UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended March 30, 2005
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
0-19217
-------
(Commission File Number)
American Tax Credit Properties III L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3545006
- -------------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
Richman Tax Credit Properties III L.P.
340 Pemberwick Road
Greenwich, Connecticut 06831
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
--------------
Securities registered pursuant to Section 12(b) of the Act:
None None
- -------------------------------- --------------------------------
(Title of each Class) (Name of each exchange on which
registered)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(Title of Class)
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
requirement for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
Registrant has no voting stock.
Documents incorporated by reference:
Part I - pages 20 through 31 and 44 through 66 of the prospectus dated February
7, 1990, as supplemented by Supplement No. 1, Supplement No. 2, Supplement No.
3, Supplement No. 4, Supplement No. 5 and Supplement No. 6 dated June 6, 1990,
November 21, 1990, December 20, 1990, October 30, 1991, December 26, 1991 and
January 15, 1992, respectively, filed pursuant to Rule 424(b)(3) under the
Securities Act of 1933.
1
PART I
Item 1. Business
Formation
American Tax Credit Properties III L.P. ("Registrant"), a Delaware limited
partnership, was formed on September 21, 1989 to invest primarily in leveraged
low-income multifamily residential complexes (the "Property" or "Properties")
which qualify for the low-income tax credit in accordance with Section 42 of the
Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition of
limited partnership equity interests in partnerships (the "Local Partnership" or
"Local Partnerships") that are the owners of the Properties. Registrant
considers its activity to constitute a single industry segment.
Richman Tax Credit Properties III L.P. (the "General Partner"), a Delaware
limited partnership, was formed on September 21, 1989 to act as the general
partner of Registrant. The general partner of the General Partner is Richman
Housing Credits Inc. ("Richman Housing"), a Delaware corporation that is wholly
owned by Richard Paul Richman. Richman Housing is an affiliate of The Richman
Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard Paul
Richman in 1988.
The Amendment No. 2 to the Registration Statement on Form S-11 was filed with
the Securities and Exchange Commission (the "Commission") on February 1, 1990
pursuant to the Securities Act of 1933 under Registration Statement File No.
33-31390 and was declared effective on February 2, 1990. Reference is made to
the prospectus dated February 7, 1990, as supplemented by Supplement No. 1,
Supplement No. 2, Supplement No. 3, Supplement No. 4, Supplement No. 5 and
Supplement No. 6 dated June 6, 1990, November 21, 1990, December 20, 1990,
October 30, 1991, December 26, 1991 and January 15, 1992, respectively, filed
with the Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933
(the "Prospectus"). Pursuant to Rule 12b-23 of the Commission's General Rules
and Regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the description of Registrant's business set forth
under the heading "Investment Objectives and Policies" at pages 44 through 66 of
the Prospectus is incorporated herein by reference.
On March 12, 1990, Registrant commenced, through Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), the offering of up to 150,000 units of
limited partnership interest ("Unit") at $1,000 per Unit to investors. On June
13, 1990, December 27, 1990, December 31, 1991 and January 23, 1992 the closings
for 19,730, 9,622, 5,227 and 1,304 Units, respectively, took place, amounting to
aggregate limited partners' capital contributions of $35,883,000.
Competition
Pursuant to Rule 12b-23 of the Commission's General Rules and Regulations
promulgated under the Exchange Act, the description of Registrant's competition,
general risks, tax risks and partnership risks set forth under the heading "Risk
Factors" at pages 20 through 31 of the Prospectus is incorporated herein by
reference.
Employees
Registrant employs no personnel and incurs no payroll costs. All management
activities of Registrant are conducted by the General Partner. An affiliate of
the General Partner employs individuals who perform the management activities of
Registrant. This entity also performs similar services for other affiliates of
the General Partner.
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue
Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget
Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget
Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and Trade Relief
Extension Act of 1998, Tax and Trade Relief Extension Act of 1999, Community
Renewal Tax Relief Act of 2000, Economic Growth and Tax Relief Reconciliation
Act of 2001, Job Creation and Worker Assistance Act of 2002, Jobs and Growth Tax
Relief Reconciliation Act of 2003 and American Jobs Creation Act of 2004
(collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax
entity that does not, itself, pay federal income tax. However, the partners of
Registrant who are subject to federal income tax may be affected by the Tax
Acts. Registrant will consider the effect of certain aspects of the Tax Acts on
the partners when making decisions regarding its investments. Registrant does
not anticipate that the Tax Acts will currently have a material adverse impact
on Registrant's business operations, capital resources and plans or liquidity.
2
Item 2. Properties
The executive offices of Registrant and the General Partner are located at 340
Pemberwick Road, Greenwich, Connecticut 06831. Registrant does not own or lease
any properties. Registrant pays no rent; all charges for leased space are borne
by an affiliate of the General Partner.
Registrant's primary objective has been to provide Low-income Tax Credits to
limited partners generally over a ten year period. The relevant state tax credit
agency has allocated each of Registrant's Local Partnerships an amount of
Low-income Tax Credits, which are generally available for a ten year period from
the year the Property is placed in service (the "Ten Year Credit Period"). The
Ten Year Credit Period was substantially fully exhausted by the Local
Partnerships as of December 31, 2003. The required holding period of each
Property, in order to avoid Low-income Tax Credit recapture, is fifteen years
from the year in which the Low-income Tax Credits commence on the last building
of the Property (the "Compliance Period"). In addition, certain of the Local
Partnerships have entered into agreements with the relevant state tax credit
agencies whereby the Local Partnerships must maintain the low-income nature of
the Properties for a period which exceeds the Compliance Period, regardless of
any sale of the Properties by the Local Partnerships after the Compliance
Period. The Properties must satisfy various requirements including rent
restrictions and tenant income limitations (the "Low-income Tax Credit
Requirements") in order to maintain eligibility for the recognition of the
Low-income Tax Credit at all times during the Compliance Period. Once a Local
Partnership has become eligible for the Low-income Tax credit, it may lose such
eligibility and suffer an event of recapture if its Property fails to remain in
compliance with the Low-income Tax Credit Requirements. It is the General
Partner's intention to sell or assign Registrant's interests in Local
Partnerships subsequent to the expiration of the respective Compliance Periods.
It is uncertain as to the amount, if any, that Registrant will receive with
respect to each specific Property from such sales and assignments. Through
December 31, 2004, none of the Local Partnerships have suffered an event of
recapture of Low-income Tax Credits.
Although Registrant generally owns a 98.9%-99% limited partnership interest
("Local Partnership Interest") in the Local Partnerships, Registrant and
American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited
partnership and an affiliate of Registrant, together, in the aggregate, own a
99% Local Partnership Interest in the following Local Partnerships:
Registrant ATCP II
---------- -------
Batesville Family, L.P. 61.75% 37.25%
Bruce Housing Associates, L.P. 61.75 37.25
Carrington Limited Dividend Housing
Association Limited Partnership 65.95 33.05
Ivy Family, L.P. 61.75 37.25
Lawrence Road Properties, Ltd. 61.75 37.25
Mirador del Toa Limited Partnership 59.06 39.94
Purvis Heights Properties, L.P. 61.75 37.25
Queen Lane Investors 48.50 50.50
Many of the Local Partnerships receive rental subsidy payments, including
payments under Section 8 of Title II of the Housing and Community Development
Act of 1974 ("Section 8") (see descriptions of subsidies on page 7). The subsidy
agreements expire at various times during and after the Compliance Periods of
the Local Partnerships. Since October 1997, the United States Department of
Housing and Urban Development ("HUD") has issued a series of directives related
to project based Section 8 contracts that define owners' notification
responsibilities, advise owners of project based Section 8 properties of what
their options are regarding the renewal of Section 8 contracts, provide guidance
and procedures to owners, management agents, contract administrators and HUD
staff concerning renewal of Section 8 contracts, provide policies and procedures
on setting renewal rents and handling renewal rent adjustments and provide the
requirements and procedures for opting-out of a Section 8 project based
contract. Registrant cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program. Such changes could adversely
affect the future net operating income before debt service and debt structure of
any or all Local Partnerships currently receiving such subsidy or similar
subsidies. One Local Partnership's Section 8 contracts are currently subject to
renewal under applicable HUD guidelines.
3
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2004 footnotes)
- -------------------------- ----- ------------ ---- ----------
April Gardens Apartments II
Limited Partnership
April Gardens Apartments
Las Piedras, Puerto Rico 48 $ 485,581 $ 1,966,069 (1b&d
Ashland Park Apartments, L.P.
Ashland Park Apartments
Ashland, Nebraska 24 235,732 1,021,302 (1b&d)
Auburn Family, L.P.
Auburn Apartments
Louisville, Mississippi 16 95,412 456,347 (1b&d)
Batesville Family, L.P.
Westridge Apartments
Batesville, Mississippi 48 239,716 (2) 1,419,819 (1b)
Bay Springs Elderly, L.P.
Bay Springs Manor
Bay Springs, Mississippi 24 208,820 666,111 (1b&d)
Brisas del Mar Apartments
Limited Partnership
Brisas del Mar Apartments
Hatillo, Puerto Rico 66 668,172 2,609,564 (1b&d)
Bruce Housing Associates, L.P.
Bruce Family Apartments
Bruce, Mississippi 40 183,155 (2) 1,087,973 (1b&d)
Carrington Limited Dividend
Housing Association Limited
Partnership
Carrington Place
Farmington Hills, Michigan 100 2,174,720 (2) 3,227,672 (1c)
Chestnut Park Associates, L.P.
Chestnut Park Apartments
East Orange, New Jersey 59 4,204,576 4,772,026 (1a)
Chowan Senior Manor Associates
Limited Partnership
Azalea Garden Senior Manor
Apartments
Murfreesboro, North Carolina 33 278,405 1,228,746 (1b&d)
Christian Street Commons
Associates
Christian Street Commons
Apartments
Philadelphia, Pennsylvania 18 581,645 571,021 (1a&b)
4
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2004 footnotes)
- -------------------------- ----- ------------ ---- ----------
Country View Apartments
Country View Apartments
Pembroke, Maine 16 $ 279,183 $ 922,768 (1b&d)
Desarrollos de Belen Limited
Partnership
Vista de Jagueyes II Apartments
Aguas Buenas, Puerto Rico 41 422,929 1,850,743 (1b&d)
Desarrollos de Emaus Limited
Partnership
Hucares II Apartments
Naguabo, Puerto Rico 72 631,404 3,144,915 (1b&d)
Ellinwood Heights Apartments, L.P.
Ellinwood Heights Apartments
Ellinwood, Kansas 24 156,261 677,438 (1b&d)
Fulton Street Houses Limited
Partnership
Fulton Street Townhouse
Apartments
New York, New York 35 1,948,081 3,869,930 (1a&b)
Hayes Run Limited Partnership
Mashburn Gap Apartments
Marshall, North Carolina 34 322,074 1,404,148 (1b&d)
Howard L. Miller Sallisaw
Apartments II, L.P.
Sallisaw II Apartments
Sallisaw, Oklahoma 24 130,158 606,846 (1b&d)
Hurlock Meadow Limited
Partnership
Hurlock Meadow Apartments
Hurlock, Maryland 30 284,218 1,249,691 (1b&d)
Ivy Family, L.P.
Ivy Apartments
Louisville, Mississippi 32 135,528 (2) 765,777 (1b&d)
Justin Associates
Locust Tower Apartments
Philadelphia, Pennsylvania 40 1,809,723 2,222,874 (1b&e)
LaBelle Commons, Ltd.
LaBelle Commons
LaBelle, Florida 32 253,580 997,116 (1b&d)
Lawrence Road Properties, Ltd.
Hillcrest Apartments
Newton, Mississippi 24 747,337 (1b&d)
123,799 (2)
5
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2004 footnotes)
- -------------------------- ----- ------------ ---- ----------
Loma Del Norte Limited
Partnership
Loma Del Norte Apartments
Anthony, New Mexico 40 $ 314,865 $ 1,416,640 (1b&d)
Long Reach Associates Limited
Partnership
Oak Ridge Apartments
Bath, Maine 30 448,922 1,457,002 (1b&d)
Mirador del Toa Limited
Partnership
Mirador del Toa Apartments
Toa Alta, Puerto Rico 48 284,847 (2) 1,850,088 (1b&d)
Moore Haven Commons, Ltd.
Moore Haven Commons
Moore Haven, Florida 28 213,402 913,852 (1b&d)
NP-89 Limited Dividend Housing
Association Limited Partnership
Newport Apartments
Clinton Township, Michigan 168 2,372,292 3,617,394 (1a,b&g)
Nash Hill Associates, Limited
Partnership
Nash Hill Place
Williamsburg, Massachusetts 28 302,575 1,446,521 (1b,d&f)
North Calhoun City, L.P.
North Calhoun City Apartments
Calhoun City, Mississippi 18 146,565 470,584 (1b&d)
Orange City Plaza, Limited
Partnership
Orange City Plaza Apartments
Orange City, Iowa 32 456,090 409,846 (1a)
Puerta del Mar Limited Partnership
Puerta del Mar Apartments
Hatillo, Puerto Rico 66 630,570 2,483,146 (1b&d)
Purvis Heights Properties, L.P.
Pineview Apartments
Purvis, Mississippi 40 191,512 (2) 1,131,600 (1b)
Queen Lane Investors
Queen's Row
Philadelphia, Pennsylvania 29 597,050 (2) 1,524,745 (1b&e)
Somerset Manor, Ltd.
