Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the year ended March 31, 2008
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: 0-21895
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(Exact name of registrant as specified in its charter)
California 33-6163848
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17782 Sky Park Circle 92614-6404
Irvine, CA (zip code)
(Address of principal executive offices)
(714) 662-5565
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act
Yes_____ No___X__
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes_____ No___X__
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 No X__
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer___ Accelerated filer___
Non-accelerated filer___X__ Smaller reporting company___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes____ No__X__
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
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PART I.
Item 1. Business
Organization
WNC Housing Tax Credit Fund V, L.P., Series 3 (the "Partnership") is a
California Limited Partnership formed under the laws of the State of California
on March 28, 1995, and commenced operations on October 24, 1995. The Partnership
was formed to acquire limited partnership interests in other limited
partnerships ("Local Limited Partnerships") which owns multi-family housing
complexes ("Housing Complexes") that are eligible for Federal low income housing
tax credits ("Low Income Housing Tax Credits"). The local general partners (the
"Local General Partners") of each Local Limited Partnership retain
responsibility for maintaining, operating and managing the Housing Complex. Each
Local Limited Partnership is governed by its agreement of limited partnership
(the "Local Limited Partnership Agreement").
The general partner of the Partnership is WNC & Associates, Inc. (the "General
Partner" or "Associates"). The chairman and the president of Associates own
substantially all of the outstanding stock of Associates. The business of the
Partnership is conducted primarily through the General Partner, as the
Partnership has no employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on July 26, 1995, the Partnership commenced a public offering of
25,000 units of limited partnership interest ("Partnership Units") at a price of
$1,000 per Partnership Unit. As of the close of the public offering on January
21, 1996 a total of 18,000 Partnership Units representing $17,558,985 had been
sold. Holders of Partnership Units are referred to herein as "Limited Partner".
Sempra Energy Financial, a California corporation, which is not an affiliate of
the Partnership or General Partner, has purchased 4,560 Partnership Units, which
represents 25.3% of the Partnership Units outstanding for the Partnership.
Sempra Energy Financial invested $4,282,600. A discount of $277,400 was allowed
due to a volume discount. On July 1, 2006 Sempra Energy Financial transferred
their 4,560 Partnership Units to Sempra Section 42, LLC. See Item 12(b) in this
10-K. Western Financial Savings Bank, which is not an affiliate of the
Partnership or General Partner, has purchased 1,068 Partnership Units, which
represent 5.9% of the Units outstanding for the Partnership. Western Financial
Savings Bank invested $1,000,000. A discount of $68,000 was allowed due to a
volume discount. See Item 12(b) in this 10-K.
The Partnership shall continue in full force and effect until December 31, 2050
unless terminated prior to that date pursuant to the Partnership Agreement (as
defined below) or law.
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Tax Credits. The Partnership's principal
business therefore consists of investing as a limited partner or non-managing
member in Local Limited Partnerships each of which will own and operate a
Housing Complex which will qualify for the Low Income Housing Tax Credits. In
general, under Section 42 of the Internal Revenue Code, an owner of low income
housing can receive the Low Income Housing Tax Credits to be used to reduce
Federal taxes otherwise due in each year of a ten-year credit period. Each
Housing Complex is subject to a 15 year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Tax Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low income
housing and (iii) the ability of government lenders to disapprove of transfer,
it is not possible at this time to predict whether the liquidation of the
Partnership's assets and the disposition of the proceeds, if any, in accordance
with the Partnership's Agreement of Limited Partnership, dated March 28, 1995
("Partnership Agreement"), will be accomplished promptly at the end of the
Compliance Period. If a Local Limited Partnership is unable to sell its Housing
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Complex, it is anticipated that the Local General Partner will either continue
to operate such Housing Complex or take such other actions as the Local General
Partner believes to be in the best interest of the Local Limited Partnership.
Notwithstanding the preceding, circumstances beyond the control of the General
Partner or the Local General Partners may occur during the Compliance Period,
which would require the Partnership to approve the disposition of a Housing
Complex prior to the end thereof, possibly resulting in recapture of Low Income
Housing Tax Credits.
The Partnership originally invested in eighteen Local Limited Partnerships, two
of which had been sold or otherwise disposed of as of March 31, 2008. Each of
these Local Limited Partnerships owns or owned a single Housing Complex that was
eligible for the Low Income Housing Tax Credits. Certain Local Limited
Partnerships may also benefit from additional government programs promoting low-
or moderate-income housing.
Exit Strategy
The Compliance Period for a Housing Complex is generally 15 years following
construction or rehabilitation completion. Associates was one of the first in
the industry to offer syndicated investments in Low Income Housing Tax Credits.
The initial programs are completing their Compliance Periods.
The following table reflects the 15-year compliance period of the sixteen
Housing Complexes:
Expiration Date for 15-year compliance period
15-year
Local Limited Partnership Name Expiration Date
------------------------------------------------------------------------------
Alliance Apartments I Limited Partnership 2010
Blessed Rock of El Monte 2012
Broadway Apartments, Limited Partnership 2013
Curtis Associates I, L.P. 2012
Escatawpa Village Associates, Limited Partnership 2011
Hastings Apartments I, Limited Partnership 2011
Heritage Apartments I, L.P. 2012
Hillcrest Associates, A Limited Partnership 2011
Patten Towers, L.P. II 2011
Prairieland Properties of Syracuse II, L.P. 2012
Raymond S. King Apartments Limited Partnership 2012
Rosedale Limited Partnership 2011
Shepherd South Apartments I, Ltd. 2010
Solomon Associates I, L.P. 2012
Talladega County Housing Ltd. 2011
The Willows Apartments, L.P. 2011
With that in mind, the General Partner is continuing its review of the Housing
Complexes, with special emphasis on the more mature Housing Complexes such as
any that have satisfied the IRS compliance requirements. The review considers
many factors, including extended use requirements (such as those due to mortgage
restrictions or state compliance agreements), the condition of the Housing
Complexes, and the tax consequences to the Limited Partners from the sale of the
Housing Complexes.
Upon identifying those Housing Complexes with the highest potential for a
successful sale, refinancing or syndication, the Partnership expects to proceed
with efforts to liquidate them. The objective is to maximize the Limited
Partners' return wherever possible and, ultimately, to wind down the
Partnership. Local Limited Partnership Interests may be disposed of any time by
the General Partner in its discretion. While liquidation of the Housing
Complexes continues to be evaluated, the dissolution of the Partnership was not
imminent as of March 31, 2008. As of March 31, 2008 none of the Housing
Complexes had completed the 15 year compliance period.
During the prior year ended March, 31, 2007 the partnership sold the Housing
Complex of one Local Limited Partnership, Cascade Pines II, L.P. ("Cascade
Pines") and the Local Limited Partnership was subsequently dissolved. Cascade
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Pines had not completed its 15-year compliance period. The Partnership did not
purchase a recapture bond since the cost of the bond was equal to the amount of
Low Income Housing Tax Credits at risk for recapture. The Partnership retained a
cash balance to cover any recapture. The Housing Complex was sold for the same
amount as the outstanding mortgage owing. The net investment balance in this
Local Limited Partnership was zero. Since there was no distribution of cash
there was no gain or loss for the Partnership. The disposition was due to this
Local Limited Partnership experiencing operational and cash flow issues. As of
March 31, 2007 the Partnership had advanced approximately $1,155,728 to this
Local Limited Partnership which was not recovered and the advances were written
off as bad debt.
The proceeds from the disposition of any of the Housing Complexes will be used
first to pay debts and other obligations per the respective Local Limited
Partnership Agreement. Any remaining proceeds will then be paid to the partners
of the Local Limited Partnership, including the Partnership, in accordance with
the terms of the particular Local Limited Partnership Agreement, the sale of a
Housing Complex may be subject to other restrictions and obligations.
Accordingly, there can be no assurance that a Local Limited Partnership will be
able to sell its Housing Complex. Even if it does so, there can be no assurance
that any significant amounts of cash will be distributed to the Partnership.
