Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
|
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the quarterly period
ended December 31, 2009
OR
|
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
transition period from
______________________to_______________________
Commission File
Number: 0-21762
Gateway Tax Credit Fund III
Ltd.
(Exact
name of Registrant as specified in its charter)
Florida
|
59-3090386
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer No.)
|
|
880 Carillon Parkway
|
St.
Petersburg, Florida 33716
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
Telephone Number, Including Area Code:
|
(727) 567-1000
|
Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [X]
|
NO [ ]
|
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files).
YES [X]
|
NO [ ]
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer [ ]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Smaller
Reporting Company [X]
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
[ ]
|
No
[X]
|
PART I –
Financial Information
Item 1.
Financial Statements
Balance
of this page intentionally left blank.
2
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
BALANCE
SHEETS
(Unaudited)
SERIES
7
|
SERIES
8
|
SERIES
9
|
|||||||||
December
31,
|
March
31,
|
December
31,
|
March
31,
|
December
31,
|
March
31,
|
||||||
2009
|
2009
|
2009
|
2009
|
2009
|
2009
|
||||||
ASSETS
|
|||||||||||
Current
Assets:
|
|||||||||||
Cash
and Cash Equivalents
|
$ 205,114
|
$ 246,867
|
$ 232,161
|
$ 185,918
|
$ 95,860
|
$ 124,326
|
|||||
Total
Current Assets
|
205,114
|
246,867
|
232,161
|
185,918
|
95,860
|
124,326
|
|||||
Investments
in Project Partnerships, net
|
84,088
|
88,308
|
287
|
15,007
|
5,356
|
9,681
|
|||||
Total
Assets
|
$ 289,202
|
$ 335,175
|
$ 232,448
|
$ 200,925
|
$ 101,216
|
$ 134,007
|
|||||
LIABILITIES
AND PARTNERS' DEFICIT
|
|||||||||||
Current
Liabilities:
|
|||||||||||
Payable
to General Partners
|
$ 81,744
|
$ 61,563
|
$ 207,430
|
$ 171,880
|
$ 48,468
|
$ 31,416
|
|||||
Distribution
Payable
|
5,555
|
78
|
385
|
385
|
-
|
-
|
|||||
Deferred
Gain on Sale of Project Partnerships
|
-
|
-
|
23,000
|
-
|
10,000
|
-
|
|||||
Total
Current Liabilities
|
87,299
|
61,641
|
230,815
|
172,265
|
58,468
|
31,416
|
|||||
Long-Term
Liabilities:
|
|||||||||||
Payable
to General Partners
|
947,998
|
895,972
|
1,013,319
|
948,984
|
612,240
|
575,799
|
|||||
Partners'
Equity (Deficit):
|
|||||||||||
Limited
Partners - 10,395, 9,980, and 6,254
|
|||||||||||
units
for Series 7, 8, and 9, respectively,
|
|||||||||||
at
December 31, 2009 and March 31, 2009
|
(748,552)
|
(568,361)
|
(982,293)
|
(891,845)
|
(508,961)
|
(413,640)
|
|||||
General
Partners
|
2,457
|
(54,077)
|
(29,393)
|
(28,479)
|
(60,531)
|
(59,568)
|
|||||
Total
Partners' Deficit
|
(746,095)
|
(622,438)
|
(1,011,686)
|
(920,324)
|
(569,492)
|
(473,208)
|
|||||
Total
Liabilities and Partners' Deficit
|
$ 289,202
|
$ 335,175
|
$ 232,448
|
$ 200,925
|
$ 101,216
|
$ 134,007
|
|||||
See
accompanying notes to financial statements.
3
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
BALANCE
SHEETS
(Unaudited)
SERIES
10
|
SERIES
11
|
TOTAL
SERIES 7 - 11
|
|||||||||
December
31,
|
March
31,
|
December
31,
|
March
31,
|
December
31,
|
March
31,
|
||||||
2009
|
2009
|
2009
|
2009
|
2009
|
2009
|
||||||
ASSETS
|
|||||||||||
Current
Assets:
|
|||||||||||
Cash
and Cash Equivalents
|
$ 108,923
|
$ 121,062
|
$ 166,043
|
$ 204,816
|
$ 808,101
|
$ 882,989
|
|||||
Investments
in Securities
|
40,217
|
38,104
|
43,640
|
41,233
|
83,857
|
79,337
|
|||||
Total
Current Assets
|
149,140
|
159,166
|
209,683
|
246,049
|
891,958
|
962,326
|
|||||
Investments
in Project Partnerships, net
|
106,534
|
136,408
|
431,877
|
536,485
|
628,142
|
785,889
|
|||||
Total
Assets
|
$ 255,674
|
$ 295,574
|
$ 641,560
|
$ 782,534
|
$ 1,520,100
|
$ 1,748,215
|
|||||
LIABILITIES
AND PARTNERS' EQUITY (DEFICIT)
|
|||||||||||
Current
Liabilities:
|
|||||||||||
Payable
to General Partners
|
$ 43,653
|
$ 32,774
|
$ 12,283
|
$ 15,049
|
$ 393,578
|
$ 312,682
|
|||||
Distribution
Payable
|
-
|
-
|
-
|
-
|
5,940
|
463
|
|||||
Deferred
Gain on Sale of Project Partnerships
|
10,000
|
-
|
-
|
-
|
43,000
|
-
|
|||||
Total
Current Liabilities
|
53,653
|
32,774
|
12,283
|
15,049
|
442,518
|
313,145
|
|||||
Long-Term
Liabilities:
|
|||||||||||
Payable
to General Partners
|
170,955
|
145,887
|
98,133
|
77,040
|
2,842,645
|
2,643,682
|
|||||
Partners'
Equity (Deficit):
|
|||||||||||
Limited
Partners - 5,043 and 5,127 units
|
|||||||||||
for
Series 10 and 11, respectively, at
|
|||||||||||
December
31, 2009 and March 31, 2009
|
74,934
|
159,923
|
571,823
|
729,531
|
(1,593,049)
|
(984,392)
|
|||||
General
Partners
|
(43,868)
|
(43,010)
|
(40,679)
|
(39,086)
|
(172,014)
|
(224,220)
|
|||||
Total
Partners' Equity (Deficit)
|
31,066
|
116,913
|
531,144
|
690,445
|
(1,765,063)
|
(1,208,612)
|
|||||
Total
Liabilities and Partners' Equity (Deficit)
|
$ 255,674
|
$ 295,574
|
$ 641,560
|
$ 782,534
|
$ 1,520,100
|
$ 1,748,215
|
|||||
See
accompanying notes to financial statements.
4
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
7
|
SERIES
8
|
SERIES
9
|
|||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
||||||
Revenues:
|
|||||||||||
Distribution
Income
|
$ 7,640
|
$ 2,656
|
$ 3,218
|
$ 1,104
|
$ 1,959
|
$ -
|
|||||
Total
Revenues
|
7,640
|
2,656
|
3,218
|
1,104
|
1,959
|
-
|
|||||
Expenses:
|
|||||||||||
Asset
Management Fee - General Partner
|
15,162
|
18,729
|
21,445
|
21,572
|
12,147
|
12,210
|
|||||
General
and Administrative:
|
|||||||||||
General
Partner
|
21,805
|
26,858
|
-
|
32,230
|
17,181
|
18,417
|
|||||
Other
|
5,812
|
5,546
|
5,761
|
6,482
|
3,906
|
4,070
|
|||||
Amortization
|
73
|
1,254
|
289
|
2,769
|
748
|
2,511
|
|||||
Impairment
Loss on Investment in Project Partnerships
|
-
|
157,405
|
-
|
221,243
|
-
|
173,523
|
|||||
Total
Expenses
|
42,852
|
209,792
|
27,495
|
284,296
|
33,982
|
210,731
|
|||||
Loss
Before Equity in Loss of Project Partnerships and Other
Income
|
(35,212)
|
(207,136)
|
(24,277)
|
(283,192)
|
(32,023)
|
(210,731)
|
|||||
Equity
in Loss of Project Partnerships
|
-
|
(23,180)
|
-
|
(54,671)
|
-
|
(55,828)
|
|||||
Gain
on Sale of Project Partnerships
|
-
|
43,425
|
-
|
-
|
-
|
-
|
|||||
Interest
Income
|
5
|
510
|
5
|
301
|
2
|
943
|
|||||
Net
Loss
|
$ (35,207)
|
$ (186,381)
|
$ (24,272)
|
$ (337,562)
|
$ (32,021)
|
$ (265,616)
|
|||||
Allocation
of Net (Loss) Income:
|
|||||||||||
Limited
Partners
|
$ (35,204)
|
$ (227,508)
|
$ (24,029)
|
$ (334,186)
|
$ (31,701)
|
$ (262,960)
|
|||||
General
Partners
|
(3)
|
41,127
|
(243)
|
(3,376)
|
(320)
|
(2,656)
|
|||||
$ (35,207)
|
$ (186,381)
|
$ (24,272)
|
$ (337,562)
|
$ (32,021)
|
$ (265,616)
|
||||||
Net
Loss Per Limited Partnership Unit
|
$ (3.39)
|
$ (21.89)
|
$ (2.41)
|
$ (33.49)
|
$ (5.07)
|
$ (42.05)
|
|||||
Number
of Limited Partnership Units Outstanding
|
10,395
|
10,395
|
9,980
|
9,980
|
6,254
|
6,254
|
|||||
See
accompanying notes to financial statements.
5
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
10
|
SERIES
11
|
TOTAL
SERIES 7 - 11
|
|||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
||||||
Revenues:
|
|||||||||||
Distribution
Income
|
$ 1,432
|
$ 432
|
$ -
|
$ -
|
$ 14,249
|
$ 4,192
|
|||||
Total
Revenues
|
1,432
|
432
|
-
|
-
|
14,249
|
4,192
|
|||||
Expenses:
|
|||||||||||
Asset
Management Fee - General Partner
|
8,356
|
8,396
|
7,031
|
7,088
|
64,141
|
67,995
|
|||||
General
and Administrative:
|
|||||||||||
General
Partner
|
10,639
|
11,511
|
8,722
|
9,208
|
58,347
|
98,224
|
|||||
Other
|
2,714
|
2,835
|
2,671
|
3,506
|
20,864
|
22,439
|
|||||
Amortization
|
167
|
5,229
|
3,129
|
7,245
|
4,406
|
19,008
|
|||||
Impairment
Loss on Investment in Project Partnerships
|
-
|
403,450
|
-
|
190,666
|
-
|
1,146,287
|
|||||
Total
Expenses
|
21,876
|
431,421
|
21,553
|
217,713
|
147,758
|
1,353,953
|
|||||
Loss
Before Equity in Loss of Project Partnerships and Other
Income
|
(20,444)
|
(430,989)
|
(21,553)
|
(217,713)
|
(133,509)
|
(1,349,761)
|
|||||
Equity
in Loss of Project Partnerships
|
(9,856)
|
(60,034)
|
(35,127)
|
(75,870)
|
(44,983)
|
(269,583)
|
|||||
Gain
on Sale of Project Partnerships
|
-
|
-
|
-
|
-
|
-
|
43,425
|
|||||
Interest
Income
|
722
|
1,473
|
822
|
1,723
|
1,556
|
4,950
|
|||||
Net
Loss
|
$ (29,578)
|
$ (489,550)
|
$ (55,858)
|
$ (291,860)
|
$ (176,936)
|
$ (1,570,969)
|
|||||
Allocation
of Net (Loss) Income:
|
|||||||||||
Limited
Partners
|
$ (29,282)
|
$ (484,655)
|
$ (55,299)
|
$ (288,941)
|
$ (175,515)
|
$ (1,598,250)
|
|||||
General
Partners
|
(296)
|
(4,895)
|
(559)
|
(2,919)
|
(1,421)
|
27,281
|
|||||
$ (29,578)
|
$ (489,550)
|
$ (55,858)
|
$ (291,860)
|
$ (176,936)
|
$ (1,570,969)
|
||||||
Net
Loss Per Limited Partnership Unit
|
$ (5.81)
|
$ (96.10)
|
$ (10.79)
|
$ (56.36)
|
|||||||
Number
of Limited Partnership Units Outstanding
|
5,043
|
5,043
|
5,127
|
5,127
|
|||||||
See
accompanying notes to financial statements.