Somerset Manor
Central City, Pennsylvania 24 208,465 884,599 (1b&d)
Sugar Cane Villas, Ltd.
Sugar Cane Villas
Pahokee, Florida 87 751,560 3,259,238 (1b&d)
6
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2004 footnotes)
- -------------------------- ----- ------------ ---- ----------
Summerfield Apartments Limited
Partnership
Summerfield Apartments
Charlotte, North Carolina 52 $ 1,088,667 $ 1,610,169 (1b)
Sydney Engel Associates L.P.
(formerly known as Sydney Engel
Associates) The Castle
New York, New York 224 3,201,874 16,052,928 (1b)
Union Valley Associates Limited
Partnership
Union Valley Apartments
Union Township, Pennsylvania 36 371,589 1,425,898 (1b)
Walnut Grove Family, L.P.
Walnut Grove Apartments
Walnut Grove, Mississippi 24 191,695 835,644 (1b&d)
Waynesboro Apartments Limited
Partnership
Waynesboro Apartments
Waynesboro, Pennsylvania 36 360,859 1,460,104 (1b)
West Calhoun City, L.P.
West Calhoun City Apartments
Calhoun City, Mississippi 28 230,212 725,123 (1b&d)
Westminster Apartments Limited
Partnership
Westminster Apartments
Philadelphia, Pennsylvania 42 1,047,993 1,607,972 (1b&e)
----------- -----------
$29,264,476 $82,069,326
=========== ===========
(1) Description of subsidies:
(a) Section 8 of Title II of the Housing and Community Development
Act of 1974 allows qualified low-income tenants to pay thirty
percent of their monthly income as rent with the balance paid
by the federal government.
(b) The Local Partnership's debt structure includes a principal or
interest payment subsidy.
(c) The Michigan State Housing Development Authority allows
tenants, who would otherwise pay more than 40% of their income
for rent and utilities, to receive rental subsidies.
(d) The Rural Housing Service (formerly the Farmers Home
Administration) of the United States Department of Agriculture
Rental Assistance Program allows qualified low-income tenants
to receive rental subsidies.
(e) The City of Philadelphia Housing Authority allows qualified
low-income tenants to receive rental certificates.
(f) The Commonwealth of Massachusetts participates in a rental
assistance program.
(g) The Local Partnership's Section 8 contracts are currently
subject to renewal under applicable HUD guidelines.
(2) Reflects amount attributable to Registrant only.
7
Item 3. Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the limited partners of Registrant
during the fourth quarter of the fiscal year covered by this report.
8
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters
Market Information and Holders
There is no established public trading market for Registrant's Units.
Accordingly, accurate information as to the market value of a Unit at any given
date is not available. The number of owners of Units as of May 31, 2005 was
approximately 1,500, holding 35,883 Units.
Merrill Lynch follows internal guidelines for providing estimated values of
limited partnerships and other direct investments reported on client account
statements. Pursuant to such guidelines, estimated values for limited
partnership interests reported on Merrill Lynch client account statements (such
as Registrant's Units) are provided to Merrill Lynch by independent valuation
services, whose estimated values are based on financial and other information
available to them. In addition, Registrant may provide an estimate of value to
Unit holders from time to time in Registrant's reports to limited partners. The
estimated values provided by the independent services and Registrant, which may
differ, are not market values and Unit holders may not be able to sell their
Units or realize either amount upon a sale of their Units. Unit holders may not
realize such estimated values upon the liquidation of Registrant.
Distributions
Registrant owns a limited partnership interest in Local Partnerships that are
the owners of Properties that are leveraged and receive government assistance in
various forms of rental and debt service subsidies. The distribution of cash
flow generated by the Local Partnerships may be restricted, as determined by
each Local Partnership's financing and subsidy agreements. Accordingly,
Registrant does not anticipate that it will provide significant cash
distributions to its partners. There were no cash distributions to the partners
during the years ended March 30, 2005 and 2004.
Low-income Tax Credits, which are subject to various limitations, may be used by
partners to offset federal income tax liabilities. The Low-income Tax Credits
per Unit generated by Registrant and allocated to the limited partners for the
tax years ended December 31, 2004 and 2003 and the cumulative Low-income Tax
Credits allocated from inception through December 31, 2004 are as follows:
Low-income
Tax Credits
-----------
Tax year ended December 31, 2004 $ .07
Tax year ended December 31, 2003 $ 3.67
Cumulative totals $1,558.96
Registrant generated total Tax Credits from investments in Local Partnerships of
approximately $1,559 per Unit through December 31, 2004, notwithstanding future
circumstances which may give rise to recapture or loss of future benefits (see
Part I, Item 2 - Properties, herein). The Ten Year Credit Period for all of the
Properties was substantially fully exhausted as of December 31, 2003.
9
Item 6. Selected Financial Data
The information set forth below presents selected financial data of Registrant.
Additional detailed financial information is set forth in the audited financial
statements included under Part II, Item 8 herein.
Years Ended March 30,
---------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
Interest and other revenue $ 176,110 $ 193,706 $ 224,254 $ 215,927 $ 235,418
=========== =========== =========== =========== ===========
Equity in loss of investment in
local partnerships $ (247,207) $ (215,731) $ (536,158) $(1,193,807) $(1,228,135)
=========== =========== =========== =========== ===========
Net loss $ (640,259) $ (611,662) $ (875,199) $(1,509,355) $(1,519,430)
=========== =========== =========== =========== ===========
Net loss per unit of limited
partnership interest $ (17.66) $ (16.88) $ (24.15) $ (41.64) $ (41.92)
=========== =========== =========== =========== ===========
As of March 30,
---------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
Total assets $ 2,747,749 $ 3,766,895 $ 4,153,964 $ 4,744,278 $ 6,512,494
=========== =========== =========== =========== ===========
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
Registrant admitted limited partners in four closings with aggregate limited
partners' capital contributions of $35,883,000. In connection with the offering
of the sale of Units, Registrant incurred organization and offering costs of
approximately $4,419,000 and established a working capital reserve of
approximately $2,153,000. The remaining net proceeds of approximately
$29,311,000 (the "Net Proceeds") were available to be applied to the acquisition
of limited partnership interests in local partnerships (the "Local
Partnerships") that own low-income multifamily residential complexes (the
"Property" or "Properties") that qualify for the low-income tax credit in
accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax
Credit"). The Net Proceeds were utilized in acquiring an interest in forty-three
Local Partnerships.
As of March 30, 2005, Registrant has cash and cash equivalents and investments
in bonds totaling $1,994,475, which is available for operating expenses of
Registrant and circumstances which may arise in connection with the Local
Partnerships. As of March 30, 2005, Registrant's investments in bonds represent
corporate bonds of $306,681 and U.S. Treasury debt securities of $1,629,793 with
various maturity dates ranging from 2007 to 2008. Registrant acquired such
investments in bonds with the intention of utilizing proceeds generated by such
investments to meet its annual obligations. Future sources of Registrant funds
are expected to be primarily from interest earned on working capital and limited
cash distributions from Local Partnerships.
During the year ended March 30, 2005, Registrant received cash from interest
revenue, maturities/redemptions and sales of bonds and distributions from Local
Partnerships and utilized cash for operating expenses. Cash and cash equivalents
and investments in bonds decreased, in the aggregate, by approximately $744,000
during the year ended March 30, 2005 (which includes a net unrealized loss on
investments in bonds of approximately $168,000, the amortization of net premium
on investments in bonds of approximately $5,000 and the accretion of zero coupon
bonds of approximately $86,000). Notwithstanding circumstances that may arise in
connection with the Properties, Registrant does not expect to realize
significant gains or losses on its investments in bonds, if any.
During the year ended March 30, 2005, the investment in local partnerships
decreased as a result of Registrant's equity in the Local Partnerships' net loss
for the year ended December 31, 2004 of $247,207 and cash distributions received
from Local Partnerships of $10,000 (exclusive of distributions from Local
Partnerships of $34,544 classified as other income). Payable to general partner
and affiliates in the accompanying balance sheet as of March 30, 2005 represents
deferred management and administration fees.
10
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations
Registrant's operating results are dependent upon the operating results of the
Local Partnerships and are significantly impacted by the Local Partnerships'
policies. In addition, the operating results herein are not necessarily the same
for tax reporting. Registrant accounts for its investment in local partnerships
in accordance with the equity method of accounting. Accordingly, the investment
is carried at cost, and is adjusted for Registrant's share of each Local
Partnership's results of operations and by cash distributions received. Equity
in loss of each investment in Local Partnership allocated to Registrant is
recognized to the extent of Registrant's investment balance in each Local
Partnership. Equity in loss in excess of Registrant's investment balance in a
Local Partnership is allocated to other partners' capital in any such Local
Partnership. As a result, the reported equity in loss of investment in local
partnerships is expected to decrease as Registrant's investment balances in the
respective Local Partnerships become zero. The combined statements of operations
of the Local Partnerships reflected in Note 5 to Registrant's financial
statements include the operating results of all Local Partnerships, irrespective
of Registrant's investment balances.
Cumulative losses and cash distributions in excess of investment in local
partnerships may result from a variety of circumstances, including a Local
Partnership's accounting policies, subsidy structure, debt structure and
operating deficits, among other things. In addition, the book value of
Registrant's investment in each Local Partnership (the "Local Partnership
Carrying Value") may be reduced if the Local Partnership Carrying Value is
considered to exceed the estimated value derived by management. Accordingly,
cumulative losses and cash distributions in excess of the investment or an
adjustment to a Local Partnership's Carrying Value are not necessarily
indicative of adverse operating results of a Local Partnership. See discussion
below under Local Partnership Matters regarding certain Local Partnerships
currently operating below economic break even levels.
Registrant's operations for the years ended March 30, 2005, 2004, and 2003
resulted in net losses of $640,259, $611,662 and $875,199, respectively. The
decrease in net loss from fiscal 2003 to fiscal 2004 is primarily attributable
to a decrease in equity in loss of investment in local partnerships of
approximately $320,000, partially offset by a decrease in interest revenue of
approximately $42,000 resulting from the maturity of certain investments in
bonds at higher than current interest rates and a reduction in money market
rates. Equity in loss of investment in local partnerships is subject to
fluctuation as a result of (i) Registrant adjusting the Local Partnership
Carrying Value in connection with its investments in certain Local Partnerships
and changes in the nonrecognition of losses in accordance with the equity method
of accounting and (ii) changes in the net operating results of those Local
Partnerships in which Registrant continues to have an investment balance.
The Local Partnerships' net loss of approximately $3,334,000 for the year ended
December 31, 2004 includes depreciation and amortization expense of
approximately $4,050,000 and interest on non-mandatory debt of approximately
$355,000, and does not include required principal payments on permanent
mortgages of approximately $932,000. The Local Partnerships' net loss of
approximately $2,933,000 for the year ended December 31, 2003 includes
depreciation and amortization expense of approximately $4,045,000 and interest
on non-mandatory debt of approximately $377,000, and does not include principal
payments on permanent mortgages of approximately $818,000. The Local
Partnerships' net loss of approximately $3,253,000 for the year ended December
31, 2002 includes depreciation and amortization expense of approximately
$4,100,000 and interest on non-mandatory debt of approximately $361,000, and
does not include principal payments on permanent mortgages of approximately
$754,000. The results of operations of the Local Partnerships for the year ended
December 31, 2004 are not necessarily indicative of the results that may be
expected in future periods.
Local Partnership Matters
Registrant's primary objective has been to provide Low-income Tax Credits to
limited partners generally over a ten year period. The relevant state tax credit
agency has allocated each of Registrant's Local Partnerships an amount of
Low-income Tax Credits, which are generally available for a ten year period from
the year the Property is placed in service (the "Ten Year Credit Period"). The
Ten Year Credit Period was substantially fully exhausted by the Local
Partnerships as of December 31, 2003. The required holding period of each
Property, in order to avoid Low-income Tax Credit recapture, is fifteen years
from the year in which the Low-income Tax Credits commence on the last building
of the Property (the "Compliance Period"). In addition, certain of the Local
Partnerships have entered into agreements with the relevant state tax credit
agencies whereby the Local Partnerships must maintain the low-income nature of
the Properties for a period which exceeds the Compliance Period, regardless of
any sale of the Properties by the Local Partnerships after the Compliance
Period. The Properties must satisfy various requirements including rent
restrictions and tenant income limitations (the "Low-income Tax Credit
Requirements") in order to maintain eligibility for the recognition of the
Low-income Tax Credit at all times during the Compliance Period. Once a Local
Partnership has become eligible for the Low-income Tax credit, it may lose such
eligibility and suffer an event of recapture if its Property fails to remain in
11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
compliance with the Low-income Tax Credit Requirements. Through December 31,
2004, none of the Local Partnerships have suffered an event of recapture of
Low-income Tax Credits. It is the General Partner's intention to sell or assign
Registrant's interests in Local Partnerships subsequent to the expiration of the
respective Compliance Periods. It is uncertain as to the amount, if any, that
Registrant will receive with respect to each specific Property from such sales
and assignments.
