Attached files
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| EX-31 - CERTIFICATION REQUIRED UNDER SECTION 302 - CAPITAL REALTY INVESTORS III LTD PARTNERSHIP | exhibit31_033110-cri3.htm |
| EX-32 - CERTIFICATION REQUIRED UNDER SECTION 906 - CAPITAL REALTY INVESTORS III LTD PARTNERSHIP | exhibit32_033110-cri3.htm |
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2010
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____________ to ____________
Commission file number 0-11962
CAPITAL REALTY INVESTORS-III
LIMITED PARTNERSHIP
(Exact Name of Issuer as Specified in its Charter)
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Maryland
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52-1311532
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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11200 Rockville Pike
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Rockville, MD
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20852
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(Address of Principal Executive Offices)
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(ZIP Code)
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(301) 468-9200
(Issuer’s Telephone Number, Including Area Code)
_____________________
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 o
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 o Accelerated filer o
Non-accelerated filer (Do not check if a smaller reporting company) o 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 o No x
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2010
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Page
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Part I
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Balance Sheets
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- March 31, 2010 and December 31, 2009
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1
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Statements of Operations and Accumulated Losses
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- for the three months ended March 31, 2010 and 2009
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2
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Statements of Cash Flows
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- for the three months ended March 31, 2010 and 2009
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3
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Notes to Financial Statements
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- March 31, 2010 and 2009
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4
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Item 2.
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Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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11
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Item 4.
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Controls and Procedures
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14
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Part II
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OTHER INFORMATION
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Item 5.
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Other Information
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15
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Item 6.
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Exhibits
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15
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Signature
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16
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Part I.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
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March 31,
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December 31,
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|||||||
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2010
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2009
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(Unaudited)
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Investments in partnerships
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$ | 2,641,918 | $ | 2,620,011 | ||||
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Cash and cash equivalents
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4,218,416 | 4,442,208 | ||||||
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Acquisition fees, principally paid to related parties,
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net of accumulated amortization of $69,062 and $68,419, respectively
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8,093 | 8,736 | ||||||
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Property purchase costs,
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net of accumulated amortization of $41,552 and $41,148, respectively
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6,930 | 7,334 | ||||||
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Total assets
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$ | 6,875,357 | $ | 7,078,289 | ||||
LIABILITIES AND PARTNERS' CAPITAL
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Due on investment in partnership
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$ | 119,544 | $ | 119,544 | ||||
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Accrued interest payable
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33,976 | 33,976 | ||||||
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Accounts payable and accrued expenses
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317,933 | 279,311 | ||||||
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Total liabilities
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471,453 | 432,831 | ||||||
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Commitments and contingencies
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Partners' capital:
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Capital paid-in:
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General Partners
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2,000 | 2,000 | ||||||
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Limited Partners
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60,001,500 | 60,001,500 | ||||||
| 60,003,500 | 60,003,500 | |||||||
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Less:
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Accumulated distributions to partners
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(26,573,905 | ) | (26,573,905 | ) | ||||
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Offering costs
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(6,156,933 | ) | (6,156,933 | ) | ||||
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Accumulated losses
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(20,868,758 | ) | (20,627,204 | ) | ||||
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Total partners' capital
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6,403,904 | 6,645,458 | ||||||
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Total liabilities and partners' capital
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$ | 6,875,357 | $ | 7,078,289 |
The accompanying notes are an integral part
of these financial statements.
-1-
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Part I.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
AND ACCUMULATED LOSSES
(Unaudited)
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For the three months ended
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March 31,
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2010
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2009
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Share of income from partnerships
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$ | 21,907 | $ | 14,867 | ||||
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Other revenue and expenses:
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Revenue:
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Interest
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4,661 | 9,634 | ||||||
| 4,661 | 9,634 | |||||||
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Expenses:
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General and administrative
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96,899 | 83,872 | ||||||
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Management fee
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75,000 | 75,000 | ||||||
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Professional fees
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95,176 | 40,794 | ||||||
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Impairment loss
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-- | 2,324 | ||||||
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Amortization of deferred costs
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1,047 | 1,047 | ||||||
| 268,122 | 203,037 | |||||||
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Total other revenue and expenses
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(263,461 | ) | (193,403 | ) | ||||
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Net loss
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(241,554 | ) | (178,536 | ) | ||||
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Accumulated losses, beginning of period
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(20,627,204 | ) | (19,966,293 | ) | ||||
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Accumulated losses, end of period
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$ | (20,868,758 | ) | $ | (20,144,829 | ) | ||
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Net loss allocated to General Partners (1.51%)
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$ | (3,647 | ) | $ | (2,696 | ) | ||
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Net loss allocated to Initial and Special Limited Partners (1.49%)
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$ | (3,599 | ) | $ | (2,660 | ) | ||
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Net loss allocated to Additional Limited Partners (97%)
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$ | (234,308 | ) | $ | (173,180 | ) | ||
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Net loss per unit of Additional Limited Partner Interest,
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based on 59,882 units outstanding
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$ | (3.91 | ) | $ | (2.89 | ) | ||
The accompanying notes are an integral part
of these financial statements.