6
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF
OPERATIONS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
7
|
SERIES
8
|
SERIES
9
|
|||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
||||||
Revenues:
|
|||||||||||
Distribution
Income
|
$ 26,604
|
$ 15,147
|
$ 16,978
|
$ 12,397
|
$ 14,812
|
$ 4,545
|
|||||
Total
Revenues
|
26,604
|
15,147
|
16,978
|
12,397
|
14,812
|
4,545
|
|||||
Expenses:
|
|||||||||||
Asset
Management Fee - General Partner
|
52,026
|
61,295
|
64,335
|
64,716
|
36,441
|
36,630
|
|||||
General
and Administrative:
|
|||||||||||
General
Partner
|
67,446
|
88,029
|
-
|
98,757
|
50,385
|
56,432
|
|||||
Other
|
30,591
|
34,361
|
31,842
|
37,997
|
21,733
|
24,523
|
|||||
Amortization
|
219
|
3,761
|
867
|
8,305
|
2,244
|
7,533
|
|||||
Impairment
Loss on Investment in Project Partnerships
|
-
|
183,299
|
-
|
221,243
|
-
|
173,523
|
|||||
Total
Expenses
|
150,282
|
370,745
|
97,044
|
431,018
|
110,803
|
298,641
|
|||||
Loss
Before Equity in Income (Loss) of Project Partnerships
|
|||||||||||
and
Other Income
|
(123,678)
|
(355,598)
|
(80,066)
|
(418,621)
|
(95,991)
|
(294,096)
|
|||||
Equity
in Income (Loss) of Project Partnerships
|
-
|
707
|
(11,312)
|
(45,239)
|
(301)
|
(72,322)
|
|||||
Gain
on Sale of Project Partnerships
|
301,008
|
43,425
|
-
|
-
|
-
|
-
|
|||||
Interest
Income
|
21
|
5,805
|
16
|
3,568
|
8
|
4,564
|
|||||
Net
Income (Loss)
|
$ 177,351
|
$ (305,661)
|
$ (91,362)
|
$ (460,292)
|
$ (96,284)
|
$ (361,854)
|
|||||
Allocation
of Net Income (Loss):
|
|||||||||||
Limited
Partners
|
$ 120,817
|
$ (345,595)
|
$ (90,448)
|
$ (455,689)
|
$ (95,321)
|
$ (358,235)
|
|||||
General
Partners
|
56,534
|
39,934
|
(914)
|
(4,603)
|
(963)
|
(3,619)
|
|||||
$ 177,351
|
$ (305,661)
|
$ (91,362)
|
$ (460,292)
|
$ (96,284)
|
$ (361,854)
|
||||||
Net
Income (Loss) Per Limited Partnership Unit
|
$ 11.62
|
$ (33.25)
|
$ (9.06)
|
$ (45.66)
|
$ (15.24)
|
$ (57.28)
|
|||||
Number
of Limited Partnership Units Outstanding
|
10,395
|
10,395
|
9,980
|
9,980
|
6,254
|
6,254
|
|||||
See
accompanying notes to financial statements.
7
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF
OPERATIONS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
10
|
SERIES
11
|
TOTAL
SERIES 7 - 11
|
|||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
||||||
Revenues:
|
|||||||||||
Distribution
Income
|
$ 3,944
|
$ 5,075
|
$ 3,582
|
$ 2,182
|
$ 65,920
|
$ 39,346
|
|||||
Total
Revenues
|
3,944
|
5,075
|
3,582
|
2,182
|
65,920
|
39,346
|
|||||
Expenses:
|
|||||||||||
Asset
Management Fee - General Partner
|
25,068
|
25,188
|
21,093
|
21,264
|
198,963
|
209,093
|
|||||
General
and Administrative:
|
|||||||||||
General
Partner
|
31,392
|
35,270
|
25,324
|
28,216
|
174,547
|
306,704
|
|||||
Other
|
15,729
|
16,623
|
15,780
|
16,629
|
115,675
|
130,133
|
|||||
Amortization
|
501
|
15,686
|
9,389
|
21,735
|
13,220
|
57,020
|
|||||
Impairment
Loss on Investment in Project Partnerships
|
-
|
478,793
|
-
|
190,666
|
-
|
1,247,524
|
|||||
Total
Expenses
|
72,690
|
571,560
|
71,586
|
278,510
|
502,405
|
1,950,474
|
|||||
Loss
Before Equity in (Loss) Income of Project Partnerships
|
|||||||||||
and
Other Income
|
(68,746)
|
(566,485)
|
(68,004)
|
(276,328)
|
(436,485)
|
(1,911,128)
|
|||||
Equity
in (Loss) Income of Project Partnerships
|
(19,223)
|
1,770
|
(93,719)
|
(102,603)
|
(124,555)
|
(217,687)
|
|||||
Gain
on Sale of Project Partnerships
|
-
|
-
|
-
|
-
|
301,008
|
43,425
|
|||||
Interest
Income
|
2,122
|
5,685
|
2,422
|
8,091
|
4,589
|
27,713
|
|||||
Net
Loss
|
$ (85,847)
|
$ (559,030)
|
$ (159,301)
|
$ (370,840)
|
$ (255,443)
|
$ (2,057,677)
|
|||||
Allocation
of Net (Loss) Income:
|
|||||||||||
Limited
Partners
|
$ (84,989)
|
$ (553,440)
|
$ (157,708)
|
$ (367,132)
|
$ (307,649)
|
$ (2,080,091)
|
|||||
General
Partners
|
(858)
|
(5,590)
|
(1,593)
|
(3,708)
|
52,206
|
22,414
|
|||||
$ (85,847)
|
$ (559,030)
|
$ (159,301)
|
$ (370,840)
|
$ (255,443)
|
$ (2,057,677)
|
||||||
Net
Loss Per Limited Partnership Unit
|
$ (16.85)
|
$ (109.74)
|
$ (30.76)
|
$ (71.61)
|
|||||||
Number
of Limited Partnership Units Outstanding
|
5,043
|
5,043
|
5,127
|
5,127
|
|||||||
See
accompanying notes to financial statements.
8
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF PARTNERS’
EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
7
|
SERIES
8
|
||||||||||
Limited
|
General
|
Limited
|
General
|
||||||||
Partners
|
Partners
|
Total
|
Partners
|
Partners
|
Total
|
||||||
Balance
at March 31, 2008
|
$ (136,355)
|
$ (93,577)
|
$ (229,932)
|
$ (378,909)
|
$ (23,650)
|
$ (402,559)
|
|||||
Net
(Loss) Income
|
(345,595)
|
39,934
|
(305,661)
|
(455,689)
|
(4,603)
|
(460,292)
|
|||||
Distributions
|
(43,425)
|
-
|
(43,425)
|
-
|
-
|
-
|
|||||
Balance
at December 31, 2008
|
$ (525,375)
|
$ (53,643)
|
$ (579,018)
|
$ (834,598)
|
$ (28,253)
|
$ (862,851)
|
|||||
Balance
at March 31, 2009
|
$ (568,361)
|
$ (54,077)
|
$ (622,438)
|
$ (891,845)
|
$ (28,479)
|
$ (920,324)
|
|||||
Net
Income (Loss)
|
120,817
|
56,534
|
177,351
|
(90,448)
|
(914)
|
(91,362)
|
|||||
Distributions
|
(301,008)
|
-
|
(301,008)
|
-
|
-
|
-
|
|||||
Balance
at December 31, 2009
|
$ (748,552)
|
$ 2,457
|
$ (746,095)
|
$ (982,293)
|
$ (29,393)
|
$ (1,011,686)
|
|||||
See
accompanying notes to financial statements.
9
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF PARTNERS’
EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
9
|
SERIES
10
|
||||||||||
Limited
|
General
|
Limited
|
General
|
||||||||
Partners
|
Partners
|
Total
|
Partners
|
Partners
|
Total
|
||||||
Balance
at March 31, 2008
|
$ (854)
|
$ (55,398)
|
$ (56,252)
|
$ 763,501
|
$ (36,913)
|
$ 726,588
|
|||||
Net
Loss
|
(358,235)
|
(3,619)
|
(361,854)
|
(553,440)
|
(5,590)
|
(559,030)
|
|||||
Balance
at December 31, 2008
|
$ (359,089)
|
$ (59,017)
|
$ (418,106)
|
$ 210,061
|
$ (42,503)
|
$ 167,558
|
|||||
Balance
at March 31, 2009
|
$ (413,640)
|
$ (59,568)
|
$ (473,208)
|
$ 159,923
|
$ (43,010)
|
$ 116,913
|
|||||
Net
Loss
|
(95,321)
|
(963)
|
(96,284)
|
(84,989)
|
(858)
|
(85,847)
|
|||||
Balance
at December 31, 2009
|
$ (508,961)
|
$ (60,531)
|
$ (569,492)
|
$ 74,934
|
$ (43,868)
|
$ 31,066
|
|||||
See
accompanying notes to financial statements.
10
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF PARTNERS’
EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
11
|
TOTAL
SERIES 7 - 11
|
||||||||||
Limited
|
General
|
Limited
|
General
|
||||||||
Partners
|
Partners
|
Total
|
Partners
|
Partners
|
Total
|
||||||
Balance
at March 31, 2008
|
$ 1,192,925
|
$ (34,405)
|
$ 1,158,520
|
$ 1,440,308
|
$ (243,943)
|
$ 1,196,365
|
|||||
Net
Loss
|
(367,132)
|
(3,708)
|
(370,840)
|
(2,080,091)
|
22,414
|
(2,057,677)
|
|||||
Distributions
|
-
|
-
|
-
|
(43,425)
|
-
|
(43,425)
|
|||||
Balance
at December 31, 2008
|
$ 825,793
|
$ (38,113)
|
$ 787,680
|
$ (683,208)
|
$ (221,529)
|
$ (904,737)
|
|||||
Balance
at March 31, 2009
|
$ 729,531
|
$ (39,086)
|
$ 690,445
|
$ (984,392)
|
$ (224,220)
|
$ (1,208,612)
|
|||||
Net
(Loss) Income
|
(157,708)
|
(1,593)
|
(159,301)
|
(307,649)
|
52,206
|
(255,443)
|
|||||
Distributions
|
-
|
-
|
-
|
(301,008)
|
-
|
(301,008)
|
|||||
Balance
at December 31, 2009
|
$ 571,823
|
$ (40,679)
|
$ 531,144
|
$ (1,593,049)
|
$ (172,014)
|
$ (1,765,063)
|
|||||
See
accompanying notes to financial statements.
11
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF CASH
FLOWS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
7
|
SERIES
8
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
Cash
Flows from Operating Activities:
|
|||||||
Net
Income (Loss)
|
$ 177,351
|
$ (305,661)
|
$ (91,362)
|
$ (460,292)
|
|||
Adjustments
to Reconcile Net Income (Loss) to Net Cash
|
|||||||
(Used
in) Provided by Operating Activities:
|
|||||||
Amortization
|
219
|
3,761
|
867
|
8,305
|
|||
Impairment
Loss on Investment in Project Partnerships
|
-
|
183,299
|
-
|
221,243
|
|||
Discount
on Investment in Securities
|
-
|
(1,519)
|
-
|
(768)
|
|||
Equity
in (Income) Loss of Project Partnerships
|
-
|
(707)
|
11,312
|
45,239
|
|||
Gain
on Sale of Project Partnerships
|
(301,008)
|
(43,425)
|
-
|
-
|
|||
Distribution
Income
|
(26,604)
|
(15,147)
|
(16,978)
|
(12,397)
|
|||
Changes
in Operating Assets and Liabilities:
|
|||||||
Decrease
in Interest Receivable
|
-
|
2,577
|
-
|
966
|
|||
Decrease
in Receivable - Other
|
-
|
696
|
-
|
-
|
|||
Increase
in Payable to General Partners
|
72,207
|
54,294
|
99,885
|
100,818
|
|||
Net
Cash (Used in) Provided by Operating Activities
|
(77,835)
|
(121,832)
|
3,724
|
(96,886)
|
|||
Cash
Flows from Investing Activities:
|
|||||||
Distributions
Received from Project Partnerships
|
30,604
|
21,166
|
19,519
|
12,868
|
|||
Net
Proceeds from Sale of Project Partnerships
|
301,008
|
43,425
|
23,000
|
-
|
|||
Redemption
of Investment Securities
|
-
|
200,000
|
-
|
75,000
|
|||
Purchase
of Investment Securities
|
-
|
(160,337)
|
-
|
(80,169)
|
|||
Net
Cash Provided by Investing Activities
|
331,612
|
104,254
|
42,519
|
7,699
|
|||
Cash
Flows from Financing Activities:
|
|||||||
Distributions
Paid to Limited Partners
|
(295,530)
|
(43,347)
|
-
|
(67,964)
|
|||
Net
Cash Used in Financing Activities
|
(295,530)
|
(43,347)
|
-
|
(67,964)
|
|||
(Decrease)
Increase in Cash and Cash Equivalents
|
(41,753)
|
(60,925)
|
46,243
|
(157,151)
|
|||
Cash
and Cash Equivalents at Beginning of Year
|
246,867
|
162,586
|
185,918
|
252,598
|
|||
Cash
and Cash Equivalents at End of Period
|
$ 205,114
|
$ 101,661
|
$ 232,161
|
$ 95,447
|
|||
See
accompanying notes to financial statements.
12
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF CASH
FLOWS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
9
|
SERIES
10
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
Cash
Flows from Operating Activities:
|
|||||||
Net
Loss
|
$ (96,284)
|
$ (361,854)
|
$ (85,847)
|
$ (559,030)
|
|||
Adjustments
to Reconcile Net Loss to Net Cash Used in Operating
Activities:
|
|||||||
Amortization
|
2,244
|
7,533
|
501
|
15,686
|
|||
Impairment
Loss on Investment in Project Partnerships
|
-
|
173,523
|
-
|
478,793
|
|||
Accreted
Interest Income on Investment in Securities
|
-
|
(2,172)
|
(2,113)
|
(3,855)
|
|||
Discount
on Investment in Securities
|
-
|
(308)
|
-
|
(472)
|
|||
Equity
in Loss (Income) of Project Partnerships
|
301
|
72,322
|
19,223
|
(1,770)
|
|||
Distribution
Income
|
(14,812)
|
(4,545)
|
(3,944)
|
(5,075)
|
|||
Changes
in Operating Assets and Liabilities:
|
|||||||
Decrease
in Interest Receivable
|
-
|
1,288
|
-
|
644
|
|||
Increase
in Payable to General Partners
|
53,493
|
32,948
|
35,947
|
22,546
|
|||
Net
Cash Used in Operating Activities
|
(55,058)
|
(81,265)
|
(36,233)
|
(52,533)
|
|||
Cash
Flows from Investing Activities:
|
|||||||
Distributions
Received from Project Partnerships
|
16,592
|
7,128
|
14,094
|
14,193
|
|||
Net
Proceeds from Sale of Project Partnerships
|
10,000
|
-
|
10,000
|
-
|
|||
Redemption
of Investment Securities
|
-
|
100,000
|
-
|
50,000
|
|||
Purchase
of Investment Securities
|
-
|
(34,641)
|
-
|
(49,487)
|
|||
Net
Cash Provided by Investing Activities
|
26,592
|
72,487
|
24,094
|
14,706
|
|||
Decrease
in Cash and Cash Equivalents
|
(28,466)
|
(8,778)
|
(12,139)
|
(37,827)
|
|||
Cash
and Cash Equivalents at Beginning of Year
|
124,326
|
64,247
|
121,062
|
79,049
|
|||
Cash
and Cash Equivalents at End of Period
|
$ 95,860
|
$ 55,469
|
$ 108,923
|
$ 41,222
|
|||
See
accompanying notes to financial statements.