Should such distributions occur, the Limited Partners will be entitled to
receive distributions from the proceeds remaining after payment of Partnership
obligations and funding of reserves, equal to their capital contributions and
their return on investment (as defined in the Partnership Agreement). The
General Partners would then be entitled to receive proceeds equal to their
capital contributions from the remainder. Any additional sale or refinancing
proceeds will be distributed 90% to the Limited Partners (in proportion to their
respective investments) and 10% to the General Partner.
One Local Limited Partnership, Patten Towers L.P. II ("Patten Towers"), had a
less-than-satisfactory score from HUD on the 2006 and 2007 property inspection.
HUD currently has the authority to revoke their housing assistance program
("HAP") with Patten Towers and thereby suspend all rental assistance for the
tenants of Patten Towers. If HUD were to revoke the HAP contract then most of
the current tenants would be unable to make their rental payments thereby
denying Patten Towers with the necessary monthly revenue it needs to pay all
costs and expenses. Patten Towers requested and received approval from HUD to
participate in a follow-up inspection. As of January 2009, HUD re-inspected the
property and Patten Towers received an acceptable score from HUD thereby
allowing the property to continue to participate in the housing assistance
program. Patten Towers is currently listed for sale with a national brokerage
firm. The Partnership does not anticipate any proceeds from the sale. Any sale
transaction contemplated will require that the property maintain compliance with
the Section 42 tax credit provisions, thereby avoiding recapture of any
previously claimed tax credits.
Item 1A. Risk Factors
Set forth below are the principal risks the Partnership believes are material to
the Limited Partners. The Partnership and the Local Limited Partnerships operate
in a continually changing business environment and, therefore, new risks emerge
from time to time. This section contains some forward-looking statements. For an
explanation of the qualifications and limitations on forward-looking statements,
see Item 7.
(a) Risks arising from the Internal Revenue Code rules governing Low Income
Housing Tax Credits
Low Income Housing Tax Credits might not be available. If a Housing Complex
does not satisfy the requirements of Internal Revenue Code Section 42, then the
Housing Complex will not be eligible for Low Income Housing Tax Credits.
Low Income Housing Tax Credits might be less than anticipated. The Local
General Partners will calculate the amount of the Low Income Housing Tax
Credits. No opinion of counsel will cover the calculation of the amount of Low
Income Housing Tax Credits. The IRS could challenge the amount of the Low Income
Housing Tax Credits claimed for any Housing Complex under any of a number of
provisions set forth in Internal Revenue Code Section 42. A successful challenge
by the IRS would decrease the amount of the Low Income Housing Tax Credits from
the amount paid for by the Partnership.
Unless a bond is posted or a Treasury Direct Account is established, Low
Income Housing Tax Credits may be recaptured if Housing Complexes are not owned
and operated for 15 years. Housing Complexes must comply with Internal Revenue
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Code Section 42 for the 15-year Compliance Period. Low Income Housing Tax
Credits will be recaptured with interest to the extent that a Housing Complex is
not rented as low income housing or in some other way does not satisfy the
requirements of Internal Revenue Code Section 42 during the Compliance Period.
For example, unless a bond is posted or a Treasury Direct Account is
established, recapture with interest would occur if:
o a Local Limited Partnership disposed of its interest in a Housing
Complex during the Compliance Period,
or
o the Partnership disposed of its interest in a Local Limited
Partnership during the Compliance Period.
For these purposes, disposition includes transfer by way of foreclosure.
It will be up to the Partnership to determine whether to post a bond. There is
no obligation under the agreements with the Local Limited Partnerships that the
Local Limited Partnerships must do so.
There can be no assurance that recapture will not occur. If it does, recapture
will be of a portion of all Low Income Housing Tax Credits taken in prior years
for that Housing Complex, plus interest. During the first 11 years of the
Compliance Period, non-compliance results in one-third of the credits up to that
point for the particular Housing Complex being recaptured, plus interest.
Between years 12 and 15, the recapture is phased out ratably.
Sales of Housing Complexes after 15 years are subject to limitations which
may impact a Local Limited Partnership's ability to sell its Housing Complex.
Each Local Limited Partnership executes an extended low income housing
commitment with the state in which the Housing Complex is located. The extended
low income housing commitment states the number of years that the Local Limited
Partnership and any subsequent owners must rent the Housing Complex as low
income housing. Under Federal law, the commitment must be for at least 30 years.
The commitment actually agreed to may be significantly longer than 30 years. In
prioritizing applicants for Low Income Housing Tax Credits, most states give
additional points for commitment periods in excess of 30 years. On any sale of
the Housing Complex during the commitment period, the purchaser would have to
agree to continue to rent the Housing Complex as low income housing for the
duration of the commitment period. This requirement reduces the potential
market, and possibly the sales price, for the Housing Complexes. The sale of a
Housing Complex may be subject to other restrictions. For example, Federal
lenders or subsidizers may have the right to approve or disapprove a purchase of
a Housing Complex. Accordingly, there can be no assurance that a Local Limited
Partnership will be able to sell its Housing Complex. Even if it does so, there
can be no assurance that any significant amount of cash will be distributed to
the Limited Partners. As a result, a material portion of the Low Income Housing
Tax Credits may represent a return of the money originally invested in the
Partnership.
Limited Partners can only use Low Income Housing Tax Credits in limited
amounts. The ability of an individual or other non-corporate Limited Partner to
claim Low Income Housing Tax Credits on his individual tax return is limited.
For example, an individual Limited Partner can use Low Income Housing Tax
Credits to reduce his tax liability on:
o an unlimited amount of passive income, which is income from entities
such as the Partnership, and
o $25,000 in income from other sources.
However, the use of Low Income Housing Tax Credits by an individual against
these types of income is subject to ordering rules, which may further limit the
use of Low Income Housing Tax Credits. Some corporate Limited Partners are
subject to similar and other limitations. They include corporations which
provide personal services, and corporations which are owned by five or fewer
shareholders.
Any portion of a Low Income Housing Tax Credit which is allowed to a Limited
Partner under such rules is then aggregated with all of the Limited Partner's
other business credits. The aggregate is then subject to the general limitation
on all business credits. That limitation provides that a Limited Partner can use
business credits to offset the Limited Partner's annual tax liability equal to
$25,000 plus 75% of the Limited Partner's tax liability in excess of $25,000.
However, business credits may not be used to offset any alternative minimum tax.
All of these concepts are extremely complicated.
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(b) Risks related to investment in Local Limited Partnerships and Housing
Complexes
Because the Partnership has few investments, each investment will have a
great impact on the Partnership's results of operations. Any single Housing
Complex experiencing poor operating performance, impairment of value or
recapture of Low Income Housing Tax Credits will have a significant impact upon
the Partnership as a whole.
The failure to pay mortgage debt could result in a forced sale of a Housing
Complex. Each Local Limited Partnership leverages the Partnership's investment
therein by incurring mortgage debt. A Local Limited Partnership's revenues could
be less than its debt payments and taxes and other operating costs. If so, the
Local Limited Partnership would have to use working capital reserves, seek
additional funds, or suffer a forced sale of its Housing Complex, which could
include a foreclosure. The same results could occur if government subsidies
ceased. Foreclosure would result in a loss of the Partnership's capital invested
in the Housing Complex. Foreclosure could also result in a recapture of Low
Income Housing Tax Credits, and a loss of Low Income Housing Tax Credits for the
year in which the foreclosure occurs. If the Housing Complex is
highly-leveraged, a relatively slight decrease in the rental revenues could
adversely affect the Local Limited Partnership's ability to pay its debt service
requirements. Mortgage debt may be repayable in a self-amortizing series of
equal installments or with a large balloon final payment. Balloon payments
maturing prior to the end of the anticipated holding period for the Housing
Complex create the risk of a forced sale if the debt cannot be refinanced. There
can be no assurance that additional funds will be available to any Local Limited
Partnership if needed on acceptable terms or at all.
The Partnership does not control the Local Limited Partnerships and must
rely on the Local General Partners. The Local General Partners will make all
management decisions for the Local Limited Partnerships and the Housing
Complexes. The Partnership has very limited rights with respect to management of
the Local Limited Partnerships. The Partnership will not be able to exercise any
control with respect to Local Limited Partnership business decisions and
operations. Consequently, the success of the Partnership will depend on the
abilities of the Local General Partners.