-2-
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Part I.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
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For the three months ended
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March 31,
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2010
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2009
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Cash flows from operating activities:
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Net loss
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$ | (241,554 | ) | $ | (178,536 | ) | ||
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Adjustments to reconcile net loss to net cash
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used in operating activities:
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Share of income from partnerships
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(21,907 | ) | (14,867 | ) | ||||
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Amortization of deferred costs
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1,047 | 1,047 | ||||||
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Impairment loss
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-- | 2,324 | ||||||
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Changes in assets and liabilities:
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Decrease in other assets
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-- | 4,126 | ||||||
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(Decrease) increase in accounts payable and accrued expenses
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38,622 | (27,747 | ) | |||||
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Net cash used in operating activities
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(223,792 | ) | (213,653 | ) | ||||
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Net decrease in cash and cash equivalents
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(223,792 | ) | (213,653 | ) | ||||
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Cash and cash equivalents, beginning of period
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4,442,208 | 5,229,267 | ||||||
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Cash and cash equivalents, end of period
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$ | 4,218,416 | $ | 5,015,614 | ||||
The accompanying notes are an integral part
of these financial statements.
-3-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the accompanying unaudited financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of Capital Realty Investors-III Limited Partnership (the Partnership) as of March 31, 2010, and the results of its operations and its cash flows for the three month periods ended March 31, 2010 and 2009. The results of operations for the interim period ended March 31, 2010 are not necessarily indicative of the results to be expected for the full year.
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q. Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such instructions. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's annual report on Form 10-K at December 31, 2009.
2. PLAN OF LIQUIDATION AND DISSOLUTION
On November 21, 2005, the Partnership filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, and mailed it to limited partners to solicit consents for approval of the following:
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(1)
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The sale of all of the Partnership’s assets and the dissolution of the Partnership pursuant to a Plan of Liquidation and Dissolution, and the amendment of the Partnership’s Limited Partnership Agreement to permit the Managing General Partner, CRI, to be eligible to receive an increased property disposition fee from the Partnership on the same basis as such fees may currently be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell properties in which the Partnership holds interests, to the extent that CRI markets and sells the Partnership’s assets instead of such persons (a “Disposition Fee”); and
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-4-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
2. PLAN OF LIQUIDATION AND DISSOLUTION
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(2)
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the amendment of the Partnership’s Limited Partnership Agreement to permit CRI to be eligible to receive a partnership liquidation fee in the amount of $500,000, payable only if the Managing General Partner is successful in liquidating all of the Partnership’s investments within 48 months from the date the liquidation is approved [January 20, 2006], in recognition that one or more of the properties in which the Partnership holds an interest might not be saleable to parties not affiliated with the respective Local Partnership due to the amount and/or terms of their current indebtedness (the “Partnership Liquidation Fee”).
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The matters for which consent was solicited are collectively referred to as the “Liquidation.”
The record date for voting was November 1, 2005, and the final voting deadline was January 20, 2006. The Managing General Partner received consent from a majority of Limited Partners for the liquidation of the Partnership. A tabulation of votes received by the voting deadline follows.
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FOR
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AGAINST
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ABSTAIN
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TOTAL
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Units of
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Units of
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Units of
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Units of
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limited
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Limited
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Limited
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limited
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partner
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Partner
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Partner
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partner
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Description
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Interest
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Percent
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Interest
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Percent
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Interest
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Percent
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Interest
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Percent
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Sale, dissolution
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and increased
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Disposition Fee
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34,464 | 57.55% | 1,778 | 2.97% | 250 | 0.42% | 36,492 | 60.94% | ||||||||||||||||||||||||
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$500,000 Partnership
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Liquidation Fee
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30,535 | 50.99% | 5,087 | 8.49% | 860 | 1.44% | 36,482 | 60.92% | ||||||||||||||||||||||||
The Partnership was not liquidated within the 48 months from the approved liquidation date of January 20, 2006, therefore no liquidation fee was taken by CRI. The Managing General Partner is continuing towards liquidation of all the Partnership’s investments.