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. Many of the Local Partnerships receive rental subsidy payments,
including payments under Section 8 of Title II of the Housing and Community
Development Act of 1974 ("Section 8"). The subsidy agreements expire at various
times during and after the Compliance Periods of the Local Partnerships. Since
October 1997, the United States Department of Housing and Urban Development
("HUD") has issued a series of directives related to project based Section 8
contracts that define owners' notification responsibilities, advise owners of
project based Section 8 properties of what their options are regarding the
renewal of Section 8 contracts, provide guidance and procedures to owners,
management agents, contract administrators and HUD staff concerning renewal of
Section 8 contracts, provide policies and procedures on setting renewal rents
and handling renewal rent adjustments and provide the requirements and
procedures for opting-out of a Section 8 project based contract. Registrant
cannot reasonably predict legislative initiatives and governmental budget
negotiations, the outcome of which could result in a reduction in funds
available for the various federal and state administered housing programs
including the Section 8 program. Such changes could adversely affect the future
net operating income before debt service and debt structure of any or all Local
Partnerships currently receiving such subsidy or similar subsidies. One Local
Partnership's Section 8 contracts are currently subject to renewal under
applicable HUD guidelines.
The Local Partnerships have various financing structures which include (i)
required debt service payments ("Mandatory Debt Service") and (ii) debt service
payments which are payable only from available cash flow subject to the terms
and conditions of the notes, which may be subject to specific laws, regulations
and agreements with appropriate federal and state agencies ("Non-Mandatory Debt
Service or Interest"). In the event rents are not sufficient to cover operating
expenses, Mandatory Debt Service requirements and other charges, certain general
partners of the Local Partnerships (the "Local General Partners") are obligated
to provide advances to cover deficits for a certain period of time up to certain
amounts (the "Deficit Guarantee"). A Local General Partner's funding of such
Deficit Guarantee is dependent on its liquidity or ability to borrow the
required funds. During the year ended December 31, 2004, revenue from operations
of the Local Partnerships has generally been sufficient to cover operating
expenses and Mandatory Debt Service. Substantially all of the Local Partnerships
are effectively operating at or above break even levels, although certain Local
Partnerships' operating information reflects operating deficits that do not
represent cash deficits due to their mortgage and financing structure and the
required deferral of property management fees. However, as discussed below,
certain Local Partnerships' operating information indicates an operating deficit
after taking into account their mortgage and financing structure and any
required deferral of property management fees.
The terms of the partnership agreement of Westminster Apartments Limited
Partnership ("Westminster") require the Local General Partner to advance funds
to cover operating deficits through the Compliance Period. As of December 31,
2004, Westminster was in default under the terms of its first mortgage; payments
of principal, interest and replacement reserve deposits are over five years in
arrears, resulting in a cumulative arrearage of approximately $607,000. The
lender has indicated a willingness to restructure the debt, whereby payments
will be required only to the extent that Westminster generates available annual
cash flow; in addition, the lender would receive all residual proceeds upon the
sale of Westminster. There can be no assurance that the issues will be resolved
and the mortgage remains in default without a formal forbearance as of June
2005. Westminster incurred an operating deficit of approximately $77,000 for the
year ended December 31, 2004, which amount includes a provision for replacement
reserve deposits of $1,184 per month and debt service payments of $6,245 per
month. Registrant's investment balance in Westminster, after cumulative equity
losses, became zero during the year ended March 30, 1999. Westminster generated
approximately $63.2 per Unit to the limited partners upon the expiration of its
Low-income Tax Credit allocation in 2003.
The terms of the partnership agreement of Sydney Engel Associates L.P. ("Sydney
Engel") require the Local General Partners to cause the management agent to
defer property management fees in order to avoid a default under the mortgage.
Sydney Engel incurred an operating deficit of approximately $281,000 for the
year ended December 31, 2004, which includes property management fees of
approximately $118,000. The Local General Partners report that payments on the
mortgage are current and the Property does not incur real estate taxes.
Registrant's investment balance in Sydney Engel, after cumulative equity losses,
became zero during the year ended March 30, 1997. The Compliance Period in
connection with Sydney Engel expires on December 31, 2005.
12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Fulton Street Houses Limited Partnership ("Fulton Street") has an escrow of
approximately $320,000 as of December 31, 2004 to cover operating deficits and
there are no Mandatory Debt Service payments or real estate taxes required
during the Compliance Period. Fulton Street incurred an operating deficit of
approximately $41,000 for the year ended December 31, 2004. Registrant's
investment balance in Fulton Street, after cumulative equity losses, became zero
during the year ended March 30, 2002. Fulton Street generated approximately
$116.8 per Unit to the limited partners upon the expiration of its Low-income
Tax Credit allocation in 2001.
The terms of the partnership agreement of Orange City Plaza Limited Partnership
("Orange City") require the Local General Partner to advance funds to cover all
operating deficits through the Compliance Period and to cause the management
agent to defer property management fees in order to avoid a default under the
mortgage. Orange City incurred an operating deficit of approximately $29,000 for
the year ended December 31, 2004, which includes property management fees of
approximately $5,000. The Local General Partner represents that payments on the
mortgage and real estate taxes are current. Registrant's investment balance in
Orange City, after cumulative equity losses, became zero during the year ended
March 30, 2002. Orange City generated approximately $24.8 per Unit to the
limited partners upon the expiration of its Low-income Tax Credit allocation in
2002.
The terms of the partnership agreement of Christian Street Commons Associates
("Christian Street") require the Local General Partner to advance funds to cover
all operating deficits through the Compliance Period and to cause the management
agent to defer property management fees in order to avoid a default under the
mortgage. Christian Street incurred an operating deficit of approximately
$13,000 for the year ended December 31, 2004, which includes property management
fees of approximately $5,000. As of December 31, 2004, the Local General Partner
has advanced approximately $120,000 under its Deficit Guarantee obligation and
it represents that payments on the mortgage and real estate taxes are current.
Registrant's investment balance in Christian Street, after cumulative equity
losses, became zero during the year ended March 30, 1998. Christian Street
generated approximately $32.1 per Unit to the limited partners upon the
expiration of its Low-income Tax Credit allocation in 2002.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's
operations during its period of ownership of the Local Partnership Interests.
Contractual Obligations
As of March 30, 2005, Registrant has the following contractual obligations
(payments due by period):
Total < 1 year 1 - 3 years 3 - 5 years > 5 years
----- -------- ----------- ----------- ---------
Other Long Term Liabilities:
Accounts Payable and
Accrued Expenses (1) $ 556,673 $ 116,000 $ 440,673 $ -- $ --
Payable to General Partner
and Affiliates (2) 1,973,908 316,000 1,657,908 -- --
$ 2,530,581 $ 432,000 $ 2,098,581 $ -- $ --
=========== =========== =========== =========== ===========
(1) Represents Administration Fees payable to a third-party former service
provider. Of such amount, $116,000 is due in fiscal 2006 and the remainder
is payable from available reserves or sale or refinancing proceeds from
the Local Partnerships to the extent such amounts are available.
(2) Represents Administration and Management Fees payable to an affiliate of
the General Partner. Of such amount, $316,000 is due in fiscal 2006 and
the remainder is payable from available reserves or sale or refinancing
proceeds from the Local Partnerships to the extent such amounts are
available.
13
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Off - Balance Sheet Arrangements
None
Recent Accounting Pronouncements
As of March 31, 2004 Registrant adopted Financial Accounting Standards Board
Interpretation No. 46 - Revised ("FIN 46R"), "Consolidation of Variable Interest
Entities." FIN 46R provides guidance on when an entity should include the
assets, liabilities, and activities of a variable interest entity ("VIE") in its
financial statements and when it should disclose information about its
relationship with a VIE. A VIE is considered a legal structure used to conduct
activities or hold assets, which must be consolidated by an entity if it is the
primary beneficiary because it absorbs the majority of the VIE's expected
losses, the majority of the expected residual returns, or both.
Based on the guidance of FIN 46R, the Local Partnerships in which Registrant
invested meet the definition of a VIE. However, Registrant does not consolidate
the accounts and activities of the Local Partnerships under FIN 46R because
Registrant is not considered the primary beneficiary. Registrant currently
records the amount of its investment in local partnerships as an asset in the
balance sheets, recognizes its share of income or loss from such investments in
the statements of operations, discloses how it accounts for such investments in
the financial statements and presents the Local Partnerships' combined balance
sheets and statements of operations in the notes to the financial statements.
Registrant's balance in investment in local partnerships, plus the risk of
recapture of tax credits previously recognized on these investments, represents
its limited partners' maximum exposure to loss. Such exposure to loss is
mitigated by the condition and financial performance of the underlying
Properties, the financial capacity and managerial expertise of the Local General
Partners and their guarantees against Low-income Tax Credit recapture and the
expiration of the Ten Year Credit Periods and Compliance Periods of the
Properties.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which requires Registrant to
make certain estimates and assumptions. A summary of significant accounting
policies is provided in Note 1 to the financial statements. The following
section is a summary of certain aspects of those accounting policies that may
require subjective or complex judgments and are most important to the portrayal
of Registrant's financial condition and results of operations. Registrant
believes that there is a low probability that the use of different estimates or
assumptions in making these judgments would result in materially different
amounts being reported in the financial statements.
o Registrant accounts for its investment in local partnerships in
accordance with the equity method of accounting since Registrant
does not control the operations of a Local Partnership.
o If the book value of Registrant's investment in a Local Partnership
exceeds the estimated value derived by management, Registrant
reduces its investment in any such Local Partnership and includes
such reduction in equity in loss of investment in local
partnerships. A loss in value of an investment in a Local
Partnership other than a temporary decline would be recorded as an
impairment loss. Impairment is measured by comparing the investment
carrying amount to the sum of the total amount of the remaining tax
credits to be allocated to Registrant and the estimated residual
value of the investment.
o Registrant does not consolidate the accounts and activities of the
Local Partnerships, which are considered VIEs under FIN 46R, because
Registrant is not considered the primary beneficiary.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
Registrant has invested a significant portion of its working capital reserves in
corporate bonds and U.S. Treasury instruments. The market value of such
investments is subject to fluctuation based upon changes in interest rates
relative to each investment's maturity date and the associated bond rating.
Since Registrant's investments in bonds have various maturity dates through
2008, the value of such investments may be adversely impacted in an environment
of rising interest rates in the event Registrant decides to liquidate any such
investment prior to its maturity. Although Registrant may utilize reserves to
pay for its operating expenses and/or assist an under performing Property, it
otherwise intends to hold such investments to their respective maturities.
Therefore, Registrant does not anticipate any material adverse impact in
connection with such investments.
14
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 8. Financial Statements and Supplementary Data
Table of Contents Page
----------------- ----
Report of Independent Registered Public Accounting Firm............16
Balance Sheets.....................................................17
Statements of Operations...........................................18
Statements of Changes in Partners' Equity (Deficit)................19
Statements of Cash Flows...........................................20
Notes to Financial Statements......................................22
No financial statement schedules are included because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or the notes thereto.
15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
American Tax Credit Properties III L.P.
We have audited the accompanying balance sheets of American Tax Credit
Properties III L.P. as of March 30, 2005 and 2004, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for each of the
three years in the period ended March 30, 2005. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. For the
year ended March 30, 2005, we did not audit the financial statements of certain
investee partnerships which investments represent $751,675 in total assets and
$247,207 of total losses as of and for the year ended March 30, 2005. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to those investee partnerships, is
based solely on the reports of the other auditors.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership has
determined that it is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership's internal control over financial reporting. Accordingly, we express
no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits, and the reports of the other auditors,
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of American Tax Credit Properties III L.P. as
of March 30, 2005 and 2004, and the results of its operations, changes in
partners' equity (deficit) and its cash flows for each of the three years in the
period ended March 30, 2005, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Reznick Group, P.C.
Bethesda, Maryland
July 22, 2005
16
AMERICAN TAX CREDIT PROPERTIES III L.P.
BALANCE SHEETS
MARCH 30, 2005 AND 2004
Notes 2005 2004
----- ---- ----
ASSETS
Cash and cash equivalents 3,9 $ 58,001 $ 103,242
Investments in bonds 4,9 1,936,474 2,635,158
Investment in local partnerships 5,8 751,675 1,008,882
Interest receivable 9 1,599 19,613
----------- -----------
$ 2,747,749 $ 3,766,895
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses 8 $ 622,126 $ 862,952
Payable to general partner and affiliates 6,8 1,973,908 1,944,316
----------- -----------
2,596,034 2,807,268
----------- -----------
Commitments and contingencies 8
Partners' equity (deficit) 2,4
General partner (314,335) (307,932)
Limited partners (35,883 units of limited
partnership interest outstanding) 410,557 1,044,413
Accumulated other comprehensive income, net 55,493 223,146
----------- -----------
151,715 959,627
----------- -----------
$ 2,747,749 $ 3,766,895
=========== ===========
See Notes to Financial Statements.
17
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 30, 2005, 2004 AND 2003
Notes 2005 2004 2003
----- ---- ---- ----
REVENUE
Interest $ 141,566 $ 160,346 $ 202,541
Other income from local partnerships 34,544 33,360 21,713
--------- --------- ---------
TOTAL REVENUE 176,110 193,706 224,254
--------- --------- ---------
EXPENSES
Administration fees - affiliate 6,8 230,571 230,571 230,571
Management fees - affiliate 6,8 230,571 230,571 230,571
Professional fees 68,253 82,681 53,730
State of New Jersey filing fees 20,145 21,428 30,000
Printing, postage and other 19,622 24,386 18,423
--------- --------- ---------
TOTAL EXPENSES 569,162 589,637 563,295
--------- --------- ---------
(393,052) (395,931) (339,041)
Equity in loss of investment in local partnerships 5 (247,207) (215,731) (536,158)
--------- --------- ---------
NET LOSS (640,259) (611,662) (875,199)
Other comprehensive income (loss), net 4 (167,653) (34,514) 225,741
--------- --------- ---------
COMPREHENSIVE LOSS $(807,912) $(646,176) $(649,458)
========= ========= =========
NET LOSS ATTRIBUTABLE TO 2
General partner $ (6,403) $ (6,117) $ (8,752)
Limited partners (633,856) (605,545) (866,447)
--------- --------- ---------
$(640,259) $(611,662) $(875,199)
========= ========= =========
NET LOSS per unit of limited partnership
Interest (35,883 units of limited partnership
interest) $ (17.66) $ (16.88) $ (24.15)
========= ========= =========
See Notes to Financial Statements.
