Partnerships that is included in the accompanying financial statements is as of June 30, 2007 and 2006. Generally, profits, losses, tax credits and cash flow from operations are allocated 99% to the Limited Partners and 1% to the General Partners. Net proceeds from a sale or refinancing will be allocated 95% to the Limited Partners and 5% to the General Partners, after certain priority payments. The General Partners may have an obligation to fund deficits in their capital accounts, subject to limits set forth in the Partnership Agreement. However, to the extent that the General Partners' capital accounts are in a deficit position, certain items of net income may be allocated to the General Partners in accordance with the Partnership Agreement. 1. Investments in Local Limited Partnerships The Partnership currently owns limited partnership interests in seven Local Limited Partnerships which were organized for the purpose of owning and operating multi-family housing complexes, all of which are government-assisted. The Partnership's ownership interest in each Local Limited Partnership is 99%. The Partnership may have negotiated or may negotiate options with the local general partners to purchase or sell the Partnership's interests in the Local Limited Partnerships at the end of the Compliance Period at nominal prices. In the event that Properties are sold to third parties, or upon dissolution of the Local Limited Partnerships, proceeds will be distributed according to the terms of each Local Limited Partnership agreement.
The following is a summary of investments in Local Limited Partnerships at September 30, 2007: Capital contributions paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 12,290,092 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $55,198,839) (8,952,934) Cumulative cash distributions received from Local Limited Partnerships (1,174,471) --------------- Investments in Local Limited Partnerships before adjustments 2,162,687 Excess investment costs over the underlying assets acquired: Acquisition fees and expenses 638,496 Cumulative amortization of acquisition fees and expenses (211,081) --------------- Investments in Local Limited Partnerships before valuation allowance 2,590,102 Valuation allowance on investments in Local Limited Partnerships (1,583,711) --------------- Investments in Local Limited Partnerships $ 1,006,391 ===============
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) (Unaudited) 1. Investments in Local Limited Partnerships (continued) The Partnership has recorded a valuation allowance for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments. The Partnership's share of the net losses of the Local Limited Partnerships for the six months ended September 30, 2007 is $1,758,057. For the six months ended September 30, 2007, the Partnership has not recognized $1,606,918 of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and distributions exceeded its total investments in these Local Limited Partnerships. 2. Significant Subsidiaries The following Local Limited Partnership invested in by the Partnership represent more than 20% of the Partnership's total assets or equity as of September 30, 2007 or 2006 or net losses for the three months ended either September 30, 2007 or 2006. The following financial information represents the performance of these Local Limited Partnerships for the three months ended June 30, 2007 and 2006: Riverfront Apartments, L.P. 2007 2006 - --------------------------- -------------- --------- Revenue $ 419,451 $ 487,809 Net Loss $ (96,148) $ (70,215) BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and is including this statement for purposes of complying with these safe harbor provisions. Although the Partnership believes the forward-looking statements are based on reasonable assumptions, the Partnership can give no assurance that its expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, general economic and real estate conditions and interest rates. Critical Accounting Policies The Partnership's accounting policies include those that relate to its recognition of investments in Local Limited Partnerships using the equity method of accounting. The Partnership's policy is as follows: The Local Limited Partnerships in which the Partnership invests are Variable Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a non-controlling limited partner equity holder. Because the Partnership is not the primary beneficiary of these VIEs, it accounts for its investments in the Local Limited Partnerships using the equity method of accounting. As a result of its involvement with the VIEs, the Partnership's exposure to economic and financial statement losses is limited to its investments in the VIEs ($1,006,391 at September 30, 2007). The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. Under the equity method, the investment is carried at cost, adjusted for the Partnership's share of net income or loss and for cash distributions from the Local Limited Partnerships; equity in income or loss of the Local Limited Partnerships is included currently in the Partnership's operations. Under the equity method, a Local Limited Partnership investment will not be carried below zero. To the extent that equity in losses are incurred when the Partnership's carrying value of the respective Local Limited Partnership has been reduced to a zero balance, the losses will be suspended and offset against future income. Income from Local Limited Partnerships, where cumulative equity in losses plus cumulative distributions have exceeded the total investment in Local Limited Partnerships, will not be