There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution.
-5-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
3. INVESTMENTS IN PARTNERSHIPS
a. Due on investments in partnerships and accrued interest payable
Notes
Due on investment in partnership includes $119,544 due to a previous owner related to Meadow Lanes Apartments at both March 31, 2010 and December 31, 2009; accrued interest payable thereon was $33,976 at both March 31, 2010 and December 31, 2009. These amounts will be paid upon the occurrence of certain specific events, as outlined in the note agreement. The fair value of the note approximates its carrying value.
b. Assets held for sale or transfer
Villa Mirage I and Villa Mirage II
On November 8, 2006, contracts for the sales of the Villa Mirage I and Villa Mirage II properties were signed. The contracts were extended through December 31, 2009 on each of the properties. On February 4, 2010, the purchaser changed the structure of the deal to a purchase of the partnership interests of the Partnership in each of Villa Mirage I and Villa Mirage II by executing a Partnership Interest Purchase Agreement. Due to the possible sale of the partnership interests in Villa Mirage I and Villa Mirage II, the Partnership’s basis in the Local Partnerships, which totaled $0 as of both March 31, 2010 and December 31, 2009, have been reclassified to asset held for sale or transfer in the accompanying balance sheets. Net capitalized acquisition fees and property purchase costs were reduced to zero at December 31, 2007. At December 31, 2007, the Partnership accrued transaction fees payable relating to the sale of the properties of $255,000. There is no assurance that a purchase will occur.
c. Advances to Local Partnerships
On October 23, 2009, the Partnership advanced $66,300 to Villa Mirage II for operating expenses. For financial statement purposes, the loan was charged off by the Partnership as a result of losses at the Local Partnership level during prior years.
On October 23, 2009, the Partnership advanced $56,680 to Pebble Valley Housing Partners Ltd. Partnership (Monterey/Hillcrest) for certain taxes. On November 5, 2009, the Partnership advanced $2,000 to Monterey/Hillcrest for certain taxes. On September 15, 2009, the Partnership advanced $3,000 to Monterey/Hillcrest for certain taxes. On April 14, 2010, the Partnership advanced $13,686 to Monterey/Hillcrest for certain taxes. For financial statement purposes, the loans were charged off by the Partnership as a result of losses at the Local Partnership level during prior years.
-6-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
3. INVESTMENTS IN PARTNERSHIPS - Continued
d. Summarized financial information
Combined statements of operations for the four Local Partnerships in which the Partnership was invested as of March 31, 2010 and 2009, respectively, follow. The combined statements have been compiled from information supplied by the management agents of the properties and are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership’s share of income from Local Partnerships.
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
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For the three months ended
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March 31,
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||||||||||||||||
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2010
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2009
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Equity
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Equity
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Method
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Suspended
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Method
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Suspended
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Number of Local Partnerships
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1 | 3 | 1 | 3 | ||||||||||||
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Revenue:
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Rental
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$ | 179,516 | $ | 905,270 | $ | 176,849 | $ | 929,783 | ||||||||
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Other
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32,937 | 54,595 | 32,397 | 53,891 | ||||||||||||
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Total revenue
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212,453 | 959,865 | 209,246 | 983,674 | ||||||||||||
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Expenses:
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Operating
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149,774 | 598,699 | 159,161 | 603,787 | ||||||||||||
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Interest
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(12,391 | ) | 246,543 | (10,556 | ) | 253,563 | ||||||||||
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Depreciation and amortization
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52,716 | 214,739 | 47,842 | 212,156 | ||||||||||||
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Total expenses
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190,099 | 1,059,981 | 196,447 | 1,069,506 | ||||||||||||
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Net income (loss)
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$ | 22,354 | $ | (100,116 | ) | $ | 12,799 | $ | (85,832 | ) | ||||||
| Partnership’s share of Local | ||||||||||||||||
| Partnership net income | $ | 21,907 | $ | -- | (1) | $ | 12,543 | $ | 2,324 | (1) | ||||||
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Share of income from partnerships
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$21,907
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$14,867
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(1) For financial reporting purposes, share of Local Partnership net income has been reduced to zero due to impairment.
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-7-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
3. INVESTMENTS IN PARTNERSHIPS - Continued
Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective statements of operations and as cash receipts on the respective balance sheets. As of March 31, 2010 and 2009, the Partnership's share of cumulative losses to date for three of four and two of four Local Partnerships, respectively, exceeded the amount of the Partnership's investments in and advances to those Local Partnerships by $9,675,287 and $9,268,313, respectively. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements.