18
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 30, 2005, 2004 AND 2003
Accumulated Other
General Limited Comprehensive
Partner Partners Income (Loss), Net Total
------- -------- ------------------ -----
Partners' equity (deficit), March 30, 2002 $ (293,063) $ 2,516,405 $ 31,919 $ 2,255,261
Net loss (8,752) (866,447)
(875,199)
Other comprehensive income, net 225,741 225,741
----------- ----------- ----------- -----------
Partners' equity (deficit), March 30, 2003 (301,815) 1,649,958 257,660 1,605,803
Net loss (6,117) (605,545) (611,662)
Other comprehensive loss, net (34,514) (34,514)
----------- ----------- ----------- -----------
Partners' equity (deficit), March 30, 2004 (307,932) 1,044,413 223,146 959,627
Net loss (6,403) (633,856) (640,259)
Other comprehensive loss, net (167,653) (167,653)
----------- ----------- ----------- -----------
Partners' equity (deficit), March 30, 2005 $ (314,335) $ 410,557 $ 55,493 $ 151,715
=========== =========== =========== ===========
See Notes to Financial Statements.
19
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 30, 2005, 2004 AND 2003
2005 2004 2003
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 60,168 $ 75,402 $ 105,058
Cash paid for
administration fees - affiliate (301,769) (16,353) (132,195)
management fees - affiliate (361,781) (183,663) (299,800)
professional fees (70,779) (66,380) (53,730)
State of New Jersey filing fees (24,445) (38,634)
printing, postage and other expenses (21,622) (25,500) (18,426)
--------- --------- ---------
Net cash used in operating activities (720,228) (255,128) (399,093)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from local partnerships 44,544 44,320 37,352
Maturities/redemptions and sales of bonds 630,443 204,500 419,395
--------- --------- ---------
Net cash provided by investing activities 674,987 248,820 456,747
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (45,241) (6,308) 57,654
Cash and cash equivalents at beginning of year 103,242 109,550 51,896
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 58,001 $ 103,242 $ 109,550
========= ========= =========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds, net $(167,653) $ (34,514) $ 225,741
========= ========= =========
================================================================================
See reconciliation of net loss to net cash used in operating activities on page
21.
See Notes to Financial Statements.
20
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS - (Continued)
YEARS ENDED MARCH 30, 2005, 2004 AND 2003
2005 2004 2003
---- ---- ----
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES
Net loss $(640,259) $(611,662) $(875,199)
--------- --------- ---------
Adjustments to reconcile net loss to net cash used in
operating activities
Equity in loss of investment in local partnerships 247,207 215,731 536,158
Distributions from local partnerships classified as other income (34,544) (33,360) (21,713)
Gain on redemptions and sales of bonds (17,753) (4,792) (19,434)
Amortization of net premium on investments in bonds 4,832 3,669 2,986
Accretion of zero coupon bonds (86,491) (86,491) (86,491)
Decrease in interest receivable 18,014 2,670 5,456
Increase in payable to general partner and affiliates 29,592 261,126 145,147
Decrease in accounts payable and accrued expenses (240,826) (2,019) (86,003)
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES $(720,228) $(255,128) $(399,093)
========= ========= =========
See Notes to Financial Statements.
21
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 30, 2005, 2004 AND 2003
1. Organization, Purpose and Summary of Significant Accounting Policies
American Tax Credit Properties III L.P. (the "Partnership") was formed on
September 21, 1989 and the Certificate of Limited Partnership of the Partnership
was filed under the Delaware Revised Uniform Limited Partnership Act. There was
no operating activity until admission of the limited partners on June 13, 1990.
The Partnership was formed to invest primarily in leveraged low-income
multifamily residential complexes (the "Property" or "Properties") which qualify
for the low-income tax credit in accordance with Section 42 of the Internal
Revenue Code (the "Low-income Tax Credit"), through the acquisition of limited
partnership equity interests (the "Local Partnership Interests") in partnerships
(the "Local Partnership" or "Local Partnerships") that are the owners of the
Properties. Richman Tax Credit Properties III L.P. (the "General Partner") was
formed on September 21, 1989 to act as the general partner of the Partnership.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for
both financial reporting and tax purposes. For financial reporting purposes, the
Partnership's fiscal year ends March 30 and its quarterly periods end June 29,
September 29 and December 30. The Local Partnerships have a calendar year for
financial reporting purposes. The Partnership and the Local Partnerships each
have a calendar year for income tax purposes.
Investment in Local Partnerships
The Partnership accounts for its investment in local partnerships in accordance
with the equity method of accounting, under which the investment is carried at
cost and is adjusted for the Partnership's share of each Local Partnership's
results of operations and by cash distributions received. Equity in loss of each
investment in Local Partnership allocated to the Partnership is recognized to
the extent of the Partnership's investment balance in each Local Partnership.
Equity in loss in excess of the Partnership's investment balance in a Local
Partnership is allocated to other partners' capital in any such Local
Partnership. Previously unrecognized equity in loss of any Local Partnership is
recognized in the fiscal year in which equity in income is earned by such Local
Partnership or additional investment is made by the Partnership. Distributions
received subsequent to the elimination of an investment balance for any such
investment in a Local Partnership are recorded as other income from local
partnerships.
The Partnership regularly assesses the carrying value of its investments in
local partnerships. If the carrying value of an investment in a Local
Partnership exceeds the estimated value derived by management, the Partnership
reduces its investment in any such Local Partnership and includes such reduction
in equity in loss of investment in local partnerships. A loss in value of an
investment in a Local Partnership other than a temporary decline would be
recorded as an impairment loss. Impairment is measured by comparing the
investment carrying amount to the sum of the total amount of the remaining tax
credits to be allocated to the Partnership and the estimated residual value of
the investment.
The Partnership does not consolidate the accounts and activities of the Local
Partnerships, which are considered Variable Interest Entities (see discussion
below under Recent Accounting Pronouncements), because the Partnership is not
considered the primary beneficiary
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with an
original maturity of three months or less at the date of acquisition to be cash
equivalents. Cash and cash equivalents are stated at cost, which approximates
market value.
22
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
1. Organization, Purpose and Summary of Significant Accounting Policies
(continued)
Income Taxes
No provision for income taxes has been made because all income, losses and tax
credits are allocated to the partners for inclusion in their respective tax
returns. In accordance with Statement of Financial Accounting Standard ("SFAS")
No. 109, "Accounting for Income Taxes," the Partnership has included in Note 7
disclosures related to differences in the book and tax bases of accounting.
Investments in Bonds
Investments in bonds are classified as available-for-sale and represent
investments that the Partnership intends to hold for an indefinite period of
time but not necessarily to maturity. Any decision to sell an investment would
be based on various factors, including significant movements in interest rates
and liquidity needs. Investments in bonds are carried at estimated fair value
and unrealized gains or losses are included as items of comprehensive income
(loss) and are reported as a separate component of partners' equity (deficit).
Premiums and discounts on investments in bonds are amortized (accreted) using
the effective yield method over the life of the investment. Amortized premiums
offset interest revenue, while the accretion of discounts and zero coupon bonds
are included in interest revenue. Realized gain (loss) on redemptions or sales
of investments in bonds are included in, or offset against, interest revenue on
the basis of the adjusted cost of each specific investment redeemed or sold.
Reclassifications
Certain prior year balances have been reclassified to conform to the current
year presentation.
Recent Accounting Pronouncements
As of March 31, 2004 the Partnership adopted Financial Accounting Standards
Board Interpretation No. 46 - Revised ("FIN 46R"), "Consolidation of Variable
Interest Entities." FIN 46R provides guidance on when an entity should include
the assets, liabilities, and activities of a variable interest entity ("VIE") in
its financial statements and when it should disclose information about its
relationship with a VIE. A VIE is considered a legal structure used to conduct
activities or hold assets, which must be consolidated by an entity if it is the
primary beneficiary because it absorbs the majority of the VIE's expected
losses, the majority of the expected residual returns, or both.
Based on the guidance of FIN 46R, the Local Partnerships in which the
Partnership invested meet the definition of a VIE. However, the Partnership does
not consolidate the accounts and activities of the Local Partnerships under FIN
46R because the Partnership is not considered the primary beneficiary. The
Partnership currently records the amount of its investment in local partnerships
as an asset in the balance sheets, recognizes its share of income or loss from
such investments in the statements of operations, and discloses how it accounts
for such investments in the financial statements and presents the Local
Partnerships' combined balance sheets and statements of operations in the notes
to the financial statements.
The Partnership's balance in investment in local partnerships, plus the risk of
recapture of tax credits previously recognized on these investments, represents
its limited partners' maximum exposure to loss. Such exposure to loss is
mitigated by the condition and financial performance of the underlying
Properties, the financial capacity and managerial expertise of the Local General
Partners and their guarantees against Low-income Tax Credit recapture and the
expiration of the ten year credit periods and compliance periods of the
Properties (see Note 5).
23
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
2. Capital Contributions
On March 12, 1990, the Partnership commenced the offering of units (the "Units")
through Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Selling
Agent"). On June 13, 1990, December 27, 1990, December 31, 1991 and January 23,
1992, under the terms of the Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), the General
Partner admitted limited partners to the Partnership in four closings. At these
closings, subscriptions for a total of 35,883 Units representing $35,883,000 in
limited partners' capital contributions were accepted. In connection with the
offering of Units, the Partnership incurred organization and offering costs of
$4,418,530, of which $75,000 was capitalized as organization costs and
$4,343,530 was charged to the limited partners' equity as syndication costs. The
Partnership received a capital contribution of $100 from the General Partner.
Net loss is allocated 99% to the limited partners and 1% to the General Partner
in accordance with the Partnership Agreement.
3. Cash and Cash Equivalents
As of March 30, 2005, the Partnership has cash and cash equivalents of $58,001
that are deposited in interest bearing accounts with an institution that is not
insured by the Federal Deposit Insurance Corporation.
4. Investments in Bonds
The Partnership carries its investments in bonds as available-for-sale because
such investments are used to facilitate and provide flexibility for the
Partnership's obligations, including the providing of operating advances
resulting from circumstances that may arise in connection with the Local
Partnerships. Investments in bonds are reflected in the accompanying balance
sheets at estimated fair value.
As of March 30, 2005, certain information concerning investments in bonds is as
follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
Description and maturity cost gains losses value
- ------------------------ ---- ----- ------ -----
Corporate debt securities
After one year through five years $ 292,251 $ 14,776 $ (346) $ 306,681
U.S. Treasury debt securities
After one year through five years 1,588,730 41,063 -- 1,629,793
----------- ----------- ----------- -----------
$ 1,880,981 $ 55,839 $ (346) $ 1,936,474
=========== =========== =========== ===========
24
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
4. Investments in Bonds (continued)
As of March 30, 2004, certain information concerning investments in bonds is as
follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
Description and maturity cost gains losses value
- ------------------------ ---- ----- ------ -----
Corporate debt securities
Within one year $ 399,999 $ 7,189 $ -- $ 407,188
After one year through five years 504,756 66,929 -- 571,685
---------- ---------- ---------- ----------
904,755 74,118 -- 978,873
---------- ---------- ---------- ----------
U.S. Treasury debt securities
After one year through five years 1,507,257 149,028 -- 1,656,285
---------- ---------- ---------- ----------
$2,412,012 $ 223,146 $ -- $2,635,158
========== ========== ========== ==========
25
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships
As of March 30, 2005, the Partnership owns a limited partnership interest in the
following Local Partnerships:
1. April Gardens Apartments II Limited Partnership;
2. Ashland Park Apartments, L.P.;
3. Auburn Family, L.P.;
4. Batesville Family, L.P.;
5. Bay Springs Elderly, L.P.;
6. Brisas del Mar Apartments Limited Partnership;
7. Bruce Housing Associates, L.P.;
8. Carrington Limited Dividend Housing Association Limited Partnership;
9. Chestnut Park Associates, L.P.*;
10. Chowan Senior Manor Associates Limited Partnership;
11. Christian Street Commons Associates;
12. Country View Apartments;
13. Desarrollos de Belen Limited Partnership;
14. Desarrollos de Emaus Limited Partnership;
15. Ellinwood Heights Apartments, L.P.;
16. Fulton Street Houses Limited Partnership;
17. Hayes Run Limited Partnership;
18. Howard L. Miller Sallisaw Apartments II, L.P.;
19. Hurlock Meadow Limited Partnership;
20. Ivy Family, L.P.;
21. Justin Associates;
22. LaBelle Commons, Ltd.;
23. Lawrence Road Properties, Ltd.;
24. Loma Del Norte Limited Partnership;
25. Long Reach Associates Limited Partnership;
26. Mirador del Toa Limited Partnership;
27. Moore Haven Commons, Ltd.;
28. NP-89 Limited Dividend Housing Association Limited Partnership;
29. Nash Hill Associates, Limited Partnership;
30. North Calhoun City, L.P.;
31. Orange City Plaza, Limited Partnership;
32. Puerta del Mar Limited Partnership;
33. Purvis Heights Properties, L.P.;
34. Queen Lane Investors;
35. Somerset Manor, Ltd.;
36. Sugar Cane Villas, Ltd.;
37. Summerfield Apartments Limited Partnership;
38. Sydney Engel Associates L.P. (formerly known as Sydney Engel
Associates)*;
39. Union Valley Associates Limited Partnership;
40. Walnut Grove Family, L.P.;
41. Waynesboro Apartments Limited Partnership;
42. West Calhoun City, L.P.; and
43. Westminster Apartments Limited Partnership ("Westminster").
*An affiliate of the General Partner is a general partner of and/or
provides services to the Local Partnership.