Housing Complexes subsidized by other government programs are subject to
additional rules which may make it difficult to operate and sell Housing
Complexes. Some or all of the Housing Complexes receive or may receive
government financing or operating subsidies in addition to Low Income Housing
Tax Credits. The following are risks associated with some such subsidy programs:
o Obtaining tenants for the Housing Complexes. Government regulations
limit the types of people who can rent subsidized housing. These
regulations may make it more difficult to rent the residential units
in the Housing Complexes.
o Obtaining rent increases. In many cases rents can only be increased
with the prior approval of the subsidizing agency.
o Limitations on cash distributions. The amount of cash that may be
distributed to owners of subsidized Housing Complexes is less than the
amount that could be earned by the owners of non-subsidized Housing
Complexes.
o Limitations on sale or refinancing of the Housing Complexes. A Local
Limited Partnership may be unable to sell its Housing Complex or to
refinance its mortgage loan without the prior approval of the
subsidizer. The subsidizer may withhold such approval in the
discretion of the subsidizer. Approval may be subject to conditions,
including the condition that the purchaser continues to operate the
property as affordable housing for terms which could be as long as 30
years or more. In addition, any prepayment of a mortgage may result in
the assessment of a prepayment penalty.
o Limitations on transfers of interests in Local Limited Partnerships.
The Partnership may be unable to sell its interest in a Local Limited
Partnership without the prior approval of the subsidizer. The
subsidizer may withhold such approval in the discretion of the
subsidizer. Approval may be subject to conditions.
o Limitations on removal and admission of Local General Partners. The
Partnership may be unable to remove a Local General Partner from a
Local Limited Partnership except for cause, such as the violation of
the rules of the subsidizer. Regulations may prohibit the removal of a
Local General Partner or permit removal only with the prior approval
of the subsidizer. Regulations may also require approval of the
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admission of a successor Local General Partner even upon the death or
other disability of a Local General Partner.
o Limitations on subsidy payments. Subsidy payments may be fixed in
amount and subject to annual legislative appropriations. The rental
revenues of a Housing Complex, when combined with the maximum
committed subsidy, may be insufficient to meet obligations. Congress
or the state legislature, as the case may be, may fail to appropriate
or increase the necessary subsidy. In those events, the mortgage
lender could foreclose on the Housing Complex unless a workout
arrangement could be negotiated.
o Possible changes in applicable regulations. Legislation may be enacted
which adversely revises provisions of outstanding mortgage loans. Such
legislation has been enacted in the past.
o Limited Partners may not receive distributions if Housing Complexes
are sold. There is no assurance that Limited Partners will receive any
cash distributions from the sale or refinancing of a Housing Complex.
The price at which a Housing Complex is sold may not be high enough to
pay the mortgage and other expenses which must be paid at such time.
If that happens, a Limited Partner's return may be derived only from
the Low Income Housing Tax Credits and tax losses.
Uninsured casualties could result in losses and recapture. There are
casualties which are either uninsurable or not economically insurable. These
include earthquakes, floods, wars and losses relating to hazardous materials or
environmental matters. If a Housing Complex experienced an uninsured casualty,
the Partnership could lose both its invested capital and anticipated profits in
such property. Even if the casualty were an insured loss, the Local Limited
Partnership might be unable to rebuild the destroyed property. A portion of
prior tax credits could be recaptured and future tax credits could be lost if
the Housing Complex were not restored within a reasonable period of time. And
liability judgments against the Local Limited Partnership could exceed available
insurance proceeds or otherwise materially and adversely affect the Local
Limited Partnership. The cost of liability and casualty insurance has increased
in recent years. Casualty insurance has become more difficult to obtain and may
require large deductible amounts.
Housing Complexes without financing or operating subsidies may be unable to
pay operating expenses. If a Local Limited Partnership were unable to pay
operating expenses, one result could be a forced sale of its Housing Complex. If
a forced sale occurs during the first 15 years of a Housing Complex, a partial
recapture of Low Income Housing Tax Credits could occur. In this regard, some of
the Local Limited Partnerships may own Housing Complexes which have no subsidies
other than Low Income Housing Tax Credits. Those Housing Complexes do not have
the benefit of below-market-interest-rate financing or operating subsidies which
often are important to the feasibility of low income housing. Those Housing
Complexes rely solely on rents to pay expenses. However, in order for any
Housing Complex to be eligible for Low Income Housing Tax Credits, it must
restrict the rent which may be charged to tenants. Over time, the expenses of a
Housing Complex will increase. If a Local Limited Partnership cannot increase
its rents, it may be unable to pay increased operating expenses.
The Partnership's investment protection policies will be worthless if the
net worth of the Local General Partners is not sufficient to satisfy their
obligations. There is a risk that the Local General Partners will be unable to
perform their financial obligations to the Partnership. The General Partner has
not established a minimum net worth requirement for the Local General Partners.
Rather, each Local General Partner demonstrates a net worth which the General
Partner believes is appropriate under the circumstances. The assets of the Local
General Partners are likely to consist primarily of real estate holdings and
similar assets. The fair market value of these types of assets is difficult to
estimate. These types of assets cannot be readily liquidated to satisfy the
financial guarantees and commitments which the Local General Partners make to
the Partnership. Moreover, other creditors may have claims on these assets. No
escrow accounts or other security arrangements will be established to ensure
performance of a Local General Partner's obligations. The cost to enforce a
Local General Partner's obligations may be high. If a Local General Partner does
not satisfy its obligations the Partnership may have no remedy, or the remedy
may be limited to removing the Local General Partner as general partner of the
Local Limited Partnership.
Fluctuating economic conditions can reduce the value of real estate. The
Partnership's principal business objective is providing its Limited Partners
with Low Income Housing Tax Credits, not the generation of gains from the
appreciation of real estate held by the Local Limited Partnerships. In its
financial statements, the Partnership has carried its investments in Local
Limited Partnerships at values reflecting the sum of the total amount of the
remaining future Low Income Housing Tax Credits estimated to be allocated to the
Partnership and the estimated residual value to the Partnership of its interests
in the Local Limited Partnerships. As of March 31, 2008 and 2007, the
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Partnership had reduced the carrying amount to $0 with respect to fourteen and
eleven, respectively, of its investments.
Any investment in real estate is subject to risks from fluctuating economic
conditions. These conditions can adversely affect the ability to realize a
profit or even to recover invested capital. Among these conditions are:
o the general and local job market,
o the availability and cost of mortgage financing,
o monetary inflation,
o tax, environmental, land use and zoning policies,
o the supply of and demand for similar properties,
o neighborhood conditions,
o the availability and cost of utilities and water.
A loss in value of an investment in a Local Limited Partnership, other than
a temporary decline, is recorded by the Partnership in its financial statements
as an impairment loss. Impairment is measured by comparing the Partnership's
carrying amount in the investment to the sum of the total amount of the
remaining future Low Income Housing Tax Credits estimated to be allocated to the
Partnership and the estimated residual value to the Partnership. For the years
ended March 31, 2008, 2007 and 2006, impairment expense related to investments
in Local Limited Partnerships was $559,408, $2,336,855 and $1,058,869,
respectively.
(c) Tax risks other than those relating to tax credits
In addition to the risks pertaining specifically to Low Income Housing Tax
Credits, there are other Federal income tax risks. Additional Federal income tax
risks associated with the ownership of Partnership Units and the operations of
the Partnership and the Local Limited Partnerships include, but are not limited
to, the following:
No opinion of counsel as to certain matters. No legal opinion is obtained
regarding matters:
o the determination of which depends on future factual circumstances,
o which are peculiar to individual Limited Partners, or
o which are not customarily the subject of an opinion.
The more significant of these matters include:
o allocating purchase price among components of a property, particularly
as between buildings and fixtures, the cost of which is depreciable,
and the underlying land, the cost of which is not depreciable,
o characterizing expenses and payments made to or by the Partnership or
a Local Limited Partnership,
o identifying the portion of the costs of any Housing Complex which
qualify for historic and other tax credits,
o applying to any specific Limited Partner the limitation on the use of
tax credits and tax losses. Limited Partners must determine for
themselves the extent to which they can use tax credits and tax
losses, and
o the application of the alternative minimum tax to any specific Limited
Partner, or the calculation of the alternative minimum tax by any
Limited Partner. The alternative minimum tax could reduce the tax
benefits from an investment in the Partnership.