4. RELATED PARTY TRANSACTIONS
In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for direct expenses in connection with managing the Partnership. For the three month periods ended March 31, 2010 and 2009, the Partnership paid $54,637 and $47,696, respectively. Such expenses are included in general and administrative expenses in the accompanying statements of operations.
In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (Management Fee) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner a Management Fee of $75,000 for each of the three month periods ended March 31, 2010 and 2009.
-8-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
4. RELATED PARTY TRANSACTIONS - Continued
Until January 22, 2006, when the Liquidation Proxy authorized an increased disposition fee to the Managing General Partner under the terms set forth therein, the Managing General Partner and/or its affiliates had been authorized to receive a fee of not more than two percent of the sales price of an investment in a Local Partnership or the property it owns, payable under certain conditions upon the sale of an investment in a Local Partnership or the property it owns. The payment of the fee has been subject to certain restrictions, including the achievement of a certain level of sales proceeds and making certain minimum distributions to limited partners. In accordance with the terms of a Definitive Proxy Statement for the Liquidation and Dissolution of the Partnership, which was approved on January 20, 2006, by holders of a majority of the Units of Limited Partner Interest, the Managing General Partner may receive property disposition fees from the Partnership on the same basis as such fees may be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell Partnership properties, to the extent that CRI markets and sells the Partnership’s properties instead of such persons. In March 2006 after the increased disposition fee was approved, the Managing General Partner was paid a disposition fee of $975,000 related to the sale of the Partnership’s interest in Arboretum Village in March 2006, which was netted against the related gain on disposition of investment in partnerships. In July 2006, the Managing General Partner was paid a disposition fee of $810,000 related to the sales of Village Squire I & II and Village Squire III, which was netted against the related gain on disposition of investment in partnerships. In addition, the Managing General Partner sought a partnership liquidation fee in the amount of $500,000, payable only if the Managing General Partner was successful in liquidating all of the Partnership’s investments within 48 months from the date the liquidation was approved, January 20, 2006, in recognition that one or more of the properties in which the Partnership holds an interest might not be saleable to parties not affiliated with the respective Local Partnership due to the amount and/or terms of their current indebtedness. The Partnership was not liquidated within the 48 months from the approved liquidation date of January 20, 2006, therefore no liquidation fee was taken by CRI. The Managing General Partner is continuing towards liquidation of all the Partnership’s investments.
-9-
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2010 and 2009
(Unaudited)
5. CASH CONCENTRATION RISK
Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains two cash accounts with SunTrust Bank. As of March 31, 2010, the uninsured portion of the cash balances was $4,203,247.
# # #
-10-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Capital Realty Investors-III Limited Partnership's (the Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.
Critical Accounting Policies
The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in the Partnership’s annual report on Form 10-K at December 31, 2009. The Partnership accounts for its investments in partnerships (Local Partnerships) by the equity method because the Partnership is a limited partner in the Local Partnerships. As such the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnerships. Environmental and operational trends, events and uncertainties that might affect the properties owned by the Local Partnerships would not necessarily have a significant impact on the Partnership’s application of the equity method of accounting, since the equity method has been suspended for three Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships. The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. If an asset were determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.
Plan of Liquidation and Dissolution
On November 21, 2005, the Partnership filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, to solicit consent for, among other things, the sale of all the Partnership’s assets and the dissolution of the Partnership pursuant to a Plan of Liquidation and Dissolution. As of the voting deadline, January 20, 2006, the holders of 34,464 units of limited partner interest (57.6%) voted “for” such sale and dissolution.
-11-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
General
The Managing General Partner has sold, and will continue to sell, certain properties by utilizing opportunities presented by federal affordable housing legislation, favorable financing terms and preservation incentives available to tax credit and not-for-profit purchasers. Some of the rental properties owned by the Local Partnerships are financed by state and federal housing agencies. The Managing General Partner has sold or refinanced, and will continue to sell or refinance, certain properties pursuant to programs developed by these agencies. These programs may include opportunities to sell a property to a qualifying purchaser who would agree to maintain the property as low to moderate income housing, or to refinance a property, or to obtain supplemental financing. The Managing General Partner continues to monitor certain state housing agency programs, and/or programs provided by certain lenders, to ascertain whether the properties would qualify within the parameters of a given program and whether these programs would provide an appropriate economic benefit to the Limited Partners of the Partnership.