26
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
Although the Partnership generally owns a 98.9%-99% limited partnership interest
in the Local Partnerships, the Partnership and American Tax Credit Properties II
L.P. ("ATCP II"), a Delaware limited partnership and an affiliate of the
Partnership, together, in the aggregate, own a 99% Local Partnership Interest in
the following Local Partnerships:
The
Partnership ATCP II
----------- -------
Batesville Family, L.P. 61.75% 37.25%
Bruce Housing Associates, L.P. 61.75 37.25
Carrington Limited Dividend Housing
Association Limited Partnership 65.95 33.05
Ivy Family, L.P. 61.75 37.25
Lawrence Road Properties, Ltd. 61.75 37.25
Mirador del Toa Limited Partnership 59.06 39.94
Purvis Heights Properties, L.P. 61.75 37.25
Queen Lane Investors 48.50 50.50
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. The required holding period of each Property, in order to avoid
Low-income Tax Credit recapture, is fifteen years from the year in which the
Low-income Tax Credits commence on the last building of the Property (the
"Compliance Period"). The rents of the Properties are controlled by federal and
state agencies pursuant to applicable laws and regulations. Under the terms of
each of the Local Partnership's partnership agreements, the Partnership
committed to make capital contribution payments in the aggregate amount of
$29,264,476, all of which has been paid. As of December 31, 2004, the Local
Partnerships have outstanding mortgage loans payable totaling approximately
$82,069,000 and accrued interest payable on such loans totaling $4,511,000,
which are secured by security interests and liens common to mortgage loans on
the Local Partnerships' real property and other assets.
Equity in loss of investment in local partnerships is limited to the
Partnership's investment balance in each Local Partnership; any such excess is
applied to other partners' capital in any such Local Partnership (see Note 1).
The amount of such excess losses applied to other partners' capital was
$2,726,948, $2,462,019, and $2,586,565 for the years ended December 31, 2004,
2003 and 2002, respectively, as reflected in the combined statements of
operations of the Local Partnerships reflected herein Note 5.
As of December 31, 2004, Westminster Apartments Limited Partnership
("Westminster") was in default under the terms of its first mortgage; payments
of principal, interest and replacement reserve deposits are over five years in
arrears, resulting in a cumulative arrearage of approximately $607,000. The
lender has indicated a willingness to restructure the debt, whereby payments
will be required only to the extent that Westminster generates available annual
cash flow; in addition, the lender would receive all residual proceeds upon the
sale of Westminster. There can be no assurance that the issues will be resolved
and the mortgage remains in default without a formal forbearance as of June
2005.
As a result of management's assessment of the carrying value of the investment
in local partnerships under applicable accounting guidelines (see Note 1), the
Partnership reduced its investment in certain Local Partnerships by $103,063 for
the year ended March 30, 2003. Such losses are included in the equity in loss of
investment in local partnerships in the accompanying statements of operations of
the Partnership for the year ended March 30, 2003.
The combined balance sheets of the Local Partnerships as of December 31, 2004
and 2003 and the combined statements of operations of the Local Partnerships for
the years ended December 31, 2004, 2003 and 2002 are reflected on pages 28 and
29, respectively.
27
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of December 31, 2004
and 2003 are as follows:
2004 2003
---- ----
ASSETS
Cash and cash equivalents $ 1,420,670 $ 1,204,402
Rents receivable 431,307 420,753
Escrow deposits and reserves 5,491,520 5,673,980
Land 3,910,215 3,910,215
Buildings and improvements (net of accumulated depreciation of
$55,018,504 and $51,152,480) 60,312,727 63,830,791
Intangible assets (net of accumulated amortization of
$594,230 and $527,467) 488,609 525,341
Other assets 1,131,804 1,236,568
------------ ------------
$ 73,186,852 $ 76,802,050
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,520,547 $ 1,113,199
Due to related parties 5,281,845 5,292,379
Mortgage loans 82,069,326 82,968,250
Accrued interest 4,510,931 4,414,472
Other liabilities 886,655 696,805
------------ ------------
94,269,304 94,485,105
------------ ------------
Partners' equity (deficit)
American Tax Credit Properties III L.P.
Capital contributions, net of distributions 28,769,504 28,812,656
Cumulative loss (26,627,828) (26,380,621)
------------ ------------
2,141,676 2,432,035
------------ ------------
General partners and other limited partners
Capital contributions, net of distributions (332,555) (310,121)
Cumulative loss (22,891,573) (19,804,969)
------------ ------------
(23,224,128) (20,115,090)
------------ ------------
(21,082,452) (17,683,055)
------------ ------------
$ 73,186,852 $ 76,802,050
============ ============
28
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the years
ended December 31, 2004, 2003 and 2002 are as follows:
2004 2003 2002
---- ---- ----
REVENUE
Rental $ 11,668,579 $ 11,365,730 $ 11,188,578
Interest and other 336,144 278,912 343,487
------------ ------------ ------------
TOTAL REVENUE 12,004,723 11,644,642 11,532,065
------------ ------------ ------------
EXPENSES
Administrative 2,898,828 2,678,068 2,643,523
Utilities 1,380,506 1,261,598 1,184,078
Operating and maintenance 3,033,442 2,543,295 2,671,075
Taxes and insurance 1,267,542 1,201,623 1,113,985
Financial 2,708,549 2,848,664 3,072,036
Depreciation and amortization 4,049,667 4,044,810 4,100,221
------------ ------------ ------------
TOTAL EXPENSES 15,338,534 14,578,058 14,784,918
------------ ------------ ------------
NET LOSS $ (3,333,811) $ (2,933,416) $ (3,252,853)
============ ============ ============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties III L.P. $ (247,207) $ (215,731) $ (433,095)
General partners and other limited
partners, which includes $2,726,948,
$2,462,019 and $2,586,565 of Partnership
loss in excess of investment (3,086,604) (2,717,685) (2,819,758)
------------ ------------ ------------
$ (3,333,811) $ (2,933,416) $ (3,252,853)
============ ============ ============
29
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended
March 30, 2005 is as follows:
Cash
Cash distributions
Partnership's distributions classified
Investment equity in Adjustment to received as other Investment
in Local income (loss) carrying value during income in Local
Partnership for the during the the during the Partnership
balance as of year ended year ended year ended year ended balance as of
March 30, December 31, March 30, March 30, March 30, March 30,
Name of Local Partnership 2004 2004 2005 2005 2005 2005
- ------------------------- ---- ---- ---- ---- ---- ----
April Gardens Apartments II Limited
Partnership $ -- $ -- (1) $ -- $ (960) $ 960 $ --
Ashland Park Apartments, L.P. -- -- (1) -- (720) 720 --
Auburn Family, L.P. -- -- (1) -- -- -- --
Batesville Family, L.P. -- -- (1) -- -- -- --
Bay Springs Elderly, L.P. -- -- (1) -- -- -- --
Brisas del Mar Apartments Limited
Partnership -- -- (1) -- (1,320) 1,320 --
Bruce Housing Associates, L.P. -- -- (1) -- -- -- --
Carrington Limited Dividend Housing
Association Limited Partnership 207,689 (124,616) -- -- -- 83,073
Chestnut Park Associates, L.P. -- -- (1) -- -- -- --
Chowan Senior Manor Associates Limited
Partnership -- -- (1) -- -- -- --
Christian Street Commons Associates -- -- (1) -- -- -- --
Country View Apartments -- -- (1) -- -- -- --
Desarrollos de Belen Limited Partnership -- -- (1) -- (2,000) 2,000 --
Desarrollos de Emaus Limited Partnership -- -- (1) -- (3,000) 3,000 --
Ellinwood Heights Apartments, L.P. 35,518 1,224 -- -- -- 36,742
Fulton Street Houses Limited Partnership -- -- (1) -- -- -- --
Hayes Run Limited Partnership -- -- (1) -- (1,785) 1,785 --
Howard L. Miller Sallisaw
Apartments II, L.P. -- -- (1) -- -- -- --
Hurlock Meadow Limited Partnership -- -- (1) -- (3,176) 3,176 --
Ivy Family, L.P. -- -- (1) -- -- -- --
Justin Associates -- -- (1) -- -- -- --
Lawrence Road Properties, Ltd. -- -- (1) -- -- -- --
Labelle Commons, Ltd. -- -- (1) -- -- -- --
Loma Del Norte Limited Partnership -- -- (1) -- (2,000) 2,000 --
Long Reach Associates Limited
Partnership -- -- (1) -- -- -- --
Mirador del Toa Limited Partnership -- -- (1) -- (572) 572 --
Moore Haven Commons, Ltd. -- -- (1) -- (2,320) 2,320 --
NP-89 Limited Dividend Housing
Association Limited Partnership 765,675 (123,815) -- (10,000) -- 631,860
Nash Hill Associates, Limited
Partnership -- -- (1) -- (1,819) 1,819 --
North Calhoun City, L.P. -- -- (1) -- -- -- --
Orange City Plaza, Limited Partnership -- -- (1) -- (1,580) 1,580 --
Puerta del Mar Limited Partnership -- -- (1) -- (1,320) 1,320 --
Purvis Heights Properties, L.P. -- -- (1) -- (889) 889 --
Queen Lane Investors -- -- (1) -- -- -- --
Somerset Manor, Ltd. -- -- (1) -- -- -- --
Sugar Cane Villas, Ltd. -- -- (1) -- (11,083) 11,083 --
Summerfield Apartments Limited
Partnership -- -- (1) -- -- -- --
Sydney Engel Associates L.P. -- -- (1) -- -- -- --
Union Valley Associates Limited
Partnership -- -- (1) -- -- -- --
Walnut Grove Family, L.P. -- -- (1) -- -- -- --
Waynesboro Apartments Limited
Partnership -- -- (1) -- -- -- --
West Calhoun City, L.P. -- -- (1) -- -- -- --
Westminster Apartments Limited
Partnership -- -- (1) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
$ 1,008,882 $ (247,207) $ -- $ (44,544) $ 34,544 $ 751,675
=========== =========== =========== =========== =========== ===========
(1) Additional equity in loss of investment is not allocated to the
Partnership until equity in income is earned or additional investment is
made by the Partnership.
30
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended
March 30, 2004 is as follows:
Cash
Cash distributions
Partnership's distributions classified
Investment equity in Adjustment to received as other Investment
in Local income (loss) carrying value during income in Local
Partnership for the during the the during the Partnership
balance as of year ended year ended year ended year ended balance as of
March 30, December 31, March 30, March 30, March 30, March 30,
Name of Local Partnership 2003 2003 2004 2004 2004 2004
- ------------------------- ---- ---- ---- ---- ---- ----
April Gardens Apartments II Limited
Partnership $ -- $ -- (2) $ -- $ (960) $ 960 $ --
Ashland Park Apartments, L.P. -- -- (2) -- -- -- --
Auburn Family, L.P. -- -- (2) -- -- -- --
Batesville Family, L.P. -- -- (2) -- -- -- --
Bay Springs Elderly, L.P. -- -- (2) -- -- -- --
Brisas del Mar Apartments Limited
Partnership -- -- (2) -- (1,320) 1,320 --
Bruce Housing Associates, L.P. -- -- (2) -- -- -- --
Carrington Limited Dividend Housing
Association Limited Partnership 336,795 (129,106) -- -- -- 207,689
Chestnut Park Associates, L.P. -- -- (2) -- -- -- --
Chowan Senior Manor Associates Limited
Partnership -- -- (2) -- -- -- --
Christian Street Commons Associates -- -- (2) -- -- -- --
Country View Apartments -- -- (2) -- (1,500) 1,500 --
Desarrollos de Belen Limited Partnership -- -- (2) -- (2,000) 2,000 --
Desarrollos de Emaus Limited Partnership -- -- (2) -- (3,000) 3,000 --
Ellinwood Heights Apartments, L.P. 25,885 10,113 -- (480) -- 35,518
Fulton Street Houses Limited Partnership -- -- (2) -- -- -- --
Hayes Run Limited Partnership -- -- (2) -- (1,785) 1,785 --
Howard L. Miller Sallisaw
Apartments II, L.P. 1,203 (723)(1) -- (480) -- --
Hurlock Meadow Limited Partnership -- -- (2) -- -- -- --
Ivy Family, L.P. -- -- (2) -- -- -- --
Justin Associates -- -- (2) -- -- -- --
LaBelle Commons, Ltd. -- -- (2) -- (2,320) 2,320 --
Lawrence Road Properties, Ltd. -- -- (2) -- -- -- --
Loma Del Norte Limited Partnership -- -- (2) -- -- -- --
Long Reach Associates Limited Partnership -- -- (2) -- -- -- --
Mirador del Toa Limited Partnership -- -- (2) -- (572) 572 --
Moore Haven Commons, Ltd. -- -- (2) -- -- -- --
NP-89 Limited Dividend Housing
Association Limited Partnership 860,503 (84,828) -- (10,000) -- 765,675
Nash Hill Associates, Limited Partnership 2,179 (2,179)(1) -- -- -- --
North Calhoun City, L.P. -- -- (2) -- -- -- --
Orange City Plaza, Limited Partnership -- -- (2) -- (2,500) 2,500 --
Puerta del Mar Limited Partnership -- -- (2) -- (1,320) 1,320 --
Purvis Heights Properties, L.P. 9,008 (9,008)(1) -- -- -- --
Queen Lane Investors -- -- (2) -- -- -- --
Somerset Manor, Ltd. -- -- (2) -- -- -- --
Sugar Cane Villas, Ltd. -- -- (2) -- (11,083) 11,083 --
Summerfield Apartments Limited Partnership -- -- (2) -- (5,000) 5,000 --
Sydney Engel Associates L.P. -- -- (2) -- -- -- --
Union Valley Associates Limited
Partnership -- -- (2) -- -- -- --
Walnut Grove Family, L.P. -- -- (2) -- -- -- --
Waynesboro Apartments Limited Partnership -- -- (2) -- -- -- --
West Calhoun City, L.P. -- -- (2) -- -- -- --
Westminster Apartments Limited Partnership -- -- (2) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
$ 1,235,573 $(215,731) $ -- $ (44,320) $ 33,360 $ 1,008,882
=========== ========= =========== =========== ========== ===========
(1) The Partnership's equity in loss of an investment in a Local Partnership is
limited to the remaining investment balance.