recorded until all of the related unrecorded losses have been offset. To the extent that a Local Limited Partnership with a carrying value of zero distributes cash to the Partnership, that distribution is recorded as income on the books of the Partnership and is included in "other revenue" in the accompanying financial statements. The Partnership has implemented policies and practices for assessing other-than-temporary declines in values of its investments in Local Limited Partnerships. Periodically, the carrying values of the investments are compared to their respective fair values. If an other-than-temporary decline in carrying value exists, a provision to reduce the asset to fair value, as calculated based primarily on remaining tax benefits, will be recorded in the Partnership's financial statements. Generally, the carrying value of most Local Limited Partnerships will decline through losses and distributions in amounts sufficient to prevent other-than-temporary impairments. However, the Partnership may record similar impairment losses in the future if the expiration of tax credits outpaces losses and distributions from any of the Local Limited Partnerships. Liquidity and Capital Resources At September 30, 2007, the Partnership has cash and cash equivalents of $11,291,669, as compared with $10,969,239 at March 31, 2007. This increase is attributable to the Partnership having an increase in investment revenue during the period ended September 30, 2007 related to the reimbursement of 2006 interest that the Partnership had lost while its cash was invested in below-market bearing accounts. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources (continued) The Managing General Partner initially designated 3.00% of the Gross Proceeds as Reserves as defined in the Partnership Agreement. The Reserves were established to be used for working capital of the Partnership and contingencies related to the ownership of Local Limited Partnership interests. The Managing General Partner may increase or decrease such Reserves from time to time, as it deems appropriate. During the year ended March 31, 1993, the Managing General Partner increased the Reserve level to 3.75%. At September 30, 2007, $11,291,669 has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $2,379,000 have been paid from Reserves. To date, Reserve funds in the amount of approximately $534,000 also have been used to make additional capital contributions to four Local Limited Partnerships, and the Partnership has paid approximately $452,000 (net of paydowns) to purchase the mortgage of The Kyle Hotel. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Managing General Partner might deem it in its best interest to voluntarily provide such funds in order to protect its investment. As of September 30, 2007, the Partnership has advanced approximately $1,578,000 to Local Limited Partnerships to fund operating deficits. The Managing General Partner believes that the investment income earned on the Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Partnership's ongoing operations. Reserves may be used to fund Partnership operating deficits, if the Managing General Partner deems funding appropriate. If Reserves are not adequate to cover the Partnership's operations, the Partnership will seek other financing sources including, but not limited to, the deferral of Asset Management Fees paid to an affiliate of the Managing General Partner or working with Local Limited Partnerships to increase cash distributions. To date, the Partnership has used approximately $12,485,000 of operating funds and proceeds from sales of investments in Local Limited Partnerships to replenish Reserves. Since the Partnership invests as a limited partner, the Partnership has no contractual duty to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, as of September 30, 2007, the Partnership had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for. Cash Distributions No cash distributions were made to Limited Partners during the six months ended September 30, 2007. The Partnership is currently working on disposing of its interest in certain Local Limited Partnerships during the next twelve months. These dispositions may result in cash available for distribution, but due to the uncertainty of the sales, no guarantees can be made as to the extent of their outcome on distributions to Limited Partners. Based on the results of 2006 Property operations, the Local Limited Partnerships are not expected to distribute significant amounts of cash to the Partnership because such amounts will be needed to fund Property operating costs. In addition, many of the Properties benefit from some type of federal or state subsidy and, as a consequence, are subject to restrictions on cash distributions. In October 2007, the Partnership distributed $9,774,747, or $96.77 per Unit, representing a distribution from the proceeds of previously reported dispositions of sixty-three Properties and/or the Partnership's investment in the Local Limited Partnerships owning these Properties. The Managing General Partner anticipates making additional distributions in the future. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations Three Month Period For the three months ended September 30, 2007, the Partnership's operations resulted in net income of $218,509 as compared to net income of $486,554 for the same period in 2006. The decrease in net income is primarily due to a gain on sale of investments in Local Limited Partnerships recognized in the 2006 period, partially offset by an increase in investment revenue. The decrease in gain on sale of investments in Local Limited Partnerships is due to no sale of investments in Local Limited Partnership during the three months ended September 30, 2007 as compared to the same period in 2006. The Partnership had an increase in investment revenue during the period ended September 30, 2007 related to the reimbursement of 2006 interest that the Partnership had lost while its cash was invested in below-market interest bearing accounts. Six Month Period For the six months ended September 30, 2007, the Partnership's operations resulted in net income of $104,226 as compared to net income of $2,176,484 for the same period in 2006. The decrease in net income is primarily due to a gain on sale of investments in Local Limited Partnerships recognized in the 2006 period, an increase in general and administrative expenses, partially offset by an increase in investment revenue. The decrease in gain on sale of investment in Local Limited Partnerships is due to the disposal of four Local Limited Partnerships with large proceeds during the six months ended September 30, 2006, where as no Local Limited Partnerships were disposed of during the six months ended September 30, 2007. The increase in general and administrative expenses is primarily due to a reversal of an accrual for monitoring fees in the prior year. The Partnership had an increase in investment revenue during the period ended September 30, 2007 related to the reimbursement of 2006 interest that the Partnership had lost while its cash was invested in below-market interest bearing accounts. Portfolio Update The Partnership was formed on August 9, 1988 under the laws of the State of Delaware for the primary purpose of investing, as a limited partner, in Local Limited Partnerships, which own and operate apartment complexes, most of which benefit from some form of federal, state or local assistance program and each of which qualify for low-income housing tax credits. The Partnership's objectives are to: (i) provide current tax benefits in the form of tax credits which qualified investors may use to offset their federal income tax liability; ii) preserve and protect the Partnership's capital; iii) provide limited cash distributions which are not expected to constitute taxable income during Partnership operations; and iv) provide cash distributions from sale or refinancing transactions. The General Partners of the Partnership are Arch Street III, Inc., which serves as the Managing General Partner, and Arch Street III L.P., which also serves as the Initial Limited Partner. Both of the General Partners are affiliates of MMA Financial, Inc. ("MMA"). The fiscal year of the Partnership ends on March 31. As of September 30, 2007, the Partnership's investment portfolio consisted of limited partnership interests in seven Local Limited Partnerships, each of which owns and operates a multi-family apartment complex and each of which has generated Tax Credits. Since inception, the Partnership generated Tax Credits, net of recapture, of approximately $1,342 per Limited Partner Unit. The aggregate amount of Tax Credits generated by the Partnership was consistent with the objective specified in the Partnership's prospectus. In October 2007, the Partnership distributed $9,774,747, or $96.77 per Unit, representing a distribution from the proceeds of previously reported dispositions of sixty-three Properties and/or the Partnership's investment in the Local Limited Partnerships owning these Properties. The Managing General Partner anticipates making additional distributions in the future. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Portfolio Update (continued) Properties that receive low income housing Tax Credits must remain in compliance with rent restriction and set-aside requirements for at least 15 calendar years from the date the Property is placed in service. Failure to do so would result in recapture of a portion of the Property's Tax Credits. The Compliance Period of the seven Properties in which the Partnership has an interest expired by December 31, 2004. The Managing General Partner has negotiated agreements that will ultimately allow the Partnership to dispose of its interest in three Local Limited Partnerships. The Partnership did not dispose of any Local Limited Partnership interests during the six months ended September 30, 2007. The Managing General Partner will continue to pursue the disposition of the Partnership's remaining Local Limited Partnership interests. The Partnership shall dissolve and its affairs shall be wound up upon the disposition of the final Local Limited Partnership interest and other assets of the Partnership. Investors will continue to be Limited Partners, receiving K-1s and quarterly and annual reports, until the Partnership is dissolved. The Partnership is not a party to any pending legal or administrative proceeding, and to the best of its knowledge, no legal or administrative proceeding is threatened or contemplated against it. Property Discussions Three Properties in which the Partnership has an interest have stabilized operations and operated above break-even as of June 30, 2007. Four Properties generate cash flow deficits that the Local General Partner funds through project expense loans, subordinated loans or operating escrows. However, some Properties have had persistent operating difficulties that could either: i) have an adverse impact on the Partnership's liquidity; ii) result in their foreclosure; or iii) result in the Managing General Partner deeming it appropriate for the Partnership to dispose of its interest in the Local Limited Partnership. Also, the Managing