13
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
STATEMENTS OF CASH
FLOWS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2009 AND 2008
(Unaudited)
SERIES
11
|
TOTAL
SERIES 7 - 11
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
Cash
Flows from Operating Activities:
|
|||||||
Net
Loss
|
$ (159,301)
|
$ (370,840)
|
$ (255,443)
|
$ (2,057,677)
|
|||
Adjustments
to Reconcile Net Loss to Net Cash Used in Operating
Activities:
|
|||||||
Amortization
|
9,389
|
21,735
|
13,220
|
57,020
|
|||
Impairment
Loss on Investment in Project Partnerships
|
-
|
190,666
|
-
|
1,247,524
|
|||
Accreted
Interest Income on Investment in Securities
|
(2,407)
|
(4,517)
|
(4,520)
|
(10,544)
|
|||
Discount
on Investment in Securities
|
-
|
(1,242)
|
-
|
(4,309)
|
|||
Equity
in Loss of Project Partnerships
|
93,719
|
102,603
|
124,555
|
217,687
|
|||
Gain
on Sale of Project Partnerships
|
-
|
-
|
(301,008)
|
(43,425)
|
|||
Distribution
Income
|
(3,582)
|
(2,182)
|
(65,920)
|
(39,346)
|
|||
Changes
in Operating Assets and Liabilities:
|
|||||||
Decrease
in Interest Receivable
|
-
|
1,610
|
-
|
7,085
|
|||
Decrease
in Receivable - Other
|
-
|
-
|
-
|
696
|
|||
Increase
in Payable to General Partners
|
18,327
|
21,339
|
279,859
|
231,945
|
|||
Net
Cash Used in Operating Activities
|
(43,855)
|
(40,828)
|
(209,257)
|
(393,344)
|
|||
Cash
Flows from Investing Activities:
|
|||||||
Distributions
Received from Project Partnerships
|
5,082
|
4,667
|
85,891
|
60,022
|
|||
Net
Proceeds from Sale of Project Partnerships
|
-
|
-
|
344,008
|
43,425
|
|||
Redemption
of Investment Securities
|
-
|
125,000
|
-
|
550,000
|
|||
Purchase
of Investment Securities
|
-
|
(129,655)
|
-
|
(454,289)
|
|||
Net
Cash Provided by Investing Activities
|
5,082
|
12
|
429,899
|
199,158
|
|||
Cash
Flows from Financing Activities:
|
|||||||
Distributions
Paid to Limited Partners
|
-
|
-
|
(295,530)
|
(111,311)
|
|||
Net
Cash Used in Financing Activities
|
-
|
-
|
(295,530)
|
(111,311)
|
|||
Decrease
in Cash and Cash Equivalents
|
(38,773)
|
(40,816)
|
(74,888)
|
(305,497)
|
|||
Cash
and Cash Equivalents at Beginning of Year
|
204,816
|
81,179
|
882,989
|
639,659
|
|||
Cash
and Cash Equivalents at End of Period
|
$ 166,043
|
$ 40,363
|
$ 808,101
|
$ 334,162
|
|||
See
accompanying notes to financial statements.
14
GATEWAY TAX CREDIT FUND III
LTD.
(A
Florida Limited Partnership)
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31,
2009
(Unaudited)
NOTE 1 -
ORGANIZATION:
Gateway
Tax Credit Fund III Ltd. (“Gateway”), a Florida Limited Partnership, was formed
October 17, 1991 under the laws of Florida. Gateway offered its
limited partnership interests in Series (“Series”). The first Series
for Gateway is Series 7. Operations commenced on July 16, 1992 for
Series 7, January 4, 1993 for Series 8, September 30, 1993 for Series 9, January
21, 1994 for Series 10 and April 29, 1994 for Series 11. Each Series
invests, as a limited partner, in other limited partnerships (“Project
Partnerships”), each of which owns and operates apartment complexes eligible for
Low-Income Housing Tax Credits (“Tax Credits”), provided for in Section 42 of
the Internal Revenue Code of 1986. Gateway will terminate on December
31, 2040 or sooner, in accordance with the terms of the limited partnership
agreement (the “Agreement”). As of December 31, 2009, Gateway had
received capital contributions of $1,000 from the General Partners and
$36,799,000 from the investor Limited Partners.
Raymond
James Partners, Inc. and Raymond James Tax Credit Funds, Inc., wholly owned
subsidiaries of Raymond James Financial, Inc., are the General Partner and
Managing General Partner, respectively and collectively the General
Partners.
Gateway
received capital contributions of $10,395,000, $9,980,000, $6,254,000,
$5,043,000 and $5,127,000 from the investor Limited Partners in Series 7, 8, 9,
10 and 11, respectively. Each Series is treated as though it were a
separate partnership, investing in a separate and distinct pool of Project
Partnerships. Income or loss and all tax items from the Project
Partnerships acquired by each Series are specifically allocated among the
Limited Partners of such Series.
Operating
profits and losses, cash distributions from operations and Tax Credits from each
Series are generally allocated 99% to the Limited Partners in that Series and 1%
to the General Partners. Profit or loss and cash distributions from
sales of properties by each Series are allocated as specified in the
Agreement.
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES:
Basis of
Accounting
Gateway
utilizes the accrual basis of accounting whereby revenues are recognized as
earned and expenses are recognized as obligations are incurred.
Gateway
accounts for its investments as the limited partner in Project Partnerships
(“Investments in Project Partnerships”) using the equity method of accounting,
because management believes that Gateway does not have a majority control of the
major operating and financial policies of the Project Partnerships in which it
invests, and reports the equity in loss of the Project Partnerships on a 3-month
lag in the Statements of Operations. Under the equity method, the
Investments in Project Partnerships initially include:
1)
|
Gateway's
capital contribution,
|
2)
|
Acquisition
fees paid to the General Partner for services rendered in selecting
properties for acquisition,
|
3)
|
Acquisition
expenses including legal fees, travel and other miscellaneous costs
relating to acquiring properties.
|
Quarterly
the Investments in Project Partnerships are increased or decreased as
follows:
1)
|
Increased
for equity in income or decreased for equity in loss of the Project
Partnerships,
|
2)
|
Decreased
for cash distributions received from the Project
Partnerships,
|
3)
|
Decreased
for the amortization of the acquisition fees and
expenses,
|
4)
|
Increased
for loans or advances made to the Project Partnerships by
Gateway,
|
5)
|
Decreased,
where appropriate, for impairment.
|
15
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Pursuant
to the limited partnership agreements for the Project Partnerships, cash losses
generated by the Project Partnerships are allocated to the general partners of
those partnerships. In subsequent years, cash profits, if any, are
first allocated to the general partners to the extent of the allocation of prior
cash losses.
Since
Gateway invests as a limited partner, and therefore is not obligated to fund
losses or make additional capital contributions, it does not recognize losses
from individual Project Partnerships to the extent that these losses would
reduce the investment in those Project Partnerships below zero. In
accordance with GAAP, once the net investment in a Project Partnership is
reduced to zero, receivables due from the Project Partnership are decreased by
Gateway’s share of Project Partnership losses. The suspended losses
will be used to offset future income from the individual Project
Partnerships. Any cash distributions received from Project
Partnerships which have a zero investment balance are accounted for as
distribution income in the period the cash distribution is received by
Gateway.
Gateway
reviews its investments in Project Partnerships to determine if there has been
any permanent impairment whenever events or changes in circumstances indicate
that the carrying amount of the investment may not be recoverable. If
the sum of the expected future cash flows is less than the carrying amount of
the investment, Gateway recognizes an impairment loss. As part of its
analysis, Gateway has historically considered the residual value of the Project
Partnerships as one key component of its estimate of future cash
flows. During the quarter ended December 31, 2008, as a direct result
of the deterioration that occurred within the United States financial markets
and more specifically, its negative impact on the Tax Credit market, Gateway
concluded that any residual value of the Project Partnerships given the Tax
Credit market conditions could not be practicably determined. As a
result, Gateway eliminated estimates of residual value of the Project
Partnerships from the recoverability portion of its impairment
analysis. Accordingly, in the quarter ended December 31, 2008,
impairment expense of $1,146,287 was recognized in the Statement of Operations,
comprised of $157,405 in Series 7, $221,243 in Series 8, $173,523 in Series 9,
$403,450 in Series 10, and $190,666 in Series 11. Impairment expense
for the year ended March 31, 2009 totaled $1,340,110, comprised of $183,299 in
Series 7, $221,243 in Series 8, $180,400 in Series 9, $506,918 in Series 10, and
$248,250 in Series 11. Refer to Note 5 – Investments in Project
Partnerships for further details regarding the components of the Investments in
Project Partnerships balance. Gateway is continuing to execute its
process of disposition of its interest in Project Partnerships that have reached
the end of their Tax Credit compliance period, refer to Note 6 – Summary of
Disposition Activities for the most recent update of those on-going
activities. No impairment expense was recognized during the
nine-month period ended December 31, 2009. Impairment expense for the
nine months ended December 31, 2008 totaled $1,247,524, comprised of $183,299 in
Series 7, $221,243 in Series 8, $173,523 in Series 9, $478,793 in Series 10, and
$190,666 in Series 11.
Gateway,
as a limited partner in the Project Partnerships, is subject to risks inherent
in the ownership of property which are beyond its control, such as fluctuations
in occupancy rates and operating expenses, variations in rental schedules,
proper maintenance and continued eligibility of Tax Credits. If the
cost of operating a property exceeds the rental income earned thereon, Gateway
may deem it in its best interest to voluntarily provide funds in order to
protect its investment. However, Gateway does not guarantee any of
the mortgages or other debt of the Project Partnerships. No such
funding to Project Partnerships occurred during each of the nine-month periods
ended December 31, 2009 and 2008.
Cash and Cash
Equivalents
Gateway's
policy is to include short-term investments with an original maturity of three
months or less in Cash and Cash Equivalents. Short-term investments
are comprised of money market mutual funds.
Concentrations of Credit
Risk
Financial
instruments which potentially subject Gateway to concentrations of credit risk
consist of cash investments in a money market mutual fund whose investment
advisor is a wholly owned subsidiary of Raymond James Financial,
Inc.
Use of Estimates in the
Preparation of Financial Statements
The
preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates that affect certain reported
amounts and disclosures. These estimates are based on management's
knowledge and experience. Accordingly, actual results could differ
from these estimates.
16
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Investment in
Securities
Gateway
is required under GAAP to categorize its debt securities as held-to-maturity,
available-for-sale or trading securities, dependent upon Gateway's intent in
holding the securities. Gateway's intent is to hold all of its debt
securities (U.S. Treasury Security Strips) until maturity and to use these
investments to fund Gateway's ongoing operations. Interest income is
recognized ratably on the U.S. Treasury Security Strips using the effective
yield to maturity. The U.S. Treasury Security Strips are carried at
amortized cost, which approximates market value, and are adjusted for
amortization of premiums and accretion of discounts to maturity. Such
adjustments are included in Interest Income.
Income
Taxes
No
provision for income taxes has been made in these financial statements, as
income taxes are a liability of the partners rather than of
Gateway. Gateway files income tax returns in the U.S. federal
jurisdiction and various state jurisdictions. Gateway is no longer
subject to U.S. federal examination by tax authorities for years prior to
calendar year 2006. The income tax returns subject to state
examination by tax authorities are generally consistent with the federal
period.
State Tax
Withholding
Certain
state tax jurisdictions impose a capital gains tax on the taxable gains
associated with the sale of investments in partnerships. As General
Partner of Gateway, it is Gateway’s obligation to calculate and withhold the
applicable state taxes that are payable by the Partners of Gateway when Project
Partnerships are sold or otherwise disposed by Gateway. In most
cases, the state taxes are due regardless if proceeds are received from the sale
of Project Partnerships. Therefore, Gateway has estimated the
withholding taxes payable and the amount is included in Distribution Payable on
the Balance Sheet.