There can be no assurance, therefore, that the IRS will not challenge some of
the tax positions adopted by the Partnership. The courts could sustain an IRS
challenge. An IRS challenge, if successful, could have a detrimental effect on
the Partnership's ability to realize its investment objectives.
Passive activity rules will limit deduction of the Partnership's losses and
impose tax on interest income. The Internal Revenue Code imposes limits on the
ability of most investors to claim losses from investments in real estate. An
individual may claim these so-called passive losses only as an offset to income
from investments in real estate or rental activities. An individual may not
claim passive losses as an offset against other types of income, such as
9
salaries, wages, dividends and interest. These passive activity rules will
restrict the ability of most Limited Partners to use losses from the Partnership
as an offset of non-passive income.
The Partnership may earn interest income on its reserves and loans. The
passive activity rules generally will categorize interest as portfolio income,
and not passive income. Passive losses cannot be used as an offset to portfolio
income. Consequently, a Limited Partner could pay tax liability on portfolio
income from the Partnership.
At risk rules might limit deduction of the Partnership's losses. If a
significant portion of the financing used to purchase Housing Complexes does not
consist of qualified nonrecourse financing, the "at risk" rules will limit a
Limited Partner's ability to claim Partnership losses to the amount the Limited
Partner invests in the Partnership. The "at risk" rules of the Internal Revenue
Code generally limit a Limited Partner's ability to deduct Partnership losses to
the sum of:
o the amount of cash the Limited Partner invests in the Partnership, and
o the Limited Partner's share of Partnership qualified nonrecourse
financing.
Qualified nonrecourse financing is non-convertible, nonrecourse debt which is
borrowed from a government, or with exceptions, any person actively and
regularly engaged in the business of lending money.
Tax liability on sale of a Housing Complex or Local Limited Partnership
Interest may exceed the cash available from the sale. When a Local Limited
Partnership sells a Housing Complex it may recognize gain. Such gain is equal to
the difference between:
o the sales proceeds plus the amount of indebtedness secured by the
Housing Complex, and
o the adjusted basis for the Housing Complex. The adjusted basis for a
Housing Complex is its original cost, plus capital expenditures, minus
depreciation.
Similarly, when the Partnership sells an interest in a Local Limited Partnership
the Partnership may recognize gain. Such gain is equal to the difference
between:
o the sales proceeds plus the Partnership's share of the amount of
indebtedness secured by the Housing Complex, and
o the adjusted basis for the interest. The adjusted basis for an
interest in a Local Limited Partnership is the amount paid for the
interest, plus income allocations and cash distributions, less loss
allocations.
Accordingly, gain will be increased by the depreciation deductions taken during
the holding period for the Housing Complex. In some cases, a Limited Partner
could have a tax liability from a sale greater than the cash distributed to the
Limited Partner from the sale.
Alternative minimum tax liability could reduce a Limited Partner's tax
benefits. If a Limited Partner pays alternative minimum tax, the Limited Partner
could suffer a reduction in benefits from an investment in the Partnership. The
application of the alternative minimum tax is personal to each Limited Partner.
Tax credits may not be utilized to reduce alternative minimum tax liability.
IRS could audit the returns of the Partnership, the Local Limited
Partnerships or the Limited Partners. The IRS can audit the Partnership or a
Local Limited Partnership at the entity level with regard to issues affecting
the entity. The IRS does not have to audit each Limited Partner in order to
challenge a position taken by the Partnership or a Local Limited Partnership.
Similarly, only one judicial proceeding can be filed to contest an IRS
determination. A contest by the Partnership of any IRS determination might
result in high legal fees.
An audit of the Partnership or a Local Limited Partnership also could
result in an audit of a Limited Partner. An audit of a Limited Partner's tax
returns could result in adjustments both to items that are related to the
Partnership and to unrelated items. The Limited Partner could then be required
to file amended tax returns and pay additional tax plus interest and penalties.
10
A successful IRS challenge to tax allocations of the Partnership or a Local
Limited Partnership would reduce the tax benefits of an investment in the
Partnership. Under the Internal Revenue Code, a partnership's allocation of
income, gains, deductions, losses and tax credits must have substantial economic
effect. Substantial economic effect is a highly-technical concept. The
fundamental principle is two-fold. If a partner will benefit economically from
an item of partnership income or gain, that item must be allocated to him so
that he bears the correlative tax burden. Conversely, if a partner will suffer
economically from an item of partnership deduction or loss, that item must be
allocated to him so that he bears the correlative tax benefit. If a
partnership's allocations do not have substantial economic effect, then the
partnership's tax items are allocated in accordance with each partner's interest
in the partnership. The IRS might challenge the allocations made by the
Partnership:
o between the Limited Partners and the General Partner,
o among the Limited Partners, or
o between the Partnership and a Local General Partner.
If any allocations were successfully challenged, a greater share of the income
or gain or a lesser share of the losses or tax credits might be allocated to the
Limited Partners. This would increase the tax liability or reduce the tax
benefits to the Limited Partners.
Tax liabilities could arise in later years of the Partnership. After a
period of years following commencement of operations by a Local Limited
Partnership, the Local Limited Partnership may generate profits rather than
losses. A Limited Partner would have tax liability on his share of such profits
unless he could offset the income with:
o unused passive losses from the Partnership or other investments, or
o current passive losses from other investments.
In such circumstances, the Limited Partner would not receive a cash distribution
from the Partnership with which to pay any tax liability.
IRS challenge to tax treatment of expenditures could reduce losses. The IRS
may contend that fees and payments of the Partnership or a Local Limited
Partnership:
o should be deductible over a longer period of time or in a later year,
o are excessive and may not be capitalized or deducted in full,
o should be capitalized and not deducted, or
o may not be included as part of the basis for computing tax credits.
Any such contention by the IRS could adversely impact, among other things:
o the eligible basis of a Housing Complex used to compute Low Income
Housing Tax Credits,
o the adjusted basis of a Housing Complex used to compute depreciation,
o the correct deduction of fees,
o the amortization of organization and offering expenses and start-up
expenditures.
If the IRS were successful in any such contention, the anticipated Low Income
Housing Tax Credits and losses of the Partnership would be reduced, perhaps
substantially.
Changes in tax law might reduce the value of Low Income Housing Tax
Credits. Although all Low Income Housing Tax Credits are allocated to a Housing
Complex at commencement of the 10-year credit period, there can be no assurance
that future legislation may not adversely affect an investment in the
Partnership. For example, legislation could reduce or eliminate the value of Low
Income Housing Tax Credits. In this regard, before 1986, the principal tax
benefit of an investment in low income housing was tax losses. These tax losses
generally were used to reduce an investor's income from all sources on a
dollar-for-dollar basis. Investments in low income housing were made in reliance
on the availability of such tax benefits. However, tax legislation enacted in
1986 severely curtailed deduction of such losses.
11
New administrative or judicial interpretations of the law might reduce the
value of tax credits. Many of the provisions of the Internal Revenue Code
related to low income housing and real estate investments have not been
interpreted by the IRS in regulations, rulings or public announcements, or by
the courts. In the future, these provisions may be interpreted or clarified by
the IRS or the courts in a manner adverse to the Partnership or the Local
Limited Partnerships. The IRS constantly reviews the Federal tax rules, and can
revise its interpretations of established concepts. Any such revisions could
reduce or eliminate tax benefits associated with an investment in the
Partnership.
State income tax laws may adversely affect the Limited Partners. A Limited
Partner may be required to file income tax returns and be subject to tax and
withholding in each state or local taxing jurisdiction in which: a Housing
Complex is located, the Partnership or a Local Limited Partnership engages in
business activities, or the Limited Partner is a resident. Corporate Limited
Partners may be required to pay state franchise taxes.
The tax treatment of particular items under state or local income tax laws
may vary materially from the Federal income tax treatment of such items.