(2) Additional equity in loss of investment is not allocated to the Partnership
until equity in income is earned or additional investment is made by the
Partnership.
31
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 2004 is
as follows:
Mortgage Buildings and Accumulated
Name of Local Partnership loans payable Land improvements depreciation
- ------------------------- ------------- ---- ------------ ------------
April Gardens Apartments II Limited Partnership $ 1,966,069 $ 39,984 $ 2,507,318 $ (1,405,156)
Ashland Park Apartments, L.P. 1,021,302 50,160 1,250,352 (638,438)
Auburn Family, L.P. 456,347 20,000 588,988 (265,782)
Batesville Family, L.P. 1,419,819 52,000 1,843,095 (799,675)
Bay Springs Elderly, L.P. 666,111 38,000 852,608 (390,757)
Brisas del Mar Apartments Limited Partnership 2,609,564 100,280 3,396,314 (1,886,606)
Bruce Housing Associates, L.P. 1,087,973 16,000 1,482,575 (766,007)
Carrington Limited Dividend Housing Association
Limited Partnership 3,227,672 200,000 6,595,168 (3,493,697)
Chestnut Park Associates, L.P. 4,772,026 781,700 8,654,778 (4,320,239)
Chowan Senior Manor Associates Limited 1,228,746 86,101 1,530,162 (798,037)
Partnership
Christian Street Commons Associates 571,021 -- 7,545 (1,633)
Country View Apartments 922,768 35,698 1,273,646 (415,604)
Desarrollos de Belen Limited Partnership 1,850,743 96,190 2,519,166 (1,039,189)
Desarrollos de Emaus Limited Partnership 3,144,915 214,000 4,046,102 (1,588,654)
Ellinwood Heights Apartments, L.P. 677,438 10,000 970,915 (317,263)
Fulton Street Houses Limited Partnership 3,869,930 2 5,964,514 (2,780,365)
Hayes Run Limited Partnership 1,404,148 85,060 1,632,566 (543,889)
Howard L. Miller Sallisaw Apartments II, L.P. 606,846 39,000 728,404 (259,038)
Hurlock Meadow Limited Partnership 1,249,691 49,525 1,605,842 (791,411)
Ivy Family, L.P. 765,777 11,000 1,082,310 (570,128)
Justin Associates 2,222,874 27,472 4,369,992 (2,070,109)
LaBelle Commons, Ltd. 997,116 98,947 1,184,937 (544,969)
Lawrence Road Properties, Ltd. 747,337 50,000 962,687 (409,117)
Loma Del Norte Limited Partnership 1,416,640 84,874 1,886,307 (669,674)
Long Reach Associates Limited Partnership 1,457,002 118,446 1,912,539 (717,968)
Mirador del Toa Limited Partnership 1,850,088 105,000 2,346,694 (1,322,198)
Moore Haven Commons, Ltd. 913,852 73,645 1,197,000 (623,407)
NP-89 Limited Dividend Housing Association
Limited Partnership 3,617,394 150,000 7,651,003 (3,735,280)
Nash Hill Associates, Limited Partnership 1,446,521 123,876 1,747,132 (629,964)
North Calhoun City, L.P. 470,584 12,000 667,464 (298,897)
Orange City Plaza, Limited Partnership 409,846 53,904 1,051,852 (429,740)
Puerta del Mar Limited Partnership 2,483,146 115,000 3,227,357 (1,810,328)
Purvis Heights Properties, L.P. 1,131,600 47,000 1,538,559 (618,784)
Queen Lane Investors 1,524,745 60,301 2,811,636 (1,403,877)
Somerset Manor, Ltd. 884,599 53,383 1,118,389 (574,144)
Sugar Cane Villas, Ltd. 3,259,238 58,500 4,091,671 (2,110,249)
Summerfield Apartments Limited Partnership 1,610,169 195,411 2,723,225 (906,061)
Sydney Engel Associates L.P. 16,052,928 284,305 19,443,725 (9,957,055)
Union Valley Associates Limited Partnership 1,425,898 97,800 1,758,877 (627,226)
Walnut Grove Family, L.P. 835,644 30,000 1,065,150 (497,980)
Waynesboro Apartments Limited Partnership 1,460,104 76,000 1,794,917 (660,565)
West Calhoun City, L.P. 725,123 18,000 1,071,865 (484,784)
Westminster Apartments Limited Partnership 1,607,972 51,651 1,175,886 (844,560)
------------- ------------- ------------- -------------
$ 82,069,326 $ 3,910,215 $ 115,331,231 $ (55,018,504)
============= ============= ============= =============
32
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 2003 is as
follows:
Mortgage Buildings and Accumulated
Name of Local Partnership loans payable Land improvements depreciation
- ------------------------- ------------- ---- ------------ ------------
April Gardens Apartments II Limited Partnership $ 1,973,815 $ 39,984 $ 2,491,962 $ (1,303,642)
Ashland Park Apartments, L.P. 1,025,226 50,160 1,246,492 (592,754)
Auburn Family, L.P. 458,699 20,000 580,872 (252,444)
Batesville Family, L.P. 1,423,964 52,000 1,843,095 (752,388)
Bay Springs Elderly, L.P. 668,431 38,000 852,608 (373,554)
Brisas del Mar Apartments Limited Partnership 2,620,029 100,280 3,372,029 (1,754,661)
Bruce Housing Associates, L.P. 1,092,492 16,000 1,482,081 (720,761)
Carrington Limited Dividend Housing Association
Limited Partnership 3,272,459 200,000 6,590,677 (3,243,210)
Chestnut Park Associates, L.P. 4,858,207 781,700 8,654,778 (4,006,230)
Chowan Senior Manor Associates Limited 1,235,772 86,101 1,530,162 (737,455)
Partnership
Christian Street Commons Associates 581,261 -- 7,545 (1,359)
Country View Apartments 926,215 35,698 1,240,915 (381,875)
Desarrollos de Belen Limited Partnership 1,857,433 96,190 2,532,279 (961,575)
Desarrollos de Emaus Limited Partnership 3,157,278 214,000 4,050,973 (1,456,740)
Ellinwood Heights Apartments, L.P. 679,943 10,000 952,966 (296,761)
Fulton Street Houses Limited Partnership 3,869,930 2 6,036,470 (2,628,521)
Hayes Run Limited Partnership 1,409,261 85,060 1,627,418 (520,875)
Howard L. Miller Sallisaw Apartments II, L.P. 608,937 39,000 728,036 (245,795)
Hurlock Meadow Limited Partnership 1,254,600 49,525 1,594,074 (731,586)
Ivy Family, L.P. 772,383 11,000 1,076,150 (535,782)
Justin Associates 2,270,290 27,472 4,374,667 (1,910,828)
LaBelle Commons, Ltd. 1,000,922 98,947 1,184,937 (501,946)
Lawrence Road Properties, Ltd. 750,067 50,000 959,446 (383,812)
Loma Del Norte Limited Partnership 1,421,608 84,874 1,853,991 (617,901)
Long Reach Associates Limited Partnership 1,462,159 118,446 1,914,965 (670,896)
Mirador del Toa Limited Partnership 1,857,814 105,000 2,343,423 (1,241,742)
Moore Haven Commons, Ltd. 917,231 73,645 1,197,000 (581,421)
NP-89 Limited Dividend Housing Association
Limited Partnership 3,767,077 150,000 7,573,732 (3,429,706)
Nash Hill Associates, Limited Partnership 1,451,870 123,876 1,696,415 (587,562)
North Calhoun City, L.P. 475,003 12,000 663,302 (284,365)
Orange City Plaza, Limited Partnership 417,935 53,904 1,051,852 (405,494)
Puerta del Mar Limited Partnership 2,493,105 115,000 3,212,170 (1,680,289)
Purvis Heights Properties, L.P. 1,135,775 47,000 1,507,912 (580,547)
Queen Lane Investors 1,524,745 60,301 2,781,755 (1,294,242)
Somerset Manor, Ltd. 887,724 53,383 1,117,435 (532,469)
Sugar Cane Villas, Ltd. 3,270,912 58,500 4,088,461 (1,964,750)
Summerfield Apartments Limited Partnership 1,644,932 195,411 2,710,360 (838,625)
Sydney Engel Associates L.P. 16,394,250 284,305 19,443,725 (9,249,275)
Union Valley Associates Limited Partnership 1,430,974 97,800 1,758,877 (583,772)
Walnut Grove Family, L.P. 838,360 30,000 1,053,700 (471,254)
Waynesboro Apartments Limited Partnership 1,465,594 76,000 1,792,999 (613,786)
West Calhoun City, L.P. 735,596 18,000 1,066,765 (459,494)
Westminster Apartments Limited Partnership 1,607,972 51,651 1,143,800 (770,336)
------------- ------------- ------------- -------------
$ 82,968,250 $ 3,910,215 $ 114,983,271 $ (51,152,480)
============= ============= ============= =============
33
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
5. Investment in Local Partnerships (continued)
The summary of property activity during the year ended December 31, 2004 is as
follows:
Net change
during the year
Balance as of ended Balance as of
December 31, 2003 December 31, 2004 December 31, 2004
----------------- ----------------- -----------------
Land $ 3,910,215 $ -- $ 3,910,215
Buildings and improvements 114,983,271 347,960 115,331,231
118,893,486 347,960 119,241,446
Accumulated depreciation (51,152,480) (3,866,024) (55,018,504)
$ 67,741,006 $ (3,518,064) $ 64,222,942
6. Transactions with General Partner and Affiliates
For the years ended March 30, 2005, 2004 and 2003 the Partnership paid and/or
incurred the following amounts to the General Partner and/or affiliates in
connection with services provided to the Partnership:
2005 2004 2003
---- ---- ----
Paid Incurred Paid Incurred Paid Incurred
---- -------- ---- -------- ---- --------
Management fees (see Note 8) $361,781 $230,571 $183,663 $230,571 $299,800 $230,571
Administration fees (see Note 8) 69,769 230,571 230,571 16,195 230,571 16,353
For the years ended December 31, 2004, 2003 and 2002, the Local Partnerships
paid and/or incurred the following amounts to the General Partner and/or
affiliates in connection with services provided to the Local Partnerships:
2005 2004 2003
---- ---- ----
Paid Incurred Paid Incurred Paid Incurred
---- -------- ---- -------- ---- --------
Property management fees $35,211 $40,010 $43,159 $38,873 $32,851 $37,800
Insurance premiums and other
services -- 17,040 37,269 35,870 35,297 34,231
34
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
7. Taxable Loss
A reconciliation of the financial statement net loss of the Partnership for the
years ended March 30, 2005, 2004 and 2003 to the tax return net loss for the
years ended December 31, 2004, 2003 and 2002 is as follows:
2005 2004 2003
---- ---- ----
Financial statement net loss for the years ended
March 30, 2005, 2004, and 2003 $ (640,259) $ (611,662) $ (875,199)
Add (less) net transactions occurring between
January 1, 2002 and March 30, 2002 -- -- (72,489)
January 1, 2003 and March 30, 2003 -- (59,193) 59,193
January 1, 2004 and March 30, 2004 (95,397) 95,397 --
January 1, 2005 and March 30, 2005 90,683 -- --
----------- ----------- -----------
Adjusted financial statement net loss for the years
ended December 31, 2004, 2003 and 2002 (644,973) (575,458) (888,495)
Adjustment to management and administration
fees pursuant to Internal Revenue Code
Section 267 139,961 146,259 145,147
Differences arising from equity in loss of
investment in local partnerships (3,438,649) (2,720,797) (2,773,921)
Other income from local partnerships (41,205) (33,286) (13,537)
Other differences 127 (5,904) (9,961)
----------- ----------- -----------
Tax return net loss for the years ended
December 31, 2004, 2003 and 2002 $(3,894,739) $(3,189,186) $(3,540,767)
=========== =========== ===========
The differences between the investment in local partnerships for tax and
financial reporting purposes as of December 31, 2004 and 2003 are as follows:
2004 2003
---- ----
Investment in local
partnerships - financial reporting $ 751,675 $ 1,008,882
Investment in local
partnerships - tax (15,601,141) (11,954,080)
------------- ------------
$ 16,352,816 $ 12,962,962
============= ============
Payable to general partner and affiliates in the accompanying balance sheets
represents accrued management and administrative fees not deductible for tax
purposes pursuant to Internal Revenue Code Section 267.