The U. S. Department of Housing and Urban Development (HUD) subsidies are provided principally under Sections 8 and 236 of the National Housing Act. Under Section 8, the government pays to the applicable apartment partnership the difference between market rental rates (determined in accordance with government procedures) and the rate the government deems residents can afford. Under Section 236, the government provides interest subsidies directly to the applicable apartment partnership through a reduction in the property’s mortgage interest rate. In turn, the partnership provides a corresponding reduction in resident rental rates. In compliance with the requirements of Section 8, and Section 236, residents are screened for eligibility under HUD guidelines. Subsidies are provided under contracts between the federal government and the apartment partnerships.
Subsidy contracts for the investment apartment properties are scheduled to expire through 2024. The Local Partnerships seek the renewal of expiring subsidy contracts, when appropriate, for their properties. HUD has in the past approved new subsidy contracts on an annual basis subject to annual appropriations by Congress. The initial HUD contract renewal process currently provides owners six options for renewing their Section 8 contract depending upon whether the owner can meet the eligibility criteria. Historically, the Local Partnerships in which the Partnership is invested have met the criteria necessary to renew their Section 8 contracts.
Villa Mirage I has a Section 8 HAP contract which expires December 19, 2010. The Section 8 HAP contract covers all of the apartment units in Villa Mirage I. It is anticipated that the Local Partnership will extend its Section 8 HAP contract for a one-year period at expiration.
As of March 31, 2010, the carrying amount of the Partnership's investment in the Local Partnership with a Section 8 HAP contract expiring in the next 12 months and which was not sold on or before June 9, 2010, was $0.
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
The Managing General Partner continues to seek strategies to deal with affordable housing requirements. While the Managing General Partner cannot predict the outcome for any particular property at this time, the Managing General Partner will continue to work with the Local Partnerships to develop strategies that maximize the benefits to investors.
Financial Condition/Liquidity
The Partnership's liquidity, with unrestricted cash resources of $4,218,416 as of March 31, 2010, along with anticipated future cash distributions from Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs. As of June 9, 2010, there were no material commitments for capital expenditures. The Managing General Partner currently intends to retain all of the Partnership’s remaining undistributed cash for operating cash reserves pending further distributions under its Plan of Liquidation and Dissolution.
The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the three month period ended March 31, 2010, existing cash resources were adequate to support operating cash requirements. Cash and cash equivalents decreased during the three month period ended March 31, 2010, primarily due to cash used in operating activities.
Results of Operations
The Partnership’s net loss for the three month period ended March 31, 2010 increased compared to 2009, primarily due to increased general and administrative expense not an increase in income from partnerships or interest revenue. Interest revenue decreased due to lower interest rates earned in 2010. Share of income from partnerships increased primarily due to lower operating expenses. General and administrative expenses increased primarily due to higher payroll costs. Professional fees increased primarily due to higher audit costs.
For financial reporting purposes, the Partnership, as a limited partner in the Local Partnerships, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the three month periods ended March 31, 2010 and 2009, did not include losses of $98,854 and $87,298, respectively.
No other significant changes in the Partnership's operations have taken place during the three month period ended March 31, 2010.
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
Certain states may assert claims against the Partnership for failure to withhold and remit state income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the state tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.
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Item 4.
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Controls and Procedures
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In February 2010, representatives of the Managing General Partner of the Partnership carried out an evaluation of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures, pursuant to Exchange Act Rules 13a-15 and 15d-15. The Managing General Partner does not expect that the Partnership’s disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2009, our disclosure controls and procedures were effective to ensure that (i) the information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, was recorded, processed, summarized or reported within the time periods specified in the SEC’s rules and forms and (ii) such information was accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In addition, there have been no significant changes in the Partnership’s internal control over financial reporting that occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 5. Other Information
There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended March 31, 2010, but not reported, whether or not otherwise required by this Form 10-Q at March 31, 2010.
There is no established market for the purchase and sale of units of additional limited partner interest (Units) in the Partnership, although various informal secondary market services may exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.
Item 6. Exhibits
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Exhibit No.
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Description
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31.1
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Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32
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Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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All other Items are not applicable.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CAPITAL REALTY INVESTORS-III LIMITED
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PARTNERSHIP
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(Registrant)
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by: C.R.I., Inc.
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Managing General Partner
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June 9, 2010
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by: /s/ H. William Willoughby
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DATE
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H. William Willoughby
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Director, President, Secretary,
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Principal Financial Officer and
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Principal Account Officer
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