General Partner, in the normal course of the Partnership's business, may arrange for the future disposition of its interest in certain Local Limited Partnerships. The following Property discussions focus only on such Properties. As previously reported, Elmwood Delmar, located in Aurora, Colorado, has a first mortgage with a prohibition of prepayment prior to December 2008. Given this major impediment to sale and the Partnership's desire to transfer its interest in the Local Limited Partnership since the Property's Compliance Period ended on December 31, 2003, the Managing General Partner entered into a put option agreement with an unaffiliated entity that would allow for the transfer of the Partnership's interest in the Local Limited Partnership to the unaffiliated entity for a nominal amount. On September 15, 2005, the Partnership effectively disposed of its interest in Elmwood Delmar when the fund received $2,083 in exchange for the sale of a Contingent Note that was created in conjunction with the put option entered into with the unaffiliated third party. Based on the operating performance of the Property, the Managing General Partner determined that there was very little value above debt in the Property. The Managing General Partner, in accordance with and as permitted by the Partnership Agreement, retained the entire amount of net proceeds from this transfer in Reserves. HUD's June 6, 2006 approval to a Transfer of Physical Assets application completed the transfer of the Partnership's interest in this Local Limited Partnership to the third party. This transfer of Partnership interest resulted in 2006 taxable income of $829,245, or $8.29 per Unit. The Partnership no longer has an interest in this Local Limited Partnership. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) As previously reported, the Managing General Partner had reached an agreement with the Local General Partner of West Dade and West Dade II, located in Miami, Florida, to sell the Partnership's interests in both Local Limited Partnerships, pending HUD's approval to a Modified Transfer of Physical Assets application. Upon further review, HUD's approval was not required. In June 2006, the Partnership received $1,502,777, or $15 per Unit, in exchange for the Partnership's interest in these Local Limited Partnerships. The proceeds from this transfer have been retained in Reserves in accordance with and as permitted by the Partnership Agreement. These transfer of interests resulted in 2006 taxable income of $3,040,190, or $30.40 per Unit. The Partnership no longer has an interest in these Local Limited Partnerships. As previously reported, increased competition for Georgetown II, located in Georgetown, Delaware, negatively impacted the Property's operations. Although the Property maintained a high level of occupancy, the Property's chronic below breakeven status was attributable to stagnant rental rates and high maintenance expenses. In 2003, the non-profit affiliate of the state housing finance agency that holds the Property's long-term ground lease offered to transfer the land at little cost to the Partnership. The Managing General Partner gave its consent to the transfer and, in order to reduce potential risk to the Partnership and provide an exit strategy, concurrently executed a put agreement for the Partnership's interest in the Local Limited Partnership with the Local General Partner. The Partnership executed its put option on August 18, 2006, effectively transferring its interest to the Local General Partner for $5,000. This transfer resulted in a 2006 taxable loss of $1,340,871, or $13.41 per Unit. The Compliance Period expired on December 31, 2004. The Partnership no longer has an interest in this Local Limited Partnership. As previously reported, Waterfront and Shoreline, both located in Buffalo, New York, continue to have operating deficits as a result of a soft rental market, low occupancy and deferred maintenance, which impacts the marketability of the developments. The mortgage loans on both Properties are payable only out of available cash flow and neither Property has made mortgage payments in several years. The Managing General Partner and the Local General Partner commenced discussions regarding the options available to improve operations at, or dispose of, the Properties. An agreement was reached whereby the Managing General Partner would allow the Local General Partner to transfer its Local General Partner interest to a developer that will re-syndicate the Properties. In return, the Partnership obtained both a put option allowing the Partnership to transfer its interest in the Local Limited Partnerships for a nominal sum and a pledge by the incoming Local General Partner to pay any Tax Credit recapture incurred due to the transfer of the Local Limited Partnerships prior to the end of the Compliance Period. These transfers of the Local General Partner interests occurred during April 2005. The transfer of the Partnership's interest is currently expected to occur in the fiscal years ending March 31, 2008 and 2009 for Shoreline and Waterfront, respectively. The Managing General Partner does not expect these transactions to result in net sales proceeds to the Partnership. These transactions are expected to result in taxable income projected to be approximately $44,000,000, or $440 per Unit. As previously reported, the Managing General Partner and Local General Partner of Wood Creek, located in Calcium, New York, were exploring an exit strategy that might have resulted in the 2007 disposal of the Partnership's interest in the Local Limited Partnership. The