Nonetheless, many of the Federal income tax risks associated with an investment
in the Partnership may also apply under state or local income tax law. The
Partnership may be required to withhold state taxes from distributions or income
allocations to Limited Partners in some instances.
(d) Risks related to the Partnership and the Partnership Agreement
The Partnership may be unable to timely provide financial reports to the
Limited Partners which would adversely affect their ability to monitor
Partnership operations.. Historically, the Partnership has been unable to timely
file and provide investors with all of its required periodic reports. Each Local
General Partner is required to retain independent public accountants and to
report financial information to the Partnership in a timely manner. There cannot
be any assurance that the Local General Partners will satisfy these obligations.
If not, the Partnership would be unable to provide to the Limited Partners in a
timely manner its financial statements and other reports. That would impact the
Limited Partners' ability to monitor Partnership operations. The Partnership's
failure to meet its filing requirements under the Securities Exchange Act of
1934 could reduce the liquidity for the Partnership Units due to the
unavailability of public information concerning the Partnership. The failure to
file could also result in sanctions imposed by the SEC. Any defense mounted by
the Partnership in the face of such sanctions could entail legal and other fees,
which would diminish cash reserves.
Lack of liquidity of investment. It is unlikely that a public market will
develop for the purchase and sale of Partnership Units. Accordingly, Limited
Partners may not be able to sell their Partnership Units promptly or at a
reasonable price. Partnership Units should be considered as a long-term
investment because the Partnership is unlikely to sell any Local Limited
Partnership Interests for at least 15 years. Partnership Units cannot be
transferred to tax-exempt or foreign entities, or through a secondary market.
The General Partner can deny effectiveness of a transfer if necessary to avoid
adverse tax consequences from the transfer. The General Partner does not
anticipate that any Partnership Units will be redeemed by the Partnership.
The Limited Partners will not control the Partnership and must rely totally
on the General Partner. The General Partner will make all management decisions
for the Partnership. Management decisions include exercising powers granted to
the Partnership by a Local Limited Partnership. Limited Partners have no right
or power to take part in Partnership management.
Individual Limited Partners will have no recourse if they disagree with actions
authorized by a vote of the majority. The Partnership Agreement grants to
Limited Partners owning more than 50% of the Partnership Units the right to:
o remove the General Partner and elect a replacement general partner,
o amend the Partnership Agreement,
o terminate the Partnership.
Accordingly, a majority-in-interest of the Limited Partners could cause any such
events to occur, even if Limited Partners owning 49% of the Partnership Units
opposed such action.
12
Limitations on liability of the General Partner to the Partnership. The
ability of Limited Partners to sue the General Partner and it affiliates is
subject to limitations. The Partnership Agreement limits the liability of the
General Partner and it affiliates to the Limited Partners. The General Partner
and it affiliates will not be liable to the Limited Partners for acts and
omissions: performed or omitted in good faith, and performed or omitted in a
manner which the General Partner reasonably believed to be within the scope of
its authority and in the best interest of the Limited Partners, provided such
conduct did not constitute negligence or misconduct.
Therefore, Limited Partners may be less able to sue the General Partner and it
affiliates than would be the case if such provisions were not included in the
Partnership Agreement.
Payment of fees to the General Partner and its affiliates reduces cash
available for investment in Local Limited Partnerships. The General Partner and
it affiliates perform many services for the Partnership. They are paid fees for
these services, which reduce the amount of the cash available for investment in
Local Limited Partnerships. Accordingly, an investor investing directly in a low
income housing apartment complex would have a greater amount available for
investment than an investor investing in low income housing through the
Partnership.
Associates and its affiliates are serving as the general partners of many
other partnerships. Depending on their corporate area of responsibility, the
officers of Associates initially devote approximately 5% to 50% of their time to
the Partnership. These individuals spend significantly less time devoted to the
Partnership after the investment of the Partnership's capital in Local Limited
Partnerships.
The interests of Limited Partners may conflict with the interests of the
General Partner and its affiliates. The General Partner and its affiliates are
committed to the management of more than 100 other limited partnerships that
have investments similar to those of the Partnership. The General Partner and
its affiliates receive substantial compensation from the Partnership. The
General Partner decides how the Partnership's investments in Housing Complexes
are managed, and when the investments will be sold. The General Partner may face
a conflict in these circumstances because the General Partner's share of fees
and cash distributions from the transaction may be more or less than their
expected share of fees if a Housing Complex was not sold. The result of these
conflicts could be that the General Partner may make investments which are less
desirable, or on terms which are less favorable, to the Partnership than might
otherwise be the case. The Partnership has not developed any formal process for
resolving conflicts of interest. However, the General Partner is subject to a
fiduciary duty to exercise good faith and integrity in handling the affairs of
the Partnership, and that duty will govern its actions in all such matters.
Furthermore, the manner in which the Partnership can operate and sell
investments is subject to substantial restrictions as outlined in the
Partnership Agreement.
Anticipated future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership are payable to
the General Partner and/or its affiliates.
The Partnership's accrued payables consist primarily of the asset
management fees payable to the General Partner. These accrued payables increased
by approximately $49,500 for each of the years ended March 31 2008, 2007 and
2006, respectively. The Partnership's future contractual cash obligations
consist solely of its obligations to pay future annual asset management fees.
These will equal approximately $49,500 per year through the termination of the
Partnership, which must occur no later than December 31, 2050. Though the
amounts payable to the General Partner and/or its affiliates are contractually
currently payable, the Partnership anticipates that the General Partner and/or
its affiliates will not require the payment of these contractual obligations
until capital reserves are in excess of the aggregate of the existing
contractual obligations and anticipated future foreseeable obligations of the
Partnership. The Partnership would be adversely affected should the General
Partner and/or its affiliates demand current payment of the existing contractual
obligations and or suspend services for this or any other reason.
Associates agreed to continue providing advances sufficient enough to fund
the operations and working capital requirements of the Partnership through
November 30, 2010.
13
Item 1B. Unresolved Staff Comments
Not Applicable
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
indirect ownership interests in the Housing Complexes. The following table
reflects the status of the sixteen Housing Complexes as of the dates or for the
periods indicated:
14
-------------------------------- -----------------------------------------
As of March 31, 2008 As of December 31, 2007
-------------------------------- -----------------------------------------
Partnership's
Total Estimated Mortgage
Investment in Amount of Aggregate Low Balances of
Local Limited Local Limited Investment Number Income Housing Local Limited
Partnership Name Location General Partner Name Partnerships Paid to Date of Units Tax Credits(1) Partnerships
------------------------------------------------------------------------------------------------------------------------------------
Alliance Apts. Alliance, Retro Development, Inc. $ 604,000 $ 604,000 19 $ 363,000 $ 323,000
I L.P. Nebraska
Blessed Rock of El Monte, Everland, Inc. 2,511,000 2,511,000 137 8,899,000 3,444,000
El Monte California
Broadway Apts., Hobbs, New Trianon - Broadway, LLC, 2,029,000 2,029,000 78 2,335,000 1,210,000
L.P. Mexico a New Mexico Limited
Liability Company
Curtis Assoc. I, Curtis, Joseph A. Shepard and 88,000 88,000 12 156,000 412,000
L.P. Nebraska Kenneth M. Vitor
Escatawpa Village Escatawpa, Clifford E. Olsen 249,000 249,000 32 458,000 869,000
Assoc., L.P. Mississippi
Hastings Apts. Hastings, Retro Development, Inc. 542,000 542,000 18 1,005,000 148,000
I, L.P. Nebraska of Oklahoma and Most
Worshipful Prince Hall
Grand Lodge
Heritage Apts. Berkeley, Joseph A. Shepard and 752,000 752,000 30 1,333,000 641,000
I, L.P. Missouri Kenneth M. Vitor
Hillcrest Assoc. Ontario, Riley J. Hill 354,000 354,000 28 683,000 1,261,000
A L.P. Oregon
Patten Towers, Chattanooga, Patten Towers Partners, 2,154,000 2,154,000 221 3,938,000 4,283,000
L.P. II (2) Tennessee LLC
Prairieland Syracuse, Kenneth M. Vitor 85,000 85,000 8 152,000 304,000
Properties of Kansas
Syracuse II,
L.P.