Variable Interest Entities
Generally,
a variable interest entity, or VIE, is an entity with one or more of the
following characteristics, (a) the total equity investment at risk is not
sufficient to permit the entity to finance its activities without additional
subordinated financial support; (b) as a group the holders of the equity
investment at risk lack (i) the ability to make decisions about an entity’s
activities through voting or similar rights, (ii) the obligation to absorb the
expected losses of the entity; or (c) the equity investors have voting rights
that are not proportional to their economic interests and substantially all of
the entity’s activities either involve, or are conducted on behalf of, an
investor that has disproportionately few voting rights. GAAP requires
a VIE to be consolidated in the financial statements of the entity that is
determined to be the primary beneficiary of the VIE. Gateway’s
determination of the primary beneficiary of each VIE requires judgment and is
based on an analysis of all relevant facts and circumstances including: (1) the
existence of a principal-agency relationship between the limited partner and the
general partner, (2) the relationship and significance of the activities of the
VIE to each partner, (3) each partner’s exposure to the expected losses of the
VIE, and (4) the design of the VIE. In the design of Project
Partnership VIEs, the overriding concept centers around the premise that the
limited partner invests solely for tax attributes associated with the property
held by the VIE, while the general partner of the project partnership is
responsible for overseeing its operations. Based upon its analysis of
all the relevant facts and considerations, Gateway has concluded that in those
instances where the Project Partnership interests are determined to be VIEs, the
general partner of the Project Partnership is more closely associated with the
Project Partnership than the limited partner (Gateway) and therefore, Gateway is
not the primary beneficiary.
Gateway
holds variable interests in 118 VIEs, which consist of Project Partnerships, of
which Gateway is not the primary beneficiary. Five of Gateway’s
Project Partnership investments have been determined not to be
VIEs. Gateway’s maximum exposure to loss as a result of its
involvement with unconsolidated VIEs is limited to Gateway’s capital
contributions to and receivables from those VIEs, which is
$24,008,145. Gateway may be subject to additional losses to the
extent of any financial support that Gateway voluntarily provides to those
Project Partnerships in the future.
17
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Basis of
Preparation
The
unaudited financial statements presented herein have been prepared in accordance
with the instructions to Form 10-Q and do not include all of the information and
note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the
financial statements and notes thereto included with Gateway's report on Form
10-K for the year ended March 31, 2009. In the opinion of management,
these financial statements include adjustments, consisting only of normal
recurring adjustments, necessary to fairly summarize Gateway's financial
position and results of operations. The results of operations for the
periods may not be indicative of the results to be expected for the
year.
NOTE 3 - INVESTMENT IN
SECURITIES:
The
December 31, 2009 Balance Sheet includes U.S. Treasury Security Strips at cost,
plus accreted interest income of $27,296 for Series 10 and $30,271 for Series
11. The March 31, 2009 Balance Sheet includes U.S. Treasury Security
Strips at cost, plus accreted interest income of $25,183 for Series 10 and
$27,864 for Series 11. The U.S. Treasury Security Strips are commonly
held in a brokerage account maintained at Raymond James and Associates, Inc., an
affiliate of the General Partners. A separate accounting is
maintained for each Series’ share of any investments.
Series
10
|
Series
11
|
||||||
December
31, 2009
|
March
31, 2009
|
December
31, 2009
|
March
31, 2009
|
||||
Amortized
Cost
|
$ 40,217
|
$ 38,104
|
$ 43,640
|
$ 41,233
|
|||
Gross
Unrealized (Loss) Gain
|
(221)
|
1,730
|
356
|
2,584
|
|||
Fair
Value
|
$ 39,996
|
$ 39,834
|
$ 43,996
|
$ 43,817
|
Total
Series 10 - 11
|
||||
December
31, 2009
|
March
31, 2009
|
|||
Amortized
Cost
|
$ 83,857
|
$ 79,337
|
||
Gross
Unrealized Gain
|
135
|
4,314
|
||
Fair
Value
|
$ 83,992
|
$ 83,651
|
As of
December 31, 2009, the cost and accreted interest of debt securities by
contractual maturities is as follows:
Series
10
|
Series
11
|
Total
|
|||
Due
within 1 year
|
$ 40,217
|
$ 43,640
|
$ 83,857
|
||
After
1 year through 5 years
|
-
|
-
|
-
|
||
Total
Amount Carried on Balance Sheet
|
$ 40,217
|
$ 43,640
|
$ 83,857
|
NOTE 4 - RELATED PARTY
TRANSACTIONS:
The
Payable to General Partners primarily represents the asset management fees and
general and administrative expenses owed to the General Partners at the end of
the period. It is unsecured, due on demand and, in accordance with
the Agreement, non-interest bearing. Within the next 12 months, the
Managing General Partner does not intend to demand payment on the portion of
Asset Management Fees payable classified as long-term on the Balance
Sheet.
Value
Partners, Inc., an affiliate of Gateway, acquired the general partner interest
in Logan Heights, one of the Project Partnerships in Series 8, in 2003 (see
further discussion in Note 5).
18
NOTE 4 - RELATED PARTY
TRANSACTIONS (Continued):
For the
nine months ended December 31, 2009 and 2008, the General Partners and
affiliates are entitled to compensation and reimbursement for costs and expenses
incurred by Gateway as follows:
Asset
Management Fee - The Managing General Partner is entitled to receive an annual
asset management fee equal to the greater of (i) $2,000 for each limited
partnership in which Gateway invests, or (ii) 0.275% of Gateway's gross proceeds
from the sale of limited partnership interests. In either event (i)
or (ii), the maximum amount may not exceed 0.2% of the aggregate cost (Gateway's
capital contribution plus Gateway's share of the Properties' mortgage) of
Gateway's interest in properties owned by the Project
Partnerships. The asset management fee will be paid only after all
other expenses of Gateway have been paid. These fees are included in
the Statements of Operations.
2009
|
2008
|
||
Series
7
|
$ 52,026
|
$ 61,295
|
|
Series
8
|
64,335
|
64,716
|
|
Series
9
|
36,441
|
36,630
|
|
Series
10
|
25,068
|
25,188
|
|
Series
11
|
21,093
|
21,264
|
|
Total
|
$ 198,963
|
$ 209,093
|
General
and Administrative Expenses - The Managing General Partner is reimbursed for
general and administrative expenses of Gateway on an accountable
basis. This expense is included in the Statements of
Operations.
2009
|
2008
|
||
Series
7
|
$ 67,446
|
$ 88,029
|
|
Series
8
|
-
|
98,757
|
|
Series
9
|
50,385
|
56,432
|
|
Series
10
|
31,392
|
35,270
|
|
Series
11
|
25,324
|
28,216
|
|
Total
|
$ 174,547
|
$ 306,704
|
19
NOTE 5 – INVESTMENTS IN
PROJECT PARTNERSHIPS:
As
of December 31, 2009, Gateway had acquired a 99% interest in the profits,
losses, and Tax Credits as a limited partner in Project Partnerships
(Series 7 - 30, Series 8 - 42, and Series 9 - 24) which own and operate
government assisted multi-family housing complexes. Cash flows
from operations are allocated according to each Project Partnership
agreement. Upon dissolution, proceeds will be distributed
according to each Project Partnership agreement.
|
|||||||||||
The
following is a summary of Investments in Project Partnerships as
of:
|
SERIES
7
|
SERIES
8
|
SERIES
9
|
|||||||||
December
31,
|
March
31,
|
December
31,
|
March
31,
|
December
31,
|
March
31,
|
||||||
2009
|
2009
|
2009
|
2009
|
2009
|
2009
|
||||||
Capital
Contributions to Project Partnerships
|
|||||||||||
and
purchase price paid for limited partner
|
|||||||||||
interests
in Project Partnerships
|
$ 5,721,083
|
$ 6,861,114
|
$ 7,400,711
|
$ 7,400,711
|
$ 4,914,116
|
$ 4,914,116
|
|||||
Loan
receivable from Project Partnerships
|
-
|
-
|
24,220
|
24,220
|
-
|
-
|
|||||
Cumulative
equity in losses of Project
|
|||||||||||
Partnerships
(1) (2)
|
(5,194,990)
|
(6,402,875)
|
(7,352,151)
|
(7,340,840)
|
(4,566,385)
|
(4,566,084)
|
|||||
Cumulative
distributions received from
|
|||||||||||
Project
Partnerships
|
(216,295)
|
(252,589)
|
(190,367)
|
(187,825)
|
(170,765)
|
(168,985)
|
|||||
Investment
in Project Partnerships before
|
|||||||||||
Adjustment
|
309,798
|
205,650
|
(117,587)
|
(103,734)
|
176,966
|
179,047
|
|||||
Excess
of investment cost over the underlying
|
|||||||||||
assets
acquired:
|
|||||||||||
Acquisition
fees and expenses
|
573,481
|
703,733
|
536,715
|
536,715
|
244,087
|
244,087
|
|||||
Accumulated
amortization of acquisition
|
|||||||||||
fees
and expenses
|
(246,634)
|
(268,518)
|
(166,252)
|
(165,385)
|
(107,765)
|
(105,521)
|
|||||
Reserve
for Impairment of Investment in
|
|||||||||||
Project
Partnerships
|
(552,557)
|
(552,557)
|
(252,589)
|
(252,589)
|
(307,932)
|
(307,932)
|
|||||
Investments
in Project Partnerships
|
$ 84,088
|
$ 88,308
|
$ 287
|
$ 15,007
|
$ 5,356
|
$ 9,681
|
(1)
In accordance with Gateway's accounting policy to not carry Investments in
Project Partnerships below zero, cumulative suspended losses of $5,309,332
in Series 7, $8,274,156 in Series 8, and $3,287,034 in Series 9 for the
period ended December 31, 2009; and cumulative suspended losses of
$5,704,356 in Series 7, $7,564,293 in Series 8, and $2,844,368 in Series 9
for the year ended March 31, 2009 are not included.
|
|||||||||||
(2)
In accordance with Gateway's accounting policy to apply equity in losses
of Project Partnerships to receivables from Project Partnerships, $24,220
in losses are included in Series 8 as of December 31, 2009 and March 31,
2009. (See discussion in Note 2 - Significant Accounting
Policies.)
|
20
NOTE 5 – INVESTMENTS IN
PROJECT PARTNERSHIPS (Continued):
As
of December 31, 2009, Gateway had acquired a 99% interest in the profits,
losses, and Tax Credits as a limited partner in Project Partnerships
(Series 10 - 15 and Series 11 - 12) which own and operate government
assisted multi-family housing complexes. Cash flows from
operations are allocated according to each Project Partnership
agreement. Upon dissolution, proceeds will be distributed
according to each Project Partnership agreement.
|
|||||||||||
The
following is a summary of Investments in Project Partnerships as
of:
|
SERIES
10
|
SERIES
11
|
TOTAL
SERIES 7 - 11
|
|||||||||
December
31,
|
March
31,
|
December
31,
|
March
31,
|
December
31,
|
March
31,
|
||||||
2009
|
2009
|
2009
|
2009
|
2009
|
2009
|
||||||
Capital
Contributions to Project Partnerships
|
|||||||||||
and
purchase price paid for limited partner
|
|||||||||||
interests
in Project Partnerships
|
$ 3,914,672
|
$ 3,914,672
|
$ 4,128,042
|
$ 4,128,042
|
$ 26,078,624
|
$ 27,218,655
|
|||||
Loan
receivable from Project Partnerships
|
-
|
-
|
-
|
-
|
24,220
|
24,220
|
|||||
Cumulative
equity in losses of Project
|
|||||||||||
Partnerships
(1)
|
(2,526,030)
|
(2,506,807)
|
(1,921,266)
|
(1,827,547)
|
(21,560,822)
|
(22,644,153)
|
|||||
Cumulative
distributions received from
|
|||||||||||
Project
Partnerships
|
(239,991)
|
(229,841)
|
(196,394)
|
(194,894)
|
(1,013,812)
|
(1,034,134)
|
|||||
Investment
in Project Partnerships before
|
|||||||||||
Adjustment
|
1,148,651
|
1,178,024
|
2,010,382
|
2,105,601
|
3,528,210
|
3,564,588
|
|||||
Excess
of investment cost over the underlying
|
|||||||||||
assets
acquired:
|
|||||||||||
Acquisition
fees and expenses
|
196,738
|
196,738
|
290,335
|
290,335
|
1,841,356
|
1,971,608
|
|||||
Accumulated
amortization of acquisition
|
|||||||||||
fees
and expenses
|
(152,929)
|
(152,428)
|
(219,862)
|
(210,473)
|
(893,442)
|
(902,325)
|
|||||
Reserve
for Impairment of Investment in
|
|||||||||||
Project
Partnerships
|
(1,085,926)
|
(1,085,926)
|
(1,648,978)
|
(1,648,978)
|
(3,847,982)
|
(3,847,982)
|
|||||
Investments
in Project Partnerships
|
$ 106,534
|
$ 136,408
|
$ 431,877
|
$ 536,485
|
$ 628,142
|
$ 785,889
|
(1)
In accordance with Gateway's accounting policy to not carry Investments in
Project Partnerships below zero, cumulative suspended losses of $848,457
in Series 10 and $1,338,996 in Series 11 for the period ended December 31,
2009; and cumulative suspended losses of $660,430 in Series 10 and
$1,231,664 in Series 11 for the year ended March 31, 2009 are not
included.