35
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
8. Commitments and Contingencies
Pursuant to the Partnership Agreement, the Partnership incurs an annual
management fee ("Management Fee") and an annual additional management fee
("Additional Management Fee") payable to the General Partner for its services in
connection with the management of the affairs of the Partnership. The annual
Management Fee is equal to .14% of all proceeds as of December 31 of any year,
invested or committed for investment in Local Partnerships plus all debts of the
Local Partnerships related to the Properties ("Invested Assets"). The
Partnership incurred a Management Fee of $161,400 for each of the three years
ended March 30, 2005. The annual Additional Management Fee is equal to .06% of
Invested Assets. The Partnership incurred an Additional Management Fee of
$69,171 for each of the three years ended March 30, 2005. Such amounts are
aggregated and reflected under the caption management fees - affiliate in the
accompanying financial statements. Unpaid Management Fees and Additional
Management Fees in the cumulative amount of $1,125,367 and $1,256,577 are
included in payable to general partner and affiliates in the accompanying
balance sheets as of March 30, 2005 and 2004, respectively.
In addition, pursuant to the Partnership Agreement, the Partnership is
authorized to contract for administrative services provided to the Partnership.
From the inception of the Partnership through November 23, 1999, such
administrative services were provided by ML Fund Administrators Inc. ("MLFA"),
an affiliate of the Selling Agent, pursuant to an Administrative Services
Agreement. MLFA resigned the performance of its basic services under the
Administrative Services Agreement effective November 23, 1999, with certain
transitional services continued through April 30, 2000. The General Partner
transitioned the administrative services to an affiliate of the General Partner
without any changes to the terms of the Administrative Services Agreement.
Pursuant to such agreement, the Partnership incurs an annual administration fee
("Administration Fee") and an annual additional administration fee ("Additional
Administration Fee") for administrative services provided to the Partnership.
The annual Administration Fee is equal to .14% of Invested Assets. The
Partnership incurred an Administration Fee of $161,400 for each of the three
years ended March 30, 2005. The annual Additional Administration Fee is subject
to certain provisions of the Partnership Agreement and is equal to .06% of
Invested Assets. The Partnership incurred an Additional Administration Fee of
$69,171 for each of the three years ended March 30, 2005. Such amounts are
aggregated and reflected under the caption administration fees - affiliate in
the accompanying financial statements. Unpaid Administration Fees and Additional
Administration Fees due to MLFA in the cumulative amount of $556,673 and
$788,673 are included in accounts payable and accrued expenses in the
accompanying balance sheets as of March 30, 2005 and 2004, respectively. Unpaid
Administration Fees and Additional Administration Fees due to an affiliate of
the General Partner in the cumulative amount of $848,541 and $687,739 are
included in due to general partner and affiliates in the accompanying balance
sheets as of March 30, 2005 and 2004, respectively.
The rents of the Properties, many of which receive rental subsidy payments,
including payments under Section 8 of Title II of the Housing and Community
Development Act of 1974 ("Section 8"), are subject to specific laws, regulations
and agreements with federal and state agencies. The subsidy agreements expire at
various times during and after the Compliance Periods of the Local Partnerships.
Since October 1997, the United States Department of Housing and Urban
Development ("HUD") has issued a series of directives related to project based
Section 8 contracts that define owners' notification responsibilities, advise
owners of project based Section 8 properties of what their options are regarding
the renewal of Section 8 contracts, provide guidance and procedures to owners,
management agents, contract administrators and HUD staff concerning renewal of
Section 8 contracts, provide policies and procedures on setting renewal rents
and handling renewal rent adjustments and provide the requirements and
procedures for opting-out of a Section 8 project based contract. The Partnership
cannot reasonably predict legislative initiatives and governmental budget
negotiations, the outcome of which could result in a reduction in funds
available for the various federal and state administered housing programs
including the Section 8 program. Such changes could adversely affect the future
net operating income before debt service and debt structure of any or all Local
Partnerships currently receiving such subsidy or similar subsidies. One Local
Partnership's Section 8 contracts are currently subject to renewal under
applicable HUD guidelines.
36
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
9. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value amounts have been
determined using available market information, assumptions, estimates and
valuation methodologies.
Cash and Cash Equivalents
The carrying amount approximates fair value.
Investments in Bonds
Fair value is estimated based on market quotes provided by an independent
service as of the balance sheet dates.
Interest Receivable
The carrying amount approximates fair value due to the terms of the underlying
investments.
The estimated fair value of the Partnership's financial instruments as of March
30, 2005 and 2004 are disclosed elsewhere in the financial statements.
10. Quarterly Financial Information - Unaudited
The following is a summary of results of operations for each of the four
quarters for the years indicated:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
2005
Total revenue $ 41,486 $ 50,841 $ 37,166 $ 46,617
Total expenses (142,864) (146,959) (142,039) (137,300)
Equity in loss of investment
in local partnerships (55,008) (150,147) (34,410) (7,642)
Net loss (156,386) (246,265) (139,283) (98,325)
Net loss per unit of
limited partnership interest (4.31) (6.80) (3.84) (2.71)
2004
Total revenue $ 44,897 $ 58,432 $ 46,115 $ 44,262
Total expenses (138,989) (149,436) (161,553) (139,659)
Equity in loss of investment
in local partnerships (61,546) (25,744) (38,902) (89,539)
Net loss (155,638) (116,748) (154,340) (184,936)
Net loss per unit of
limited partnership interest (4.29) (3.23) (4.25) (5.11)
37
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2005, 2004 AND 2003
10. Quarterly Financial Information - Unaudited (continued)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
2003
Total revenue $ 57,556 $ 48,609 $ 48,056 $ 70,033
Total expenses (140,916) (127,719) (135,434) (159,226)
Equity in loss of investment
in local partnerships (103,853) (138,879) (135,450) (157,976)
Net loss (187,213) (217,989) (222,828) (247,169)
Net loss per unit of
limited partnership interest (5.17) (6.01) (6.15) (6.82)
38
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 9A. Controls and Procedures
As of March 30, 2005, under the direction of the Chief Executive Officer and
Chief Financial Officer, Registrant evaluated the effectiveness of its
disclosure controls and procedures and internal controls over financial
reporting and concluded that (i) Registrant's disclosure controls and procedures
were effective as of March 30, 2005, and (ii) no changes occurred during the
quarter ended March 30, 2005, that materially affected, or are reasonably likely
to materially affect, such internal controls.
Item 9B. Other Information
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Registrant has no officers or directors. The General Partner manages
Registrant's affairs and has general responsibility and authority in all matters
affecting its business. The responsibilities of the General Partner are
currently carried out by Richman Housing. The executive officers and director of
Richman Housing are:
Served in present
Name capacity since(1) Position held
- ---- ----------------- -------------
Richard Paul Richman September 21, 1989 Director
David A. Salzman February 1, 2001 President
Neal Ludeke September 21, 1989 Vice President and Treasurer
Gina K. Dodge September 21, 1989 Secretary
- --------------------------------------------------------------------------------
(1) Director holds office until his successor is elected and qualified. All
officers serve at the pleasure of the Director.
Richard Paul Richman, age 57, is the sole Director of Richman Housing. Mr.
Richman is the Chairman and a stockholder of Richman Group. Mr. Richman is
involved in the syndication, development and management of residential property.
Mr. Richman is also a director of Wilder Richman Resources Corp., an affiliate
of Richman Housing and the general partner of Secured Income L.P., a director of
Wilder Richman Historic Corporation, an affiliate of Richman Housing and the
general partner of Wilder Richman Historic Properties II, L.P., a director of
Richman Tax Credit Properties Inc., an affiliate of Richman Housing and the
general partner of the general partner of American Tax Credit Properties L.P., a
director of Richman Tax Credits Inc., an affiliate of Richman Housing and the
general partner of the general partner of American Tax Credit Properties II L.P.
and a director of Richman American Credit Corp., an affiliate of Richman Housing
and the manager of American Tax Credit Trust, a Delaware statutory business
trust.
David A. Salzman, age 44, is the President of Richman Housing and is a
stockholder and the President of Richman Group. Mr. Salzman has been employed by
Richman group since October 1986 and is responsible for the acquisition of
residential real estate for syndication for Richman Group.
Neal Ludeke, age 47, is a Vice President and the Treasurer of Richman Housing.
Mr. Ludeke, the Treasurer of Richman Group, is engaged primarily in the
syndication, asset management and finance operations of Richman Group. In
addition, Mr. Ludeke is a Vice President and the Treasurer of Richman Asset
Management, Inc. ("RAM"), an affiliate of Richman Housing. Mr. Ludeke's
responsibilities in connection with RAM include various partnership management
functions.
Gina K. Dodge, age 49, is the Secretary of Richman Housing. Ms. Dodge is a Vice
President and the Secretary of Richman Group. As the Director of Investor
Services, Ms. Dodge is responsible for communications with investors.
Registrant is not aware of any family relationship between its director and
executive officers noted herein Item 10.
39
Registrant is not aware of the involvement in certain legal proceedings with
respect to the director and executive officers noted herein Item 10.
Mr. Richman, the sole Director of Richman Housing, Mr. Ludeke and Charles
Krafnick, Assistant Treasurer of Richman Housing, represent the audit committee
of the Registrant. Mr. Richman is deemed to be an audit committee financial
expert and is not independent of the Registrant.
The Board of Director of Richman Housing has adopted a code of ethics for senior
financial officers of the Registrant, applicable to the Registrant's principal
financial officer and comptroller or principal accounting officer, or persons
performing similar functions. The Registrant will provide to any person without
charge a copy of such code of ethics upon written request to the General Partner
at 340 Pemberwick Road, Greenwich, Connecticut 06831, Attention: Secretary.
Item 11. Executive Compensation
Registrant has no officers or directors. Registrant does not pay the officers or
director of Richman Housing any remuneration. During the year ended March 30,
2005, Richman Housing did not pay any remuneration to any of its officers or its
director.
Item 12. Security Ownership of Certain Beneficial Owners and Management
JJJ Fund, LLC, having the mailing address 7463 E. Beryl, Scottsdale, Arizona
85258 is the owner of 2,588 Units, representing approximately 7.2% of all such
Units. As of May 31, 2005, no person or entity, other than JJJ Fund, LLC, was
known by Registrant to be the beneficial owner of more than five percent of the
Units. Richman Housing is wholly owned by Richard Paul Richman.
Item 13. Certain Relationships and Related Transactions
The General Partner and certain of its affiliates are entitled to receive
certain fees and reimbursement of expenses and have received/earned fees for
services provided to Registrant as described in Notes 6 and 8 to the audited
financial statements included in Item 8 - "Financial Statements and
Supplementary Data" herein.
Transactions with General Partner and Affiliates
The net tax loss and Low-income Tax Credits generated by Registrant during the
year ended December 31, 2004 allocated to the General Partner were $38,946 and
$27, respectively. The net tax loss and Low-income Tax Credits generated by the
General Partner during the year ended December 31, 2004 (from the allocation of
Registrant discussed above) and allocated to Richman Housing were $31,479 and
$24, respectively.
Indebtedness of Management.
No officer or director of Richman Housing or any affiliate of the foregoing was
indebted to Registrant at any time during the year ended March 30, 2005.
Item 14. Principal Accountant Fees and Services
The audit fees for Registrant for the years ended March 30, 2005 and 2004 were
$44,459 and $42,873, respectively, while the tax fees for Registrant for each of
the years ended March 30, 2005 and 2004 were $10,000. There were no other
accounting fees incurred by Registrant in fiscal 2005 and fiscal 2004. The audit
committee approved all fiscal 2005 and fiscal 2004 accounting fees.
40
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on form 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
See Item 8 - "Financial Statements and Supplementary Data."
(2) Financial Statement Schedules
No financial statement schedules are included because of the absence
of the conditions under which they are required or because the
information is included in the financial statements or the notes
thereto.