15
-------------------------------- -----------------------------------------
As of March 31, 2008 As of December 31, 2007
-------------------------------- -----------------------------------------
Partnership's
Total Estimated Mortgage
Investment in Amount of Aggregate Low Balances of
Local Limited Local Limited Investment Number Income Housing Local Limited
Partnership Name Location General Partner Name Partnerships Paid to Date of Units Tax Credits(1) Partnerships
------------------------------------------------------------------------------------------------------------------------------------
Raymond S. King Greensboro, Project Homestead, Inc. 437,000 437,000 23 883,000 781,000
Apts. L.P. N.C.
Rosedale L.P. Silver City, Deke Noftsker and ABO 309,000 309,000 32 547,000 1,285,000
New Mexico Corporation
Shepherd South Shepherd, Donald W. Sowell 121,000 121,000 24 223,000 536,000
Apts. I, Ltd. Texas
Solomon Assoc. Solomon, Joseph A. Shepard and 138,000 138,000 16 250,000 555,000
I, L.P. Kansas Kenneth M. Vitor
Talladega County Talladega, Apartment Developers, Inc. 653,000 653,000 30 1,200,000 735,000
Housing Ltd. Alabama and Thomas H. Cooksey
The Willows Apts. Morganton, John C. Loving, Gordon D. 841,000 841,000 36 1,545,000 1,013,000
L.P. North Brown, Jr. and Western ------------ ------------ -- ------------ ------------
Carolina N.C. Housing
Partnership $ 11,867,000 $ 11,867,000 744 $ 23,970,000 $ 17,800,000
============ ============ === ============ ============
(1) Represents aggregate anticipated Low Income Housing Tax Credits to be
received over the 10 year credit period if Housing Complexes are
retained and rented in compliance with credit rules for the 15-year
compliance period. Approximately 99% of the anticipated Low Income
Housing Tax Credits have been received from the Local Limited
Partnerships and are no longer available to the Limited Partners.
(2) This Local Limited Partnership is currently listed for sale.
16
-------------------------------------------------------------------------------
For the year ended December 31, 2007
-------------------------------------------------------------------------------
Low Income Housing Tax
Local Limited Credits Allocated to
Partnership Name Rental Income Net Income (Loss) Partnership
--------------------------------------------------------------------------------------------------------------------
Alliance Apartments I L.P.
$ 91,000 $ 257,000 99%
Blessed Rock of El Monte 938,000 37,000 49.49%
Broadway Apartments, L.P. 395,000 (106,000) 99%
Curtis Associates I, L.P. 52,000 (19,000) 99%
Escatawpa Village Associates, 180,000 (45,000) 99%
L.P.
Hastings Apartments I, L.P. 70,000 154,000 99%
Heritage Apartments I, L.P. 135,000 (63,000) 98.99%
Hillcrest Associates, A L.P. 201,000 (22,000) 99%
Patten Towers, L.P. II (1) 1,446,000 (511,000) 99%
Prairieland Properties of 46,000 (1,000) 99%
syracusse II, L.P.
Raymond S. King Apartments L.P. 82,000 (34,000) 99%
Rosedale L.P. 151,000 (41,000) 99%
Shepherd South Apartments I, Ltd. 103,000 7,000 99%
Solomon Associates I, L.P. 79,000 - 99%
Talladega County Housing Ltd. 101,000 (35,000) 99%
The Willows Apartments L.P. 148,000 (47,000) 99%
------------ -------------
$ 4,218,000 $ (469,000)
============ =============
(1) This Local Limited Partnership is currently listed for sale.
17
WNC Housing Tax Credit Fund V, L.P., Series 3
Occupancy Rates
As of December 31,
-----------------------------------------------------------------------
Local Limited
Partnership Name Location General Partner Name 2007 2006 2005 2004 2003
------------------------------------------------------------------------------------------------------------------------------------
Alliance Apts. Alliance, Retro Development, Inc. 100% 100% 95% 79% 95%
I L.P. Nebraska
Blessed Rock of El Monte, Everland, Inc. 99% 100% 100% 100% 100%
El Monte California
Broadway Apts., Hobbs, New Trianon - Broadway, LLC, 99% 92% 94% 79% 59%
L.P. Mexico a New Mexico Limited
Liability Company
Cascade Pines, Atlanta, Urban Residential Management, N/A 57% 51% 53% 58%
L.P. II (2) Georgia Inc., a Georgia Corporation
Curtis Assoc. I, Curtis, Joseph A. Shepard and 92% 92% 92% 83% 83%
L.P. Nebraska Kenneth M. Vitor
Escatawpa Village Escatawpa, Clifford E. Olsen 100% 100% 100% 100% 100%
Assoc., L.P. Mississippi
Hastings Apts. Hastings, Retro Development, Inc. 94% 100% 100% 94% 100%
I, L.P. Nebraska of Oklahoma and Most
Worshipful Prince Hall
Grand Lodge
Heritage Apts. Berkeley, Joseph A. Shepard and 100% 97% 100% 100% 100%
I, L.P. Missouri Kenneth M. Vitor
Hillcrest Assoc. Ontario, Riley J. Hill 96% 96% 86% 79% 89%
A L.P. Oregon
Patten Towers, Chattanooga, Patten Towers Partners, 93% 86% 93% 93% 92%
L.P. II (2) Tennessee LLC
18
WNC Housing Tax Credit Fund V, L.P., Series 3
Occupancy Rates
As of December 31,
-----------------------------------------------------------------------
Local Limited
Partnership Name Location General Partner Name 2007 2006 2005 2004 2003
------------------------------------------------------------------------------------------------------------------------------------
Prairieland Syracuse, Kenneth M. Vitor 100% 100% 100% 100% 63%
Properties of Kansas
Syracuse II,
L.P.
Raymond S. King Greensboro, Project Homestead, Inc. 96% 100% 78% 57% 91%
Apts. L.P. N.C.
Rosedale L.P. Silver City, Deke Noftsker and ABO 88% 97% 94% 88% 84%
New Mexico Corporation
Shepherd South Shepherd, Donald W. Sowell 92% 92% 92% 100% 100%
Apts. I, Ltd. Texas
Solomon Assoc. Solomon, Joseph A. Shepard and 81% 88% 81% 94% 94%
I, L.P. Kansas Kenneth M. Vitor
Talladega County Talladega, Apartment Developers, Inc. 90% 97% 87% 100% 93%
Housing Ltd. Alabama and Thomas H. Cooksey
The Willows Apts. Morganton, John C. Loving, Gordon D. 97% 97% 100% 100% 97%
L.P. North Brown, Jr. and Western --- --- ---- ---- ---
Carolina N.C. Housing
Partnership 95% 94% 80% 79% 80%
=== === === === ===
N/A- The Local Limited Partnership was sold prior to the respective year end.
(1)This Local Limited Partnership is currently listed for sale.
19
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of of Equity Securities
Item 5a.
a) The Partnership Units are not traded on a public exchange but were sold
through a public offering. It is not anticipated that any public market
will develop for the purchase and sale of any Partnership Units and none
exists. Partnership Units can be assigned or otherwise transferred only if
certain requirements in the Partnership Agreement are satisfied.
b) At March 31, 2008, there were 867 Limited Partners and 0 assignees of
Partnership Units who were not admitted as Limited Partners.
c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than, perhaps, refinancing or disposition
of its investments in Local Limited Partnerships. Any such distributions
would be made in accordance with the terms of the Partnership Agreement.
For all periods presented there were no cash distributions to the Limited
Partners.
d) No securities are authorized for issuance by the Partnership under equity
compensation plans.
e) The Partnership does not issue common stock
f) No unregistered securities were sold by the Partnership during the year
ended March 31 2008.