|
21
NOTE 5 – INVESTMENTS IN
PROJECT PARTNERSHIPS (Continued):
In
accordance with Gateway’s policy of presenting the financial information of the
Project Partnerships on a three month lag, below is the summarized balance
sheets for the Project Partnerships of Series 7 and Series 8 as of September 30
and the respective summarized statements of operations for the nine months ended
September 30 of each year:
SERIES
7
|
SERIES
8 (1)
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
SUMMARIZED
BALANCE SHEETS
|
|||||||
Assets:
|
|||||||
Current
assets
|
$ 3,657,899
|
$ 4,924,546
|
$ 4,745,962
|
$ 4,726,966
|
|||
Investment
properties, net
|
16,319,613
|
20,739,161
|
22,745,223
|
24,071,468
|
|||
Other
assets
|
32,935
|
22,535
|
335,717
|
307,004
|
|||
Total
assets
|
$ 20,010,447
|
$ 25,686,242
|
$ 27,826,902
|
$ 29,105,438
|
|||
Liabilities
and Partners' Deficit:
|
|||||||
Current
liabilities
|
$ 746,803
|
$ 824,092
|
$ 1,438,787
|
$ 1,570,652
|
|||
Long-term
debt
|
24,666,597
|
30,700,844
|
35,579,018
|
35,854,400
|
|||
Total
liabilities
|
25,413,400
|
31,524,936
|
37,017,805
|
37,425,052
|
|||
Partners'
deficit
|
|||||||
Limited
Partner
|
(5,143,290)
|
(5,434,990)
|
(8,422,794)
|
(7,615,127)
|
|||
General
Partners
|
(259,663)
|
(403,704)
|
(768,109)
|
(704,487)
|
|||
Total
partners' deficit
|
(5,402,953)
|
(5,838,694)
|
(9,190,903)
|
(8,319,614)
|
|||
Total
liabilities and partners' deficit
|
$ 20,010,447
|
$ 25,686,242
|
$ 27,826,902
|
$ 29,105,438
|
|||
SUMMARIZED
STATEMENTS OF OPERATIONS
|
|||||||
Rental
and other income
|
$ 2,977,595
|
$ 3,591,392
|
$ 4,149,000
|
$ 4,056,111
|
|||
Expenses:
|
|||||||
Operating
expenses
|
2,412,447
|
2,519,353
|
3,205,102
|
3,213,272
|
|||
Interest
expense
|
387,565
|
490,088
|
551,292
|
575,791
|
|||
Depreciation
and amortization
|
751,169
|
962,452
|
1,123,804
|
1,116,489
|
|||
Total
expenses
|
3,551,181
|
3,971,893
|
4,880,198
|
4,905,552
|
|||
Net
loss
|
$ (573,586)
|
$ (380,501)
|
$ (731,198)
|
$ (849,441)
|
|||
Other
partners' share of net loss
|
$ (1,224)
|
$ (3,805)
|
$ (10,023)
|
$ (11,218)
|
|||
Gateway's
share of net loss
|
$ (572,362)
|
$ (376,696)
|
$ (721,175)
|
$ (838,223)
|
|||
Suspended
losses
|
572,362
|
377,403
|
709,863
|
792,984
|
|||
Equity
in Income (Loss) of Project Partnerships
|
$ -
|
$ 707
|
$ (11,312)
|
$ (45,239)
|
|||
22
NOTE 5 – INVESTMENTS IN
PROJECT PARTNERSHIPS (Continued):
(1) As
discussed in Note 4, an affiliate of the General Partner (Value Partners, Inc.)
is the operating general partner in one of the Project Partnerships included in
Series 8 above (Logan Heights). The Logan Heights Project Partnership
is not consolidated in Gateway’s financial statements as Gateway’s investment in
Logan Heights is accounted for under the equity method. The
information below is included for related party disclosure
purposes. The Project Partnership’s financial information for the
periods ending September 2009 and September 2008 is as follows:
September
2009
|
September
2008
|
||
Total
Assets
|
$ 438,462
|
$ 486,093
|
|
Total
Liabilities
|
803,920
|
809,698
|
|
Gateway
Deficit
|
(333,155)
|
(291,720)
|
|
Other
Partner's Deficit
|
(32,303)
|
(31,885)
|
|
Total
Revenue
|
93,012
|
86,151
|
|
Net
Loss
|
$ (41,218)
|
$ (19,910)
|
|
23
NOTE 5 – INVESTMENTS IN
PROJECT PARTNERSHIPS (Continued):
In
accordance with Gateway’s policy of presenting the financial information of the
Project Partnerships on a three month lag, below is the summarized balance
sheets for the Project Partnerships of Series 9 and Series 10 as of September 30
and the respective summarized statements of operations for the nine months ended
September 30 of each year:
SERIES
9
|
SERIES
10
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
SUMMARIZED
BALANCE SHEETS
|
|||||||
Assets:
|
|||||||
Current
assets
|
$ 2,360,620
|
$ 2,439,986
|
$ 2,178,747
|
$ 2,166,482
|
|||
Investment
properties, net
|
13,837,720
|
14,570,885
|
10,847,568
|
11,251,037
|
|||
Other
assets
|
45,889
|
50,426
|
28,718
|
20,578
|
|||
Total
assets
|
$ 16,244,229
|
$ 17,061,297
|
$ 13,055,033
|
$ 13,438,097
|
|||
Liabilities
and Partners' Equity (Deficit):
|
|||||||
Current
liabilities
|
$ 421,171
|
$ 478,090
|
$ 429,177
|
$ 430,866
|
|||
Long-term
debt
|
19,445,872
|
19,584,456
|
12,824,266
|
12,931,615
|
|||
Total
liabilities
|
19,867,043
|
20,062,546
|
13,253,443
|
13,362,481
|
|||
Partners'
equity (deficit)
|
|||||||
Limited
Partner
|
(3,181,934)
|
(2,595,966)
|
298,624
|
534,959
|
|||
General
Partners
|
(440,880)
|
(405,283)
|
(497,034)
|
(459,343)
|
|||
Total
partners' equity (deficit)
|
(3,622,814)
|
(3,001,249)
|
(198,410)
|
75,616
|
|||
Total
liabilities and partners' equity (deficit)
|
$ 16,244,229
|
$ 17,061,297
|
$ 13,055,033
|
$ 13,438,097
|
|||
SUMMARIZED
STATEMENTS OF OPERATIONS
|
|||||||
Rental
and other income
|
$ 2,192,329
|
$ 2,129,679
|
$ 1,462,951
|
$ 1,475,579
|
|||
Expenses:
|
|||||||
Operating
expenses
|
1,750,158
|
1,651,433
|
1,140,884
|
1,103,057
|
|||
Interest
expense
|
296,080
|
302,572
|
162,135
|
166,482
|
|||
Depreciation
and amortization
|
592,980
|
588,017
|
364,958
|
359,554
|
|||
Total
expenses
|
2,639,218
|
2,542,022
|
1,667,977
|
1,629,093
|
|||
Net
loss
|
$ (446,889)
|
$ (412,343)
|
$ (205,026)
|
$ (153,514)
|
|||
Other
partners' share of net (loss) income
|
$ (3,922)
|
$ (4,123)
|
$ 2,224
|
$ (3,639)
|
|||
Gateway's
share of net loss
|
$ (442,967)
|
$ (408,220)
|
$ (207,250)
|
$ (149,875)
|
|||
Suspended
losses
|
442,666
|
335,898
|
188,027
|
151,645
|
|||
Equity
in (Loss) Income of Project Partnerships
|
$ (301)
|
$ (72,322)
|
$ (19,223)
|
$ 1,770
|
|||
24
NOTE 5 – INVESTMENTS IN
PROJECT PARTNERSHIPS (Continued):
In
accordance with Gateway’s policy of presenting the financial information of the
Project Partnerships on a three month lag, below is the summarized balance
sheets for the Project Partnerships of Series 11 and Total Series 7 - 11 as of
September 30 and the respective summarized statements of operations for the nine
months ended September 30 of each year:
SERIES
11
|
TOTAL
SERIES 7 - 11
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
SUMMARIZED
BALANCE SHEETS
|
|||||||
Assets:
|
|||||||
Current
assets
|
$ 1,240,468
|
$ 1,236,176
|
$ 14,183,696
|
$ 15,494,156
|
|||
Investment
properties, net
|
9,169,170
|
9,514,690
|
72,919,294
|
80,147,241
|
|||
Other
assets
|
297,854
|
274,783
|
741,113
|
675,326
|
|||
Total
assets
|
$ 10,707,492
|
$ 11,025,649
|
$ 87,844,103
|
$ 96,316,723
|
|||
Liabilities
and Partners' Equity (Deficit):
|
|||||||
Current
liabilities
|
$ 490,754
|
$ 393,023
|
$ 3,526,692
|
$ 3,696,723
|
|||
Long-term
debt
|
9,916,521
|
10,035,475
|
102,432,274
|
109,106,790
|
|||
Total
liabilities
|
10,407,275
|
10,428,498
|
105,958,966
|
112,803,513
|
|||
Partners'
equity (deficit)
|
|||||||
Limited
Partner
|
696,633
|
955,016
|
(15,752,761)
|
(14,156,108)
|
|||
General
Partners
|
(396,416)
|
(357,865)
|
(2,362,102)
|
(2,330,682)
|
|||
Total
partners' equity (deficit)
|
300,217
|
597,151
|
(18,114,863)
|
(16,486,790)
|
|||
Total
liabilities and partners' equity (deficit)
|
$ 10,707,492
|
$ 11,025,649
|
$ 87,844,103
|
$ 96,316,723
|
|||
SUMMARIZED
STATEMENTS OF OPERATIONS
|
|||||||
Rental
and other income
|
$ 1,368,621
|
$ 1,330,562
|
$ 12,150,496
|
$ 12,583,323
|
|||
Expenses:
|
|||||||
Operating
expenses
|
1,022,046
|
1,001,486
|
9,530,637
|
9,488,601
|
|||
Interest
expense
|
159,746
|
159,495
|
1,556,818
|
1,694,428
|
|||
Depreciation
and amortization
|
392,611
|
397,273
|
3,225,522
|
3,423,785
|
|||
Total
expenses
|
1,574,403
|
1,558,254
|
14,312,977
|
14,606,814
|
|||
Net
loss
|
$ (205,782)
|
$ (227,692)
|
$ (2,162,481)
|
$ (2,023,491)
|
|||
Other
partners' share of net loss
|
$ (4,732)
|
$ (6,808)
|
$ (17,677)
|
$ (29,593)
|
|||
Gateway's
share of net loss
|
$ (201,050)
|
$ (220,884)
|
$ (2,144,804)
|
$ (1,993,898)
|
|||
Suspended
losses
|
107,331
|
118,281
|
2,020,249
|
1,776,211
|
|||
Equity
in Loss of Project Partnerships
|
$ (93,719)
|
$ (102,603)
|
$ (124,555)
|
$ (217,687)
|
|||
25
NOTE 6 – SUMMARY OF
DISPOSITION ACTIVITIES:
Gateway
at one time held investments in 133 Project Partnerships (39 in Series 7, 43 in
Series 8, 24 in Series 9, 15 in Series 10, and 12 in Series 11). As
of December 31, 2009, Gateway has sold its interest in 10 Project Partnerships
(9 in Series 7 and 1 in Series 8). A summary of the sale transactions
for the Project Partnerships disposed during the current fiscal year-to-date and
the previous fiscal year are summarized below:
Fiscal Year 2010 Disposition
Activity:
Series 7
Transaction
|
Net
Proceeds
|
Gain
on
|
||
Month
/ Year
|
Project
Partnership
|
Net
Proceeds
|
Per
LP Unit
|
Disposal
|
August
2009
|
Mountain
City Manor
|
$ 36,860
|
$ 3.54
|
$ 38,190
|
August
2009
|
Tazewell
Village
|
41,290
|
3.97
|
42,620
|
August
2009
|
Jamestown
Village
|
36,450
|
3.51
|
37,864
|
August
2009
|
Clinch
View Manor
|
134,400
|
12.93
|
135,814
|
May
2009
|
Spring
Creek Apartments II LP
|
46,520
|
4.48
|
46,520
|
$ 301,008
|
The net
proceeds per LP unit from the sale of Mountain City Manor, Tazewell Village,
Jamestown Village, Clinch View Manor, and Spring Creek Apartments II LP were
distributed to the Series 7 Limited Partners in September 2009.
Fiscal Year 2009 Disposition
Activity:
Series 7
Transaction
|
Net
Proceeds
|
Gain
on
|
||
Month
/ Year
|
Project
Partnership
|
Net
Proceeds
|
Per
LP Unit
|
Disposal
|
September
2008
|
Cedar
Hollow Apartments
|
$ 9,741
|
$ 0.94
|
$ 9,741
|
September
2008
|
Sunrise
I Apartments
|
14,741
|
1.42
|
14,741
|
September
2008
|
Burbank
Apartments
|
9,502
|
0.91
|
9,502
|
September
2008
|
Walnut
Apartments
|
9,441
|
0.91
|
9,441
|
$ 43,425
|
The net
proceeds per LP unit from the sale of Cedar Hollow Apartments, Sunrise I
Apartments, Burbank Apartments, and Walnut Apartments were distributed to the
Series 7 Limited Partners in December 2008.
Series 8
Transaction
|
Net
Proceeds
|
Gain
on
|
||
Month
/ Year
|
Project
Partnership
|
Net
Proceeds
|
Per
LP Unit
|
Disposal
|
Other,
net (see below)
|
$ -
|
$ -
|
$ 349
|
|
$ 349
|
Gateway
recognized an additional gain on sale of Project Partnerships in the amount of
$349 resulting from the true-up of certain legal and other sale transaction
closing expenses arising from a Project Partnership sale transaction which
closed in the prior fiscal year. This amount, less the applicable
state tax withholding, will be distributed to the Series 8 Limited Partners in a
subsequent quarter.