(3) Exhibits
Incorporated by
Exhibit Reference to
------- ------------
10.1 April Gardens Apartments II Limited Partnership Exhibit 10.1 to Form 10-Q Report
(A Delaware Limited Partnership) Amended and dated December 30, 1990
Restated Agreement of Limited Partnership (File No. 33-31390)
10.2 Ashland Park Apartments, L.P. Second Amended and Exhibit 10.2 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
10.3 Auburn Family, L.P. Amended and Restated Limited Exhibit 10.1 to Form 10-Q Report
Partnership Agreement and Certificate of Limited dated December 31, 1991
Partnership (File No. 0-19217)
10.4 Amended No. 2 to the Batesville Family, L.P. Exhibit 10.2 to Form 10-Q Report
Amended and Restated Agreement of Limited dated December 30, 1990
Partnership (File No. 33-31390)
10.5 Batesville Family, L.P. Amendment No. 3 to the Exhibit 10.2 to Form 10-Q Report
Amended and Restated Agreement of Limited dated December 31, 1991
Partnership (File No. 0-19217)
10.6 Bay Springs Elderly, L.P. (A Mississippi Limited Exhibit 10.1 to Form 10-Q Report
Partnership) Amended and Restated Limited dated September 29, 1991
Partnership Agreement and Certificate of Limited (File No. 0-19217)
Partnership
10.7 Brisas del Mar Apartments Limited Partnership (A Exhibit 10.3 to Form 10-Q Report
Delaware Limited Partnership) Amended and dated December 30, 1990
Restated Agreement of Limited Partnership (File No. 33-31390)
10.8 Amendment No. 1 to the Bruce Housing Associates, Exhibit 10.8 to Form 10-K Report
L.P. Amended and Restated Agreement of Limited dated March 30, 1992
Partnership (File No. 33-31390)
41
Incorporated by
Exhibit Reference to
------- ------------
10.9 Amendment No. 2 to the Bruce Housing Associates, Exhibit 10.4 to Form 10-Q Report
L.P. Amended and Restated Agreement of Limited dated December 30, 1990
Partnership (File No. 33-31390)
10.10 Bruce Housing Associates, L.P. Amendment No. 3 Exhibit 10.3 to Form 10-Q Report
to the Amended and Restated Agreement of Limited dated December 31, 1991
Partnership (File No. 0-19217)
10.11 Carrington Limited Dividend Housing Association Exhibit 10.1 to Form 10-Q Report
Limited Partnership Amended and Restated dated September 29, 1990
Agreement of Limited Partnership (File No. 33-31390)
10.12 Carrington Limited Dividend Housing Association Exhibit 10.2 to Form 10-Q Report
Limited Partnership Second Amended and Restated dated September 29, 1990
Agreement of Limited Partnership (File No. 33-31390)
10.13 Carrington Limited Dividend Housing Association Exhibit 10.5 to Form 10-Q Report
Limited Partnership Amendment No. 1 to the dated December 30, 1990
Second Amended and Restated Agreement of Limited (File No. 33-31390)
Partnership
10.14 Chestnut Park Associates, L.P. Amended and Exhibit 10.3 to Form 10-Q Report
Restated Agreement of Limited Partnership dated September 29, 1990
(File No. 33-31390)
10.15 Chowan Senior Manor Associates Limited Exhibit 10.15 to Form 10-K Report
Partnership Amended and Restated Agreement of dated March 30, 1992
Limited Partnership (File No. 33-31390)
10.16 Christian Street Commons Associates Amended and Exhibit 10.16 to Form 10-K Report
Restated Limited Partnership Agreement and dated March 30, 1992
Certificate of Limited Partnership (File No. 33-31390)
10.17 Country View Apartments Second Amended and Exhibit 10.17 to Form 10-K Report
Restated Limited Partnership Agreement and dated March 30, 1992
Certificate of Limited Partnership (File No. 33-31390)
10.18 Desarrollos de Belen Limited Partnership Amended Exhibit 10.18 to Form 10-K Report
and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.19 Desarrollos de Emaus Limited Partnership Amended Exhibit 10.19 to Form 10-K Report
and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.20 Ellinwood Heights Apartments, L.P. Amended and Exhibit 10.1 to Form 10-Q Report
Restated Agreement of Limited Partnership dated June 29, 1991
(File No. 0-19217)
42
Incorporated by
Exhibit Reference to
------- ------------
10.21 Fulton Street Houses Limited Partnership Amended Exhibit 10.21 to Form 10-K Report
and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.22 Hayes Run Limited Partnership Amended and Exhibit 10.2 to Form 10-Q Report
Restated Agreement of Limited Partnership dated June 29, 1991
(File No. 0-19217)
10.23 Howard L. Miller Sallisaw Apartments II, L.P. Exhibit 10.10 to Form 10-K Report
Third Amended and Restated Agreement and dated March 30, 1991
Certificate of Limited Partnership (File No. 33-31390)
10.24 Hurlock Meadow Limited Partnership Amended and Exhibit 10.24 to Form 10-K Report
Restated Limited Partnership Agreement dated March 30, 1992
(File No. 33-31390)
10.25 Amendment No. 1 to the Ivy Family, L.P. Amended Exhibit 10.6 to Form 10-Q Report
and Restated Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.26 Ivy Family, L.P. Amendment No. 3 to the Amended Exhibit 10.4 to Form 10-Q Report
and Restated Agreement of Limited Partnership dated December 31, 1991
(File No. 0-19217)
10.27 Justin Associates Amended and Restated Agreement Exhibit 10.7 to Form 10-Q Report
and Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.28 LaBelle Commons, Ltd. Amended and Restated Exhibit 10.13 to Form 10-K Report
Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
10.29 LaBelle Commons, Ltd. Amendment No. 1 to Amended Exhibit 10.29 to Form 10-K Report
and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.30 Amendment No. 2 to the Lawrence Road Properties, Exhibit 10.8 to Form 10-Q Report
Ltd. Amended and Restated Agreement of Limited dated December 30, 1990
Partnership (File No. 33-31390)
10.31 Lawrence Road Properties, Ltd. Amendment No. 3 Exhibit 10.5 to Form 10-Q Report
to the Amended and Restated Agreement of Limited dated December 31, 1991
Partnership (File No. 0-19217)
10.32 Loma Del Norte Limited Partnership Amended and Exhibit 10.2 to Form 10-Q Report
Restated Limited Partnership Agreement dated September 29, 1991
(File No. 0-19217)
10.33 Long Reach Associates Limited Partnership Sixth Exhibit 10.15 to Form 10-K Report
Amended and Restated Agreement of Limited dated March 30, 1991
Partnership (File No. 33-31390)
43
Incorporated by
Exhibit Reference to
------- ------------
10.34 Mirador del Toa Limited Partnership Amended and Exhibit 10.16 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
10.35 Amendment No. 1 to the Mirador del Toa Limited Exhibit 10.17 to Form 10-K Report
Partnership Amended and Restated Agreement of dated March 30, 1991
Limited Partnership (File No. 33-31390)
10.36 Moore Haven Commons, Ltd. Amended and Restated Exhibit 10.9 to Form 10-Q Report
Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.37 NP-89 Limited Dividend Housing Association Exhibit 10.3 to Form 10-Q Report
Limited Partnership Second Restated and Amended dated June 29, 1991
Agreement of Limited Partnership (File No. 0-19217)
10.38 Nash Hill Associates, Limited Partnership Exhibit 10.37 to Form 10-K Report
Amended and Restated Agreement of Limited dated March 30, 1992
Partnership (File No. 33-31390)
10.39 North Calhoun City, L.P. (A Mississippi Limited Exhibit 10.3 to Form 10-Q Report
Partnership) Amended and Restated Limited dated September 29, 1991
Partnership Agreement and Certificate of Limited (File No. 0-19217)
Partnership
10.40 Orange City Plaza, Limited Partnership Amended Exhibit 10.40 to Form 10-K Report
and Restated Partnership Agreement dated March 30, 1992
(File No. 33-31390)
10.41 Puerta del Mar Limited Partnership (A Delaware Exhibit 10.10 to Form 10-Q Report
Limited Partnership) Amended and Restated dated December 30, 1990
Agreement of Limited Partnership (File No. 33-31390)
10.42 Amendment No. 2 to the Purvis Heights Exhibit 10.11 to Form 10-Q Report
Properties, L.P. Amended and Restated Agreement dated December 30, 1990
of Limited Partnership (File No. 33-31390)
10.43 Purvis Heights Properties, L.P. Amendment No. 3 Exhibit 10.6 to Form 10-Q Report
to the Amended and Restated Agreement of Limited dated December 31, 1991
Partnership (File No. 0-19217)
10.44 Queen Lane Investors Amendment No. 1 to Amended Exhibit 10.12 to Form 10-Q Report
and Restated Agreement and Certificate of dated December 30, 1990
Limited Partnership (File No. 33-31390)
10.45 Somerset Manor, Ltd. Amended and Restated Exhibit 10.13 to Form 10-Q Report
Agreement and Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.46 Sugar Cane Villas, Ltd. Amended and Restated Exhibit 10.23 to Form 10-K Report
Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
44
Incorporated by
Exhibit Reference to
------- ------------
10.47 Summerfield Apartments Limited Partnership Exhibit 10.47 to Form 10-K Report
Amended and Restated Agreement of Limited dated March 30, 1992
Partnership (File No. 33-31390)
10.48 Amendment No.1 to the Summerfield Apartments Exhibit 10.48 to Form 10-K Report
Limited Partnership Amended and Restated dated March 30, 1999
Agreement of Limited Partnership (File No. 0-19217)
10.49 Sydney Engel Associates Second Amended and Exhibit 10.4 to Form 10-Q Report
Restated Agreement of Limited Partnership dated September 29, 1990
(File No. 33-31390)
10.50 First Amendment to Second Amended and Restated Exhibit 10.49 to Form 10-K Report
Agreement of Limited Partnership of Sydney Engel dated March 30, 1997
Associates (File No. 0-19217)
10.51 Second Amendment to Second Amended and Restated Exhibit 10.50 to Form 10-K Report
Agreement of Limited Partnership of Sydney Engel dated March 30, 1997
Associates L.P. (File No. 0-19217)
10.52 Third Amendment to Second Amended and Restated Exhibit 10.51 to Form 10-K Report
Agreement of Limited Partnership of Sydney Engel dated March 30, 1997
Associates L.P. (File No. 0-19217)
10.53 Fourth Amendment to Second Amended and Restated Exhibit 10.52 to Form 10-K Report
Agreement of Limited Partnership of Sydney Engel dated March 30, 1997
Associates L.P. (File No. 0-19217)
10.54 Union Valley Associates Limited Partnership Exhibit 10.14 to Form 10-Q Report
Amended and Restated Agreement and Certificate dated December 30, 1990
of Limited Partnership (File No. 33-31390)
10.55 Walnut Grove Family, L.P. (A Mississippi Limited Exhibit 10.4 to Form 10-Q Report
Partnership) Amended and Restated Limited dated September 29, 1991
Partnership Agreement and Certificate of Limited (File No. 0-19217)
Partnership
10.56 Waynesboro Apartments Limited Partnership Exhibit 10.15 to Form 10-Q Report
Amended and Restated Agreement and Certificate dated December 30, 1990
of Limited Partnership (File No. 33-31390)
10.57 West Calhoun City, L.P. (A Mississippi Limited Exhibit 10.5 to Form 10-Q Report
Partnership) Amended and Restated Limited dated September 29, 1991
Partnership Agreement and Certificate of Limited (File No. 0-19217)
Partnership
10.58 Westminster Apartments Limited Partnership Exhibit 10.53 to Form 10-K Report
Second Amended and Restated Agreement of Limited dated March 30, 1992
Partnership (File No. 33-31390)
45
Incorporated by
Exhibit Reference to
------- ------------
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief
Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief
Financial Officer.
32.1 Section 1350 Certification of Chief Executive
Officer.
32.2 Section 1350 Certification of Chief Financial
Officer.
99.1 Pages 20 through 31, 44 through 71 and 78 Exhibit 28.0 to Form 10-K Report
through 80 of Prospectus filed pursuant to Rule dated March 30, 1990
424(b)(3) under Securities Act of 1933 (File No. 33-31390)
99.2 Pages 14 through 19 of Prospectus filed pursuant Exhibit 28.1 to Form 10-K Report
to Rule 424(b)(3) under Securities Act of 1933 dated March 30, 1991
(File No. 33-31390)
99.3 Supplement No. 1 dated June 6, 1990 to Prospectus Exhibit 28.2 to Form 10-K Report
dated March 30, 1991
(File No. 33-31390)
99.4 Supplement No. 2 dated November 21, 1990 to Exhibit 28.3 to Form 10-K Report
Prospectus dated March 30, 1991
(File No. 33-31390)
99.5 Supplement No. 3 dated December 20, 1990 to Exhibit 28.4 to Form 10-K Report
Prospectus dated March 30, 1991
(File No. 33-31390)
99.6 Supplement No. 4 dated October 30, 1991 to Exhibit 28.5 to Form 10-K Report
Prospectus dated March 30, 1992
(File No. 33-31390)
99.7 Supplement No. 5 dated December 26, 1991 to Exhibit 28.6 to Form 10-K Report
Prospectus dated March 30, 1992
(File No. 33-31390)
99.8 Supplement No. 6 dated January 15, 1992 to Exhibit 28.7 to Form 10-K Report
Prospectus dated March 30, 1990
(File No. 33-31390)
99.9 Report of Independent Registered Public
Accounting Firm of Carrington L.D.H.A. Limited
Partnership
99.10 Independent Auditor's Report of Ellinwood
Heights Apartments L.P.
99.11 Independent Auditors' Report of NP-89 Limited
Dividend Housing Association Limited Partnership
46
(b) Exhibits
See (a)(3) above.
(c) Financial Statement Schedules
See (a)(2) above.
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN TAX CREDIT PROPERTIES III L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties III L.P.,
General Partner
By: Richman Housing Credits Inc.,
General Partner
Dated: August 11, 2005 /s/ David Salzman
-----------------------
David Salzman
Chief Executive Officer
Dated: August 11, 2005 /s/ Neal Ludeke
-----------------------
Neal Ludeke
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Signature Title Date
/s/ David Salzman Chief Executive Officer of the general August 11, 2005
- ----------------- partner of the General Partner
(David Salzman)
/s/ Neal Ludeke Chief Financial Officer of the general August 11, 2005
- ----------------- partner of the General Partner
(Neal Ludeke)
48