Item 5b. Use of Proceeds
NOT APPLICABLE
Item 5c. Purchases of Equity Securities by the Issuers and Affiliated Purchasers
NONE
20
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
For the Years Ending March 31,
-----------------------------------------------------------------------------------
2008 2007 2006 2005 2004
------------- --------------- -------------- --------------- --------------
ASSETS
Cash $ 83,448 $ 46,994 $ 23,160 $ 28,976 $ 22,748
Investments in Local Limited
Partnerships, net 1,120,103 1,912,366 2,735,652 4,284,480 5,676,458
------------- --------------- -------------- --------------- --------------
Total Assets $ 1,203,551 $ 1,959,360 $ 2,758,812 $ 4,313,456 $ 5,699,206
============= =============== ============== =============== ==============
LIABILITIES
Accrued expenses $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 4,000
Accrued fees and expenses due to
General Partner and affiliates 1,781,320 1,738,278 1,514,839 640,631 336,206
------------- --------------- -------------- --------------- --------------
Total Liabilities 1,785,320 1,742,278 1,518,839 644,631 340,206
PARTNERS' EQUITY (DEFICIT) (581,769) 217,082 1,239,973 3,668,825 5,359,000
------------- --------------- -------------- --------------- --------------
Total Liabilities and
Partners' Equity (Deficit) $ 1,203,551 $ 1,959,360 $ 2,758,812 $ 4,313,456 $ 5,699,206
============= =============== ============== =============== ===============
Selected results of operations, cash flows and other information for the
Partnership are as follows:
For the Years Ending March 31,
-----------------------------------------------------------------------------------
2008 2007 2006 2005 2004
------------- --------------- -------------- --------------- --------------
Loss from operations
(Note 1) $ (590,333) $ (3,724,657) $ (1,973,035) $ (578,619) $ (227,907)
Equity in losses of Local
Limited Partnerships (208,618) 1,545,903 (455,938) (1,111,635) (934,158)
Interest income 100 135 121 79 122
------------- --------------- -------------- --------------- --------------
Net loss $ (798,851) $ (2,178,619) $ (2,428,852) $ (1,690,175) $ (1,161,943)
============= =============== ============== =============== ==============
Net loss allocated to:
General Partner $ (7,989) $ (21,786) $ (24,289) $ (16,902) $ (11,619)
============= =============== ============== ============== ==============
Limited Partners $ (790,862) $ (2,156,833) $ (2,404,563) $ (1,673,273) $ (1,150,324)
============= =============== ============== ============== ==============
Net loss per Partnership
Unit $ (43.94) $ (119.82) $ (133.59) $ (92.96) $ (63.91)
============= =============== ============== ============== ==============
Outstanding weighted
Partnership Units 18,000 18,000 18,000 18,000 18,000
============= =============== ============== ============== ==============
Note 1 - Loss from operations for the years ended March 31, 2008, 2007, 2006,
2005 and 2004 include a charge for impairment losses on investments in Local
Limited Partnerships of $559,408, $2,336,855, $1,058,869, $243,888 and $132,387,
respectively. (See Note 2 to the financial statements.)
21
For the Years Ending March 31,
-----------------------------------------------------------------------------------
2008 2007 2006 2005 2004
------------- --------------- -------------- -------------- --------------
Net cash provided by
(used in):
Operating activities $ 24,504 $ (301,823) $ (18,401) $ 1,455 $ 576
Investing activities 11,950 16,134 12,585 4,773 3,824
Financing activities - 309,523 - - -
------------- --------------- -------------- -------------- --------------
Net change in cash 36,454 23,834 (5,816) 6,228 4,400
Cash, beginning of period 46,994 23,160 28,976 22,748 18,348
------------- --------------- -------------- -------------- --------------
Cash, end of period $ 83,448 $ 46,994 $ 23,160 $ 28,976 $ 22,748
============= =============== ============== ============== ==============
Low Income Housing Tax Credits per Partnership Unit were as follows for the years ended December 31:
2007 2006 2005 2004 2003
------------- --------------- -------------- -------------- --------------
Federal $ 51 $ 91 $ 132 $ 132 $ 132
State - - - - -
------------- --------------- --------------- -------------- --------------
Total 51 $ 91 $ 132 $ 132 $ 132
============= ============== =============== ============== ==============
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
With the exception of the discussion regarding historical information, this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other discussions elsewhere in this Form 10-K contain forward
looking statements. Such statements are based on current expectations subject to
uncertainties and other factors which may involve known and unknown risks that
could cause actual results of operations to differ materially from those
projected or implied. Further, certain forward-looking statements are based upon
assumptions about future events which may not prove to be accurate.
Risks and uncertainties inherent in forward looking statements include, but are
not limited to, the Partnership's future cash flows and ability to obtain
sufficient financing, level of operating expenses, conditions in the Low Income
Housing Tax Credits property market and the economy in general, as well as legal
proceedings. Historical results are not necessarily indicative of the operating
results for any future period.
Subsequent written and oral forward looking statements attributable to the
Partnership or persons acting on its behalf are expressly qualified in their
entirety by cautionary statements in this Form 10-K and in other reports filed
with the Securities and Exchange Commission. The following discussion should be
read in conjunction with the Financial Statements and the Notes thereto included
elsewhere in this filing.
Critical Accounting Policies and Certain Risks and Uncertainties
The Partnership believes that the following discussion addresses the
Partnership's most significant accounting policies, which are the most critical
to aid in fully understanding and evaluating the Partnership's reported
financial results, and certain of the Partnershi's risks and uncertainties.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
22
during the reporting period. Actual results could materially differ from those
estimates.
Method of Accounting for Investments in Local Limited Partnerships
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnerships' results of operations
and for any contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by the estimated value derived by
management, generally consisting of the product of the remaining future Low
Income Housing Tax Credits estimated to be allocable to the Partnership and the
estimated residual value to the Partnership. If an investment is considered to
be impaired, the Partnership reduces the carrying value of its investment in any
such Local Limited Partnership. The accounting policies of the Local Limited
Partnerships, generally, are expected to be consistent with those of the
Partnership. Costs incurred by the Partnership in acquiring the investments are
capitalized as part of the investment account and are being amortized over 30
years. (See Notes 2 and 3 to the financial statements)
"Equity in losses of Local Limited Partnerships" for each year ended March 31
has been recorded by the Partnership based on nine months of reported results
provided by the Local Limited Partnerships for each year ended December 31 and
on three months of results estimated by management of the Partnership.
Management's estimate for the three-month period is based on either actual
unaudited results reported by the Local Limited Partnerships or historical
trends in the operations of the Local Limited Partnerships. In subsequent annual
financial statements, upon receiving the actual annual results reported by the
Local Limited Partnerships, management reverses its prior estimate and records
the actual results reported by the Local Limited Partnerships. Equity in losses
from the Local Limited Partnerships allocated to the Partnership is not
recognized to the extent that the investment balance would be adjusted below
zero. As soon as the investment balance reaches zero, the related costs of
acquiring the investment are impaired.
Distributions received from the Local Limited Partnerships are accounted for as
a reduction of the investment balance. Distributions received after the
investment has reached zero are recognized as distribution income. If the Local
Limited Partnerships report net income in future years, the Partnership will
resume applying the equity method only after its share of such net income equals
the share of net losses not recognized during the period(s) the equity method
was suspended.
The Partnership does not consolidate the accounts and activities of the Local
Limited Partnerships which are Variable Interest Entities under Financial
Accounting Standards Board ("FASB") Interpretation No. 46-Revised,
"Consolidation of Variable Interest Entities", because the Partnership is not
considered the primary beneficiary. The Partnership's balance in Investments in
Local Limited Partnerships represents the maximum exposure to loss in connection
with such investments. The Partnership's exposure to loss on the Local Limited
Partnerships is mitigated by the condition and financial performance of the
underlying Housing Complexes as well as the strength of the Local General
Partners.
Income Taxes
No provision for income taxes has been recorded in the financial statements as
any liabilities and/or benefits from income taxes flow to the partners of the
Partnership and are their obligations and/or benefits. For income tax purposes,
the Partnership reports on a calendar year basis.
In June 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48), an
interpretation of FASB Statement No. 109. FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Partnership's tax
returns to determine whether the tax positions are more-likely-than-not of being
sustained upon examination by the applicable tax authority, based on the
technical merits of the tax position, and then recognizing the tax benefit that
is more-likely-than-not to be realized. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax expense in the current
reporting period. As required, the Partnership adopted FIN 48 effective April 1,
2007 and concluded that the effect is not material to its financial statements.