26
NOTE 7 – SIGNIFICANT EQUITY
INVESTEES:
Certain
Project Partnerships constitute 20% or more of assets, equity or income (loss)
from continuing operations of the respective Series in which they are held
(“Significant Project Partnerships”). In accordance with Gateway’s
policy of presenting the financial information of the Project Partnerships on a
three month lag, below is the summarized results of operations as of September
30, 2009 for each Significant Project Partnership:
Series 7
|
|||
Cardinal
Apartments
|
|||
Rental
and other income
|
$ 68,489
|
||
Gross
profit
|
24,695
|
||
Net
income
|
$ 4,558
|
||
Series 10
|
|||
Stigler
Properties
|
|||
Rental
and other income
|
$ 69,337
|
||
Gross
profit
|
27,382
|
||
Net
income
|
$ 5,521
|
||
Series 11
|
|||
Creekstone
Apartments, L.P.
|
Magnolia
Place Apartments, L.P.
|
||
Rental
and other income
|
$ 168,205
|
$ 108,791
|
|
Gross
profit
|
7,078
|
28,606
|
|
Net
loss
|
$ (44,909)
|
$ (3,056)
|
NOTE 8 – NONRECURRING FAIR
VALUE MEASUREMENTS:
Gateway
is required to disclose assets and liabilities measured at fair value and the
method used to determine fair value. The methods are categorized by
level. These levels are: (Level 1) – inputs are based upon
unadjusted quoted prices for identical instruments traded in active markets,
(Level 2) – inputs are based upon quoted prices for similar instruments in
active markets or can be corroborated by observable market data for
substantially the full term of the assets or liabilities, or (Level 3) – inputs
are generally unobservable and typically reflect management’s estimates of
assumptions that market participants would use in pricing the asset or
liability.
Gateway
measures certain assets, including Investments in Project Partnerships, at fair
value on a nonrecurring basis. Refer to Basis of Accounting section
within Note 2 – Significant Accounting Polices for discussion of
impairment. The table below sets out the balances for those assets
required to be measured at fair value on a nonrecurring basis and the associated
losses recognized as a result of fair value changes during the nine-month period
ended December 31, 2009:
Investments
in Project Partnerships, Net
|
December
31, 2009
|
Level
1
|
Level
2
|
Level
3
|
Total
Losses
|
||||
Series
7
|
$ 84,088
|
$ -
|
$ -
|
$ 84,088
|
$ -
|
||||
Series
8
|
287
|
-
|
-
|
287
|
-
|
||||
Series
9
|
5,356
|
-
|
-
|
5,356
|
-
|
||||
Series
10
|
106,534
|
-
|
-
|
106,534
|
-
|
||||
Series
11
|
431,877
|
-
|
-
|
431,877
|
-
|
||||
Total
|
$ 628,142
|
$ -
|
$ -
|
$ 628,142
|
$ -
|
27
NOTE 9 – SUBSEQUENT
EVENTS:
Gateway
reviewed and evaluated events from the period ended December 31, 2009 through
the date the financial statements were issued, February 12, 2010, and concluded
that no other subsequent events have occurred that require recognition in the
financial statements.
Series 8
Subsequent
to the December 31, 2009 quarter-end, Gateway sold its partnership interest in
South Brenchley Limited Partnership and Cimmaron Station Limited
Partnership. Gateway received approximately $23,000 in net proceeds
(approximately $2.30 per limited partnership unit) from these sale
transactions. Available proceeds, less the applicable state tax
withholding, will be distributed to the Series 8 Limited Partners in a
subsequent quarter. The net proceeds were received in December
2009. In accordance with GAAP, although the net proceeds from these
sale transactions were received on or prior to December 31, 2009, the gain on
the sale of these assets of $23,000 and the related distribution payable ($2.30
per limited partnership unit) will be recognized in the Statement of Operations
when all conditions for a sale of real estate have been met. All
conditions for recognition of the gain on sale of these Project Partnerships
were met after December 31, 2009. Gateway’s financial statements
reflect the net proceeds in the Deferred Gain on Sale of Project Partnerships on
the Balance Sheet as of December 31, 2009.
Series 9
Subsequent
to the December 31, 2009 quarter-end, Gateway sold its partnership interest in
Mountain Glen Limited Partnership. Gateway received approximately
$10,000 in net proceeds (approximately $1.60 per limited partnership unit) from
this sale transaction. Available proceeds, less the applicable state
tax withholding, will be distributed to the Series 9 Limited Partners in a
subsequent quarter. The net proceeds were received in December
2009. In accordance with GAAP, although the net proceeds from this
sale transaction were received on or prior to December 31, 2009, the gain on the
sale of this asset of $10,000 and the related distribution payable ($1.60 per
limited partnership unit) will be recognized in the Statement of Operations when
all conditions for a sale of real estate have been met. All
conditions for recognition of the gain on sale of this Project Partnership were
met after December 31, 2009. Gateway’s financial statements reflect
the net proceeds in the Deferred Gain on Sale of Project Partnerships on the
Balance Sheet as of December 31, 2009.
Series
10
Subsequent
to the December 31, 2009 quarter-end, Gateway sold its partnership interest in
Redstone Limited Partnership. Gateway received approximately $10,000
in net proceeds (approximately $1.98 per limited partnership unit) from this
sale transaction. Available proceeds, less the applicable state tax
withholding, will be distributed to the Series 10 Limited Partners in a
subsequent quarter. The net proceeds were received in December
2009. In accordance with GAAP, although the net proceeds from this
sale transaction were received on or prior to December 31, 2009, the gain on the
sale of this asset of $10,000 and the related distribution payable ($1.98 per
limited partnership unit) will be recognized in the Statement of Operations when
all conditions for a sale of real estate have been met. All
conditions for recognition of the gain on sale of this Project Partnership were
met after December 31, 2009. Gateway’s financial statements reflect
the net proceeds in the Deferred Gain on Sale of Project Partnerships on the
Balance Sheet as of December 31, 2009.
28
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand the results of operations and financial condition of
Gateway. The MD&A is provided as a supplement to, and should be
read in conjunction with the financial statements and accompanying footnotes to
the financial statements contained elsewhere in this report.
The
Managing General Partner monitors developments in the area of legal and
regulatory compliance. For example, the Sarbanes-Oxley Act of 2002
(the “Act”) mandates or suggests additional compliance measures with regard to
governance, disclosure, audit and other areas, and certain provisions of the Act
have been implemented by Gateway and other provisions will be implemented by
Gateway in subsequent years.
Gateway – All Series
- The following discusses the overall results of operations, liquidity and
capital resources for Gateway as a whole. A summary of the activity within each
specific Series of Gateway then follows.
Results of
Operations
As more
fully detailed in the Exit Strategy discussion included within this MD&A,
all of the Project Partnerships have delivered their Tax Credits to Gateway and
the Tax Credit compliance period has expired for 125 of the Project Partnerships
initially held. Gateway is in the process of selling or disposing of
its interests in Project Partnerships that have reached the end of their Tax
Credit compliance period. Net proceeds received from the sales are in
turn distributed to the Limited Partners. Once all Project
Partnership interests have been sold or otherwise disposed of, Gateway will be
liquidated. The target date for liquidation of Gateway is on or
before December 31, 2012, although there is no certainty, and it may not even be
considered likely at this time, that all the activities necessary to occur as of
such date will have transpired.
Distribution
income arises from any cash distributions received from Project Partnerships
which have a zero investment balance for financial reporting
purposes. Distribution income increased $26,574 from $39,346 for the
nine months ended December 31, 2008 to $65,920 for the nine months ended
December 31, 2009. The increase in distribution income is a result of
fewer Project Partnerships with investment balances coupled with an increase of
gross distributions received from Project Partnerships. The number of
Project Partnerships with an investment balance decreased from 32 as of December
31, 2008 to 13 Project Partnerships as of December 31, 2009. The
gross distributions received from Project Partnerships increased from $60,022
for the nine-month period ended December 31, 2008 to $85,891 for the same period
ended in 2009.
Total
expenses of Gateway were $502,405 for the nine months ended December 31, 2009, a
decrease of $1,448,069 as compared to the nine months ended December 31, 2008
total expenses of $1,950,474. The decrease results primarily from
decreases in 1) asset management fees and general and administrative expenses –
General Partner due to sales of Project Partnerships (Gateway ceases accruing
Asset Management Fees and General and Administrative expenses – General Partner
for sold Project Partnerships) along with the cessation of accruals for general
and administrative expenses – General Partner in Series 8 beginning in fiscal
year 2010, 2) amortization expense (resulting from the suspension of
amortization due to Project Partnership investment balances reaching zero or the
acquisition fees and expense being fully amortized), and 3) impairment losses on
Project Partnerships. Impairment expense is a non-cash charge that
reflects a potential decline in the carrying value of Gateway’s interest in
Project Partnerships. Historically, Gateway has considered the
residual value of the Project Partnerships as one key component of its estimate
of the present value of Gateway’s interest in any of its Project
Partnerships. During the quarter ended December 31, 2008, as a direct
result of the deterioration that occurred within the United States financial
markets and more specifically, its negative impact on the Tax Credit market,
Gateway concluded that any residual value of the Project Partnerships given the
Tax Credit market conditions could not be practicably determined. As
a result, in the quarter ended December 31, 2008 Gateway eliminated estimates of
residual value of the Project Partnerships from the recoverability portion of
its impairment analysis. Resultantly, non-cash impairment expense for
that quarter was incurred. No impairment expense was recognized
during the nine-month period ended December 31, 2009.
Equity in
Loss of Project Partnerships decreased $93,132 from $217,687 for the nine months
ended December 31, 2008 to $124,555 for the nine months ended December 31, 2009
because of a decrease in the losses from Project Partnerships with positive
investment balances. Because Gateway utilizes the equity method of
accounting to account for its investment in Project Partnerships, income or
losses from Project Partnerships with a zero investment balance are not
recognized in the Statement of Operations. For the nine months ended
September 30, 2009 (Project Partnership financial information is on a
three-month lag), Gateway’s share of the net loss was $2,144,804, of which
$2,020,249 was suspended. For the nine months ended September 30,
2008, Gateway’s share of the net loss was $1,993,898, of which $1,776,211 was
suspended.
29
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
Gain on
Sale of Project Partnerships increased $257,583 from $43,425 for the nine months
ended December 31, 2008 to $301,008 for the nine months ended December 31,
2009. As more fully discussed within this MD&A, five Project
Partnership investments were sold during the first three quarters of fiscal year
2010 as compared to the first three quarters of fiscal year 2009 when four
Project Partnership investments were sold. The amount of the gain or
loss from the sale of a Project Partnership and the period in which it is
recognized on the Statement of Operations is dependent upon the specifics
related to each sale or disposition transaction. Refer to the
discussion of each Project Partnership sold in the Exit Strategy section within
this MD&A.
Interest
income decreased $23,124 from $27,713 for the nine months ended December 31,
2008 to $4,589 for the nine months ended December 31, 2009. The
change in interest income results primarily from the fluctuation of interest
rates on short-term investments over this period along with the maturation of
several investments in securities over the same period. Investments
in Securities decreased $499,386 from $583,243 as of December 31, 2008 to
$83,857 as of December 31, 2009 from the redemption of U.S. Treasury Notes in
January 2009 and the redemption of U.S. Treasury Security Strips in February
2009, and the reinvestment of these funds into cash and cash
equivalents. Interest income is generally one source of funds
available to pay administrative costs of Gateway.
Liquidity and Capital
Resources
The
capital resources of each Series are used to pay General and Administrative
operating costs including personnel, supplies, data processing, travel, legal,
and accounting and audit fees associated with the administration and monitoring
of Gateway and the Project Partnerships. The capital resources are
also used to pay the Asset Management Fee due the Managing General Partner, but
only to the extent that Gateway's remaining resources are sufficient to fund
Gateway's ongoing needs. (Payment of any Asset Management Fee unpaid
at the time Gateway sells its interests in the Project Partnerships is
subordinated to the investors' return of their original capital
contribution).
The
sources of funds to pay the expenses of Gateway are cash and cash equivalents
and short-term investments which are generally comprised of U.S. Treasury
Security Strips along with the interest earnings thereon, and cash distributed
to the Series from the operations of the Project Partnerships. Due to
the rent limitations applicable to the Project Partnerships as a result of their
qualifying for Tax Credits, Gateway does not expect there to be a significant
increases in future rental income of the Project
Partnerships. Therefore, cash distributions from the operations of
the Project Partnerships are not expected to increase. However,
operational factors of the Project Partnerships and the timing of distributions
contribute to fluctuations of distributions from period to period and year to
year. Management believes these sources of funds are sufficient to
meet current and ongoing operating costs for the foreseeable future, and to pay
part of the Asset Management Fee.
In total,
Gateway reported a net loss of $255,443 from operations for the nine months
ended December 31, 2009. Cash and Cash Equivalents decreased by
$74,888 and Investments in Securities increased by $4,520. Of the
Cash and Cash Equivalents on hand as of December 31, 2009 and March 31, 2009,
$5,940 and $463 are payable to certain Series’ Limited Partners arising from the
sale of Project Partnerships. Distributions either have occurred or
will occur to those certain Limited Partners in a subsequent quarter, less the
applicable state tax withholding. After consideration of these sales
proceeds, Cash and Cash Equivalents and Investments in Securities decreased
$75,845 as compared to the prior year-end balances.