Managing General Partner is now estimating an early 2008 disposal, as the Local General Partner began marketing the Property for sale in October of 2007. In accordance with the terms of the listing agreement, the Managing General Partner estimates this transaction will result in net proceeds to the Partnership of approximately $700,000, or $7.00, per Unit. The Managing General Partner estimates that a sale, under the proposed terms, will result in taxable income projected to be approximately $750,000, or $7.50 per Unit. As previously reported, with respect to the Partnership, a Settlement Agreement providing options, subject to various conditions, to purchase the Partnership's interests in River Front Apartments, L.P., located in Sunbury, PA, and Susquehanna View, L.P., located in Camp Hill, PA, for an aggregate price of $1,500,000, were not exercised. The Managing General Partner will explore alternative exit strategies for these Local Limited Partnership interests. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) In January 2008, the Managing General Partner will exercise the Partnership's put option and transfer its interest in the Local Limited Partnership that that owns and operates Fourche Valley, located in Perryville, Arkansas. The Partnership will receive $5,000, or $.05 per Unit, for its interest in this Local Limited Partnership. The Managing General Partner estimates this transaction will result in 2008 taxable income projected to be approximately $225,000, or $2.25 per Unit. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, with the participation of the Partnership's management, the Partnership's principal executive officer and principal financial officer conducted an evaluation of the Partnership's disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on this evaluation, our PEO and PFO concluded that our disclosure controls and procedures were effective as of September 30, 2007, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Changes in Internal Control over Financial Reporting. During the quarter ended September 30, 2007, the Partnership completed implementation of the following control improvements to remediate the material weaknesses existing as of March 31, 2007: Controls over Monitoring of Contractual Agreements o As part of the remediation plan, management initiated changes in processes and controls including: o the refund of lost interest; o restricting authority to the corporate treasury department over the opening, closing, investment and movement of cash accounts; o the engagement of the corporate legal department to perform due diligence on new agreements to assure compliance with existing agreements; and o the development and implementation of a fiduciary and conflicts policy that provides guidance to personnel on conflict management. Controls over Recording Equity in Income/Losses o Management now performs a more detailed review and analysis of quarterly financial data and audited financial statements received from its investees to assure proper accounting in the appropriate period. Specifically, investee audited financial statements are reviewed for unusual events (such as a fire) to assure proper accounting in the appropriate period. Quarterly, where warranted, commencing in the quarter ended September 30, 2007, management will expand the scope of line items tested for reasonableness in comparison to prior year financial statements. There were no other changes in the Partnership's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of the Securities and Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended September 30, 2007 that affected, or were reasonably likely to affect, the Partnership's internal control over financial reporting. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) PART II OTHER INFORMATION Items 1-5 Not applicable Item 6 Exhibits and reports on Form 8-K Exhibits 31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) SIGNATURE 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. DATED: November 14, 2007 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III By: Arch Street III, Inc., its Managing General Partner /s/Gary Mentesana Gary Mentesana President Arch Street III, Inc. EX-31 2 qh3q2ex31.txt EX31Q207 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) EXHIBIT 31.1 I, Gary Mentesana, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Boston Financial Qualified Housing Tax Credits L.P. III; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalents functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 14, 2007 /s/Gary Mentesana -------------------------------------- Gary Mentesana Principal Executive Officer and Principal Financial Officer Arch Street III, Inc., as Managing General Partner of Boston Financial Qualified Housing Tax Credits L.P. III EX-32 3 qh3q2ex32.txt EX32Q207 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III (A Limited Partnership) EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Boston Financial Qualified Housing Tax Credits L.P. III (the "Partnership") on Form 10-QSB for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, the Principal Executive Officer and Principal Financial Officer, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Gary Mentesana -------------------------------------- Gary Mentesana Principal Executive Officer and Principal Financial Officer Arch Street III, Inc., as Managing General Partner of Boston Financial Qualified Housing Tax Credits L.P. III Date: November 14 , 2007 A signed original of this written statement required by section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----