The
financial performance of each respective Series is summarized as
follows:
Series 7 - Gateway
closed this series on October 16, 1992 after receiving $10,395,000 from 635
Limited Partner investors. Equity in Income of Project Partnerships
decreased to $0 for the nine months ended December 31, 2009 from $707 for the
nine months ended December 31, 2008. For the nine months ended
September 30, 2009 and 2008, the Project Partnerships generated a loss of
$573,586 and $380,501 on Rental and other income of $2,977,595 and $3,591,392,
respectively. Gateway’s share of the Project Partnerships’ net loss
for the nine months ended September 30. 2009 and 2008 was $572,362 and $376,696,
of which $572,362 and $377,403 were suspended, respectively. The
suspended losses for the nine months ended September 30, 2008 of $377,403 exceed
Gateway’s share of the total net loss of $376,696 because certain Project
Partnerships with investment balances generated net income of
$707. In general, it is common in the real estate industry to
experience losses for financial and tax reporting purposes because of the
non-cash expenses of depreciation and amortization. (These Project
Partnerships reported depreciation and amortization of $751,169 and $962,452 for
the nine months ended September 30, 2009 and 2008,
respectively.) Overall, management believes the Project Partnerships
are operating as expected and have generated Tax Credits which met
projections.
30
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
At
December 31, 2009, the Series had $205,114 of short-term investments (Cash and
Cash Equivalents). Management believes the sources of funds are
sufficient to meet current and ongoing operating costs for the foreseeable
future, and to pay part of the Asset Management Fee.
As
disclosed on the statement of cash flows, the Series had net income of $177,351
for the nine months ended December 31, 2009. However, after
considering the changes in operating assets and liabilities, net cash used in
operating activities was $77,835. Cash provided by investing
activities totaled $331,612 consisting of $30,604 in cash distributions from the
Project Partnerships and $301,008 in net proceeds from the Sale of Project
Partnerships (refer to the Exit Strategy section within this MD&A for more
detailed discussion of these sales of Project Partnerships). Cash
used in financing activities consists of distributions paid to Limited Partners
totaling $295,530.
Series 8 - Gateway
closed this Series on June 28, 1993 after receiving $9,980,000 from 664 Limited
Partner investors. Equity in Loss of Project Partnerships decreased
$33,927 from $45,239 for the nine months ended December 31, 2008 to $11,312 for
the nine months ended December 31, 2009. For the nine months ended
September 30, 2009 and 2008, the Project Partnerships generated a loss of
$731,198 and $849,441 on Rental and other income of $4,149,000 and $4,056,111,
respectively. Gateway’s share of the Project Partnerships’ net loss
for the nine months ended September 30, 2009 and 2008 was $721,175 and $838,223,
of which $709,863 and $792,984 were suspended, respectively. In
general, it is common in the real estate industry to experience losses for
financial and tax reporting purposes because of the non-cash expenses of
depreciation and amortization. (These Project Partnerships reported
depreciation and amortization of $1,123,804 and $1,116,489 for the nine months
ended September 30, 2009 and 2008, respectively). Overall, management
believes the Project Partnerships are operating as expected and have generated
Tax Credits which met projections.
At
December 31, 2009, the Series had $232,161 of short-term investments (Cash and
Cash Equivalents). Management believes the sources of funds are
sufficient to meet current and ongoing operating costs for the foreseeable
future, and to pay part of the Asset Management Fee.
As
disclosed on the statement of cash flows, the Series had a net loss of $91,362
for the nine months ended December 31, 2009. However, after
considering the Equity in Loss of Project Partnerships of $11,312 and the
changes in operating assets and liabilities, net cash provided by operating
activities was $3,724. Cash provided by investing activities totaled
$42,519 consisting of $19,519 in cash distributions from the Project
Partnerships and $23,000 in net proceeds from the Sale of Project Partnerships
(refer to the Exit Strategy section within this MD&A for more detailed
discussion of these sales of Project Partnerships).
Series 9 - Gateway
closed this Series on September 30, 1993 after receiving $6,254,000 from 406
Limited Partner investors. Equity in Loss of Project Partnerships
decreased $72,021 from $72,322 for the nine months ended December 31, 2008 to
$301 for the nine months ended December 31, 2009. For the nine months
ended September 30, 2009 and 2008, the Project Partnerships generated a loss of
$446,889 and $412,343 on Rental and other income of $2,192,329 and $2,129,679,
respectively. Gateway’s share of the Project Partnerships’ net loss
for the nine months ended September 30, 2009 and 2008 was $442,967 and $408,220,
of which $442,666 and $335,898 were suspended, respectively. In
general, it is common in the real estate industry to experience losses for
financial and tax reporting purposes because of the non-cash expenses of
depreciation and amortization. (These Project Partnerships reported
depreciation and amortization of $592,980 and $588,017 for the nine months ended
September 30, 2009 and 2008, respectively.) Overall, management
believes the Project Partnerships are operating as expected and have generated
Tax Credits which met projections.
At
December 31, 2009, the Series had $95,860 of short-term investments (Cash and
Cash Equivalents). Management believes the sources of funds are
sufficient to meet current and ongoing operating costs for the foreseeable
future, and to pay part of the Asset Management Fee.
As
disclosed on the statement of cash flows, the Series had a net loss of $96,284
for the nine months ended December 31, 2009. However, after
considering the Equity in Loss of Project Partnerships of $301 and the changes
in operating assets and liabilities, net cash used in operating activities was
$55,058. Cash provided by investing activities totaled $26,592
consisting of $16,592 in cash distributions from the Project Partnerships and
$10,000 in net proceeds from the Sale of Project Partnerships (refer to the Exit
Strategy section within this MD&A for more detailed discussion of this sale
of Project Partnership).
31
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
Series 10 - Gateway
closed this Series on January 21, 1994 after receiving $5,043,000 from 325
Limited Partner investors. Equity in (Loss) Income of Project
Partnerships decreased $20,993 from income of $1,770 for the nine months ended
December 31, 2008 to a loss of $19,223 for the nine months ended December 31,
2009. For the nine months ended September 30, 2009 and 2008, the
Project Partnerships generated a loss of $205,026 and $153,514 on Rental and
other income of $1,462,951 and $1,475,579, respectively. Gateway’s
share of the Project Partnerships’ net loss for the nine months ended September
30, 2009 and 2008 was $207,250 and $149,875, of which $188,027 and $151,645 were
suspended, respectively. The suspended losses for the nine months
ended September 30, 2008 of $151,645 exceed Gateway’s share of the total net
loss of $149,875 because certain Project Partnerships with investment balances
generated net income of $1,770. In general, it is common in the real
estate industry to experience losses for financial and tax reporting purposes
because of the non-cash expenses of depreciation and
amortization. (These Project Partnerships reported depreciation and
amortization of $364,958 and $359,554 for the nine months ended September 30,
2009 and 2008, respectively.) Overall, management believes the
Project Partnerships are operating as expected and have generated Tax Credits
which met projections.
At
December 31, 2009, the Series had $108,923 of short-term investments (Cash and
Cash Equivalents). Series 10 also had $40,217 in U.S. Treasury
securities with annual maturities providing $40,000 in the current fiscal
year. Management believes the sources of funds are sufficient to meet
current and ongoing operating costs for the foreseeable future and to pay part
of the Asset Management Fee.
As
disclosed on the statement of cash flows, the Series had a net loss of $85,847
for the nine months ended December 31, 2009. However, after
considering the Equity in Loss of Project Partnerships of $19,223 and the
changes in operating assets and liabilities, net cash used in operating
activities was $36,233. Cash provided by investing activities totaled
$24,094 consisting of $14,094 in cash distributions from the Project
Partnerships and $10,000 in net proceeds from the Sale of Project Partnerships
(refer to the Exit Strategy section within this MD&A for more detailed
discussion of this sale of Project Partnership).
Series 11 - Gateway
closed this Series on April 29, 1994 after receiving $5,127,000 from 330 Limited
Partner investors. Equity in Loss of Project Partnerships decreased
$8,884 from $102,603 for the nine months ended December 31, 2008 to $93,719 for
the nine months ended December 31, 2009. For the nine months ended
September 30, 2009 and 2008, the Project Partnerships generated a loss of
$205,782 and $227,692 on Rental and other income of $1,368,621 and $1,330,562,
respectively. Gateway’s share of the Project Partnerships’ net loss
for the nine months ended September 30, 2009 and 2008 was $201,050 and $220,884,
of which $107,331 and $118,281 were suspended, respectively. In
general, it is common in the real estate industry to experience losses for
financial and tax reporting purposes because of the non-cash expenses of
depreciation and amortization. (These Project Partnerships reported
depreciation and amortization of $392,611 and $397,273 for the nine months ended
September 30, 2009 and 2008, respectively.) Overall, management
believes the Project Partnerships are operating as expected and have generated
Tax Credits which met projections.
At
December 31, 2009, the Series had $166,043 of short-term investments (Cash and
Cash Equivalents). Series 11 also had $43,640 in U.S. Treasury
securities with annual maturities providing $44,000 in the current fiscal
year. Management believes the sources of funds are sufficient to meet
current and ongoing operating costs for the foreseeable future and to pay part
of the Asset Management Fee.
As
disclosed on the statement of cash flows, the Series had a net loss of $159,301
for the nine months ended December 31, 2009. However, after
considering the Equity in Loss of Project Partnerships of $93,719 and the
changes in operating assets and liabilities, net cash used in operating
activities was $43,855. Cash provided by investing activities
consists of cash distributions from the Project Partnerships totaling
$5,082.
Critical Accounting
Estimates
Gateway
reviews its investments in Project Partnerships to determine if there has been
any permanent impairment whenever events or changes in circumstances indicate
that the carrying amount of the investment may not be recoverable. If
the sum of the expected future cash flows is less than the carrying amount of
the investment, Gateway recognizes an impairment loss. No impairment
expense was recognized during the nine-month period ended December 31,
2009. Impairment expense for the nine months ended December 31, 2008
totaled $1,247,524, comprised of $183,299 in Series 7, $221,243 in Series 8,
$173,523 in Series 9, $478,793 in Series 10, and $190,666 in Series
11.
32
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
Recent Accounting
Changes
Certain
accounting guidance within FASB ASC 740 – Income Taxes (“ASC 740”) was issued in
July 2006 which interpreted previous guidance. The “Accounting for
Income Tax Changes” required all taxpayers to analyze all material positions
they have taken or plan to take in all tax returns that have been filed or
should have been filed with all taxing authorities for all years still subject
to challenge by those taxing authorities. If the position taken is
“more-likely-than-not” to be sustained by the taxing authority on its technical
merits and if there is more than a 50% likelihood that the position would be
sustained if challenged and considered by the highest court in the relevant
jurisdiction, the tax consequences of that position should be reflected in the
taxpayer’s GAAP financial statements. Earlier proposed
interpretations within ASC 740 had recommended a “probable” standard for
recognition of tax consequences rather than the “more-likely-than-not” standard
finally adopted.
Because
Gateway is a pass-through entity and is not required to pay income taxes, the
changes to ASC 740 do not currently have any impact on its financial
statements. On December 30, 2008, the FASB issued further guidance
regarding ASC 740 which deferred the effective date of the Accounting for Income
Tax Changes for nonpublic enterprises included within the scope of the revised
guidance to the annual financial statements for fiscal years beginning after
December 15, 2008. The deferred effective date was intended to give
the Board additional time to develop guidance on the application of the
Accounting for Income Tax Changes by pass-through entities and not-for-profit
organizations. FASB also issued further guidance in September 2009
about the implementation on accounting for uncertainty in income
taxes. Gateway may modify its disclosures if the FASB’s guidance
regarding application of the Accounting for Income Tax Changes to pass-through
entities changes.
In
November 2008, the FASB updated FASB ASC 323 – Investments – Equity Method and
Joint Ventures by clarifying the accounting for certain transactions and
impairment considerations involving equity method investments. This
update was effective in fiscal years beginning on or after December 15, 2008,
and interim periods within those fiscal years. The changes in this
standard did not have a material impact on Gateway’s financial position,
operations or cash flow.
In
December 2008, the FASB updated FASB ASC 860 – Transfers and Servicing to
require public entities to provide additional disclosures about transferors’
continuing involvements with transferred financial assets. The
adoption of this standard did not have a material impact on the Gateway’s
financial statements.
In June
2009, the FASB issued amendments to the consolidation guidance applicable to
variable interest entities. Upon adoption of the standards, Gateway
will have reconsidered its previous ASC 810-10 conclusions regarding its
investments in Project Partnerships. These amendments are not
effective for Gateway until its fiscal year ended March 31, 2011 and early
adoption is prohibited. Gateway has not yet determined the impact, if
any, the amendments will have on its financial statements for the year-ended
March 31, 2011.
In June
2009, the FASB issued, and Gateway has adopted, FASB ASC 855 – Subsequent
Events. The objective of this statement is to establish general
standards of accounting for disclosure of events that occur after the balance
sheet date but before financial statements are issued or are available to be
issued. See Note 9 for information resulting from the
implementation of this new standard.
Exit Strategy upon
Expiration of the Project Partnership Tax Credit Compliance
Period
The IRS
compliance period for low-income housing Tax Credit properties is generally 15
years from occupancy following construction or rehabilitation
completion. When Project Partnerships reach the end of their Tax
Credit compliance period, Gateway initiates the process of disposing of its
investment in the Project Partnership; the objective of the process is to sell
Gateway’s interest in the properties for fair market value and ultimately, when
Gateway’s last Project Partnership investment is sold, liquidate
Gateway. Generally, the market for Project Partnerships is
limited. Some of the factors which negatively impact the
marketability of these projects include (1) requirements by government agencies
or the project’s debt holder to continue to maintain the property in the
low-income housing program, and (2) the mortgage balance of the property is very
near the initial balance as a result of the heavily subsidized debt of the
Project Partnerships and lengthy (usually 50 year) amortization
periods.
33
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
As of
December 31, 2009, Gateway holds a limited partner interest in 123 Project
Partnerships which own and operate government assisted multi-family housing
complexes. Project investments by Series are as
follows: 30 Project Partnerships for Series 7, 42 Project
Partnerships for Series 8, 24 Project Partnerships for Series 9, 15 Project
Partnerships for Series 10, and 12 Project Partnerships for Series
11. Gateway at one time held investments in 133 Project Partnerships
(39 in Series 7, 43 in Series 8, 24 in Series 9, 15 in Series 10, and 12 in
Series 11). As of December 31, 2009, only 8 of the Project
Partnerships have yet to reach the end of their Tax Credit compliance period but
will do so in the year ending December 31, 2010. As of December 31,
2009, 10 of the Project Partnerships have been sold (9 in Series 7 and 1 in
Series 8) and, in accordance with the Gateway partnership agreement, the entire
net proceeds received from these sales either have been or will be distributed
to the Limited Partners of the respective Series. No Project
Partnership interests were sold during the quarter-ended December 31, 2009,
leaving the total number of Project Partnerships sold during the current fiscal
year-to-date at 5 (all in Series 7). A summary of the sale
transactions for the Project Partnerships disposed during the current fiscal
year-to-date and the previous fiscal year are summarized below:
Fiscal Year 2010 Disposition
Activity:
Series 7
Transaction
|
Net
Proceeds
|
Gain
on
|
||
Month
/ Year
|
Project
Partnership
|
Net
Proceeds
|
Per
LP Unit
|
Disposal
|
August
2009
|
Mountain
City Manor
|
$ 36,860
|
$ 3.54
|
$ 38,190
|
August
2009
|
Tazewell
Village
|
41,290
|
3.97
|
42,620
|
August
2009
|
Jamestown
Village
|
36,450
|
3.51
|
37,864
|
August
2009
|
Clinch
View Manor
|
134,400
|
12.93
|
135,814
|
May
2009
|
Spring
Creek Apartments II LP
|
46,520
|
4.48
|
46,520
|
$ 301,008
|
The net
proceeds per LP unit from the sale of Mountain City Manor, Tazewell Village,
Jamestown Village, Clinch View Manor, and Spring Creek Apartments II LP were
distributed to the Series 7 Limited Partners in September 2009.
Fiscal Year 2009 Disposition
Activity:
Series 7
Transaction
|
Net
Proceeds
|
Gain
on
|
||
Month
/ Year
|
Project
Partnership
|
Net
Proceeds
|
Per
LP Unit
|
Disposal
|
September
2008
|
Cedar
Hollow Apartments
|
$ 9,741
|
$ 0.94
|
$ 9,741
|
September
2008
|
Sunrise
I Apartments
|
14,741
|
1.42
|
14,741
|
September
2008
|
Burbank
Apartments
|
9,502
|
0.91
|
9,502
|
September
2008
|
Walnut
Apartments
|
9,441
|
0.91
|
9,441
|
$ 43,425
|
The net
proceeds per LP unit from the sale of Cedar Hollow Apartments, Sunrise I
Apartments, Burbank Apartments, and Walnut Apartments were distributed to the
Series 7 Limited Partners in December 2008.
Series 8
Transaction
|
Net
Proceeds
|
Gain
on
|
||
Month
/ Year
|
Project
Partnership
|
Net
Proceeds
|
Per
LP Unit
|
Disposal
|
Other,
net (see below)
|
$ -
|
$ -
|
$ 349
|
|
$ 349
|
Gateway
recognized an additional gain on sale of Project Partnerships in the amount of
$349 resulting from the true-up of certain legal and other sale transaction
closing expenses arising from a Project Partnership sale transaction which
closed in the prior fiscal year. This amount, less the applicable
state tax withholding, will be distributed to the Series 8 Limited Partners in a
subsequent quarter.
34
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
Status Update on Unsold
Project Partnerships:
The
following summarizes the most recent status of the sale/disposal process for the
remaining Project Partnership investments held as of December 31,
2009:
Project Partnerships sold
subsequent to December 31, 2009:
Series 8
South
Brenchley Limited Partnership
|
Cimmaron
Station Limited Partnership
|
Subsequent
to the December 31, 2009 quarter-end, Gateway sold its partnership interest in
South Brenchley Limited Partnership and Cimmaron Station Limited
Partnership. Gateway received approximately $23,000 in net proceeds
(approximately $2.30 per limited partnership unit) from these sale
transactions. Available proceeds, less the applicable state tax
withholding, will be distributed to the Series 8 Limited Partners in a
subsequent quarter. The net proceeds were received in December
2009. In accordance with GAAP, although the net proceeds from these
sale transactions were received on or prior to December 31, 2009, the gain on
the sale of these assets of $23,000 and the related distribution payable ($2.30
per limited partnership unit) will be recognized in the Statement of Operations
when all conditions for a sale of real estate have been met. All
conditions for recognition of the gain on sale of these Project Partnerships
were met after December 31, 2009. Gateway’s financial statements
reflect the net proceeds in the Deferred Gain on Sale of Project Partnerships on
the Balance Sheet as of December 31, 2009.
Series 9
Mountain
Glen Limited Partnership
|
Subsequent
to the December 31, 2009 quarter-end, Gateway sold its partnership interest in
Mountain Glen Limited Partnership. Gateway received approximately
$10,000 in net proceeds (approximately $1.60 per limited partnership unit) from
this sale transaction. Available proceeds, less the applicable state
tax withholding, will be distributed to the Series 9 Limited Partners in a
subsequent quarter. The net proceeds were received in December
2009. In accordance with GAAP, although the net proceeds from this
sale transaction were received on or prior to December 31, 2009, the gain on the
sale of this asset of $10,000 and the related distribution payable ($1.60 per
limited partnership unit) will be recognized in the Statement of Operations when
all conditions for a sale of real estate have been met. All
conditions for recognition of the gain on sale of this Project Partnership were
met after December 31, 2009. Gateway’s financial statements reflect
the net proceeds in the Deferred Gain on Sale of Project Partnerships on the
Balance Sheet as of December 31, 2009.
Series
10
Redstone
Limited Partnership
|
Subsequent
to the December 31, 2009 quarter-end, Gateway sold its partnership interest in
Redstone Limited Partnership. Gateway received approximately $10,000
in net proceeds (approximately $1.98 per limited partnership unit) from this
sale transaction. Available proceeds, less the applicable state tax
withholding, will be distributed to the Series 10 Limited Partners in a
subsequent quarter. The net proceeds were received in December
2009. In accordance with GAAP, although the net proceeds from this
sale transaction were received on or prior to December 31, 2009, the gain on the
sale of this asset of $10,000 and the related distribution payable ($1.98 per
limited partnership unit) will be recognized in the Statement of Operations when
all conditions for a sale of real estate have been met. All
conditions for recognition of the gain on sale of this Project Partnership were
met after December 31, 2009. Gateway’s financial statements reflect
the net proceeds in the Deferred Gain on Sale of Project Partnerships on the
Balance Sheet as of December 31, 2009.
35
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
Gateway has approved the
sale to the general partner of the Project Partnership or a third
party:
Series 7
Mt.
Vernon Rental Housing, L.P.
|
Meadow
Run Apartments, LP
|
Lakeland
II, LP
|
Blue
Ridge Elderly Housing, Ltd., L.P.
|
Washington
Apartments Limited Partnership
|
Horton
Housing, L.P.
|
Atoka
Properties
|
Coalgate
Properties
|
These
approvals are subject to a number of contingencies, the outcome of which cannot
be predicted with certainty. However, utilizing the sales amounts as
approved by Gateway, should all the transactions close without modification, the
estimated net proceeds to Gateway from the sales of these Project Partnerships
are estimated to be $295,000, or $28.38 per limited partnership
unit. Sales proceeds would be available for distribution, less the
applicable state tax withholding, to the Series 7 Limited Partners subsequent to
the closing of these sales transactions which would most likely occur within the
next two years.
Series 8
Logan
Heights, Ltd.
|
Antlers
Properties
|
Antlers
Properties II
|
AAA
Properties of Bentonville
|
Meadowview
Properties Limited Partnership
|
Concordia
Senior Housing, L.P.
|
Holdenville
Properties
|
Kirksville
Senior Apartments, Limited Partnership
|
Mountainburg
Properties
|
Wetumka
Properties
|
These
approvals are subject to a number of contingencies, the outcome of which cannot
be predicted with certainty. However, utilizing the sales amounts as
approved by Gateway, should all the transactions close without modification, the
estimated net proceeds to Gateway from the sales of these Project Partnerships
are estimated to be $635,000, or $63.63 per limited partnership
unit. Sales proceeds would be available for distribution, less the
applicable state tax withholding, to the Series 8 Limited Partners subsequent to
the closing of these sales transactions which would most likely occur within the
next two years.
Series 9
Arbor
Trace Apartments Phase I LP
|
Arbor
Trace Apartments Phase II LP
|
Abernathy
Properties
|
Boxwood
Place Properties
|
Lamar
Properties, L.P.
|
Stilwell
Properties III
|
Jay
Properties II
|
These
approvals are subject to a number of contingencies, the outcome of which cannot
be predicted with certainty. However, utilizing the sales amounts as
approved by Gateway, should all the transactions close without modification, the
estimated net proceeds to Gateway from the sales of these Project Partnerships
are estimated to be $350,000, or $55.96 per limited partnership
unit. Sales proceeds would be available for distribution, less the
applicable state tax withholding, to the Series 9 Limited Partners subsequent to
the closing of these sales transactions which would most likely occur within the
next two years.
Series
10
Stigler
Properties
|
This
approval is subject to a number of contingencies, the outcome of which cannot be
predicted with certainty. However, utilizing the sales amount as
approved by Gateway, should the transaction close without modification, the
estimated net proceeds to Gateway from the sale of this Project Partnership are
estimated to be $54,000, or $10.71 per limited partnership
unit. Sales proceeds would be available for distribution, less the
applicable state tax withholding, to the Series 10 Limited Partners subsequent
to the closing of this sales transaction which would most likely occur within
the next two years.
36
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued):
Gateway has consented to the
general partner granting an option for either the general partner or a
third-party to purchase either the Project Partnership Interest or
Assets:
Series 7
Pioneer
Apartments, an Arkansas Limited Partnership
|
Should
this option be exercised, the estimated net sales proceeds to Gateway from the
sales transaction are estimated to be $157,000, or $15.10 per limited
partnership unit potentially available for distribution, less the applicable
state tax withholding, to the Series 7 Limited Partners within the next two
years. This option to purchase could expire without being exercised
which would result in no sales proceeds and remarketing of the Project
Partnership, the results of which are undeterminable.
Gateway
is exploring options regarding the sale or other disposition of the remaining
Project Partnership investments that have exited their Tax Credit compliance
period and are not specifically listed above. Any net proceeds
arising from these particular Project Partnerships are anticipated to be
minimal.
Item
3. Quantitative and Qualitative
Disclosure About Market Risk.
As a
smaller reporting company, no information is required.
Item
4. Controls
and Procedures.
Not
applicable to this report.
Item
4T. Controls and
Procedures.
Disclosure
controls are procedures designed to ensure that information required to be
disclosed in Gateway's reports filed under the Exchange Act, such as this
report, is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms. Disclosure controls are also
designed to ensure that such information is accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable, not absolute,
assurance of achieving the desired control objectives, as Gateway's are designed
to do, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures.
Under the
supervision and with the participation of the Managing General Partner’s
management, including the Chief Executive Officer and Chief Financial Officer,
Gateway has evaluated the effectiveness of its disclosure controls and
procedures applicable to each of the Series as well as to the total partnership
pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by
this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that these disclosure controls and
procedures applicable to each of the Series as well as to the total partnership
are effective. There were no changes in Gateway’s internal control
over financial reporting during the nine months ended December 31, 2009 that
have materially affected, or are reasonably likely to materially affect,
Gateway’s internal control over financial reporting.
With
respect to the Rule 13a-14(a)/15d-14(a) Certifications of the President and
Chief Financial Officer, respectively, of the Managing General Partner of
Gateway (see Exhibits 31.1 and 31.2 included herein), such certifications are
applicable to each of the Series as well as to the total
partnership.
37
PART II –
Other Information
Item
1. Legal Proceedings.
Not
applicable to this report.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Not
applicable to this report.
Item
3. Defaults upon Senior Securities.
Not
applicable to this report.
Item
4. Submission of Matters to a Vote of Security Holders.
Not
applicable to this report.
Item
5. Other Information.
Not
applicable to this report.
Item
6. Exhibits.
31.1
Principal Executive Officer Certification as required by Rule
13a-14(a)/15d-14(a), filed herewith.
31.2
Principal Financial Officer Certification as required by Rule
13a-14(a)/15d-14(a), filed herewith.
32.
Certification of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
38
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
GATEWAY TAX CREDIT FUND III,
LTD.
|
(A
Florida Limited Partnership)
|
By:
Raymond James Tax Credit Funds, Inc.
|
(the
Managing General Partner)
|
Date:
February 12,
2010
|
By:/s/ Ronald M.
Diner
|
|
Ronald
M. Diner
|
||
President
|
Date:
February 12,
2010
|
By:/s/ Toni S.
Matthews
|
|
Toni
S. Matthews
|
||
Vice
President and Chief Financial
Officer
|
39