Accordingly, no cumulative effect adjustment related to the adoption of FIN 48
was recorded.
23
Impact of New Accounting Pronouncements
---------------------------------------
In September 2006, the FASB issued SFAS No. 157 ("SFAS 157"), Fair Value
Measurements, which provides enhanced guidance for using fair value to measure
assets and liabilities. SFAS 157 also requires expanded information about the
extent to which the Partnership measures assets and liabilities at fair value,
the information used to measure fair value, and the effect of fair value
measurements on earnings. The standard applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value in any new circumstances. In 2009, the
FASB issued FASB Staff Position 157-2 ("FAS FS 157-2"), Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years. The Partnership does not anticipate either of
these pronouncements will have a material impact on the Partnership's financial
statements.
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), The Fair Value
Option for Financial Assets and Financial Liabilities - Including an amendment
of FASB Statement No. 115. SFAS 159 permits the choice of measuring financial
instruments and certain other items at fair value. SFAS 159 is effective for
financial statements issued for fiscal years beginning after November 15, 2007.
The Partnership does not anticipate that this pronouncement will have a material
impact on the Partnership's financial statements.
In December 2007, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 141(R) ("SFAS 141R"), which amends SFAS No. 141, and provides
revised guidance for recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed, and any noncontrolling interest in the acquiree.
SFAS 141R is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively. SFAS 141R also requires changes to the accounting
for transaction costs, certain contingent assets and liabilities, and other
balances in a business combination. In addition, in partial acquisitions, when
control is obtained, the acquiring company must measure and record all of the
target's assets and liabilities, including goodwill, at fair value as if the
entire target company had been acquired. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The Partnership is currently
evaluating the impacts and disclosures of this pronouncement, but would not
expect SFAS 141R to have a material impact on the Partnership's financial
statements.
On December 4, 2007, the FASB issued SFAS No. 160 ("SFAS 16"), Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS
160 replaces the concept of minority interest with noncontrolling interests in
subsidiaries. Noncontrolling interests will now be reported as a component of
equity in the consolidated statement of financial position. Earnings
attributable to noncontrolling interests will continue to be reported as part of
consolidated earnings; however, SFAS 160 requires that income attributable to
both controlling and noncontrolling interests be presented separately on the
face of the consolidated income statement. In addition, SFAS 160 provides that
when losses attributable to noncontrolling interests exceed the noncontrolling
interest's basis, losses continue to be attributed to the noncontrolling
interest as opposed to being absorbed by the consolidating entity. SFAS 160
required retroactive adoption of the presentation and disclosure requirements
for existing minority interests. All other requirements of SFAS 160 shall be
applied prospectively. SAS 160 is effective for the first annual reporting
period beginning on or after December 15, 2008. The Partnership does not expect
SFAS 160 to have a material impact on the Partnership's financial statements.
In November 2008 the FASB ratified EITF No. 08-6, Equity Method Investment
Accounting Considerations, which clarifies the accounting for how to account for
certain transactions and impairment considerations involving equity method
investments. This Issue shall be effective in fiscal years beginning on or after
December 15, 2008, and interim periods within those fiscal years. This Issue
shall be applied prospectively. Earlier application by an entity that has
previously adopted an alternative accounting policy is not permitted. The
transition disclosures in paragraphs 17 and 18 of Statement 154 shall be
provided, if applicable. The Partnership does not expect this pronouncement to
have a material impact on the Partnership's financial statements.
In December 2008, the FASB issue FASB Staff Position No. FAS 140-4 and
FIN46(R)-8 (the "FSP"), Disclosures by Public Entities (Enterprises) about
Transfers of Financial Assets and Interests in Variable Interest Entities. It
amends SFAS 140 to require public entities to provide additional disclosures
about transferors' continuing involvements with transferred financial assets.
The FSP is effective for public companies in their first reporting period
(interim or annual) that ends after December 15, 2008. The FSP also amends
FIN46R to require public enterprises, including sponsors that have a variable
interest in a variable interest entity, to provide additional disclosures about
their involvement with variable interest entities. The FSP also requires
24
disclosures by a public enterprise that is (a) a sponsor of a qualifying
special-purpose entity (SPE) that holds a variable interest in the qualifying
SPE but was not the transferor of financial assets to the qualifying SPE and (b)
a servicer of a qualifying SPE that holds a significant variable interest in the
qualifying SPE but was not the transferor of financial assets to the qualifying
SPE. The Partnership does not expect the FSP to have a material impact on the
Partnership's financial statements.
In April 2009, the FASB issued FSP 107-1 and APB 28-1 "Interim Disclosures about
Fair Value of Financial Instruments." The FSP requires disclosure about the
method and significant assumptions used to establish the fair value of financial
instruments for interim reporting periods as well as annual statements. The FSP
is effective for the Partnership as of Jun 30, 2009 and will not impact the
Partnership's financial condition or results of operations.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events." This standard
incorporates into authoritative accounting literature certain guidance that
already existed within generally accepted auditing standards, with the
requirements concerning recognition and disclosure of subsequent events
remaining essentially unchanged. This guidance addresses events which occur
after the balance sheet date but before the issuance of financial statements.
Under SFAS No.165, as under previous practice, an entity must record the effects
of subsequent events that provide evidence about conditions that existed at the
balance sheet date and must disclose but not record the effects of subsequent
events which provide evidence about conditions that did not exist at the balance
sheet date. This standard added an additional required disclosure relative to
the date through which subsequent events have been evaluated and whether that is
the date on which the financial statements were issued. SFAS No. 165 is
effective for periods ending after June 15, 2009. The adoption of SFAS No. 165
is not expected to have a material impact on the Partnership's financial
condition or results of operations.
Certain Risks and Uncertainties
See Item 1A for a discussion of risks regarding the Partnership.
Substantially all of the Low Income Housing Tax Credits anticipated to be
realized from the Local Limited Partnerships have been realized. The Partnership
does not anticipate being allocated a significant amount of Low Income Housing
Tax Credits from the Local Limited Partnerships in the future. Until the Local
Limited Partnerships have completed the 15 year Low Income Housing Tax Credit
Compliance period, risks exist for potential recapture of prior Low Income
Housing Tax Credits.
To date, certain Local Limited Partnerships have incurred significant operating
losses and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partners may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
lost, and the loss and recapture of the related Low Income Housing Tax Credits
could occur.
Anticipated future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership are payable to
the General Partner and/or its affiliates. Though the amounts payable to the
General Partner and/or its affiliates are contractually currently payable, the
Partnership anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual obligations until capital reserves are
in excess of the aggregate of then existing contractual obligations and then
anticipated future foreseeable obligations of the Partnership. The Partnership
would be adversely affected should the General Partner and/or its affiliates
demand current payment of the existing contractual obligations and or suspend
services for this or any other reason.
25
Financial Condition
For the year ended March 31, 2008
The Partnership's assets at March 31, 2008 consisted of $83,000 in cash and
aggregate investments in 16 Local Limited Partnerships of $1,120,000 (See
"Method of Accounting for Investments in Local Limited Partnerships").
Liabilities at March 31, 2008 consisted of $1,781,000 of accrued fees and
advances payable to the General Partner and/or its affiliates, (See "Future
Contractual Cash Obligations" below) and $4,000 of accrued expenses.
Results of Operations
Year Ended March 31, 2008 Compared to Year Ended March 31, 2007 The
Partnership's net loss for the year ended March 31, 2008 was $(799,000),
reflecting a decrease of $1,380,000 from the net loss experienced for the year
ended March 31, 2007 of $(2,179,000). That decrease in net loss was largely due
to a decrease in equity in income from Local Limited Partnerships of
$(1,755,000). For the year ended March 31, 2007 one Local Limited Partnership,
Patten Towers, L.P., II had forgiveness of debt income of $2,771,000 and for the
year ended March 31, 2008 that Local Limited Partnership had operational losses.
The large increase of equity in losses was offset by the decrease in loss from
operations which was largely due to a $1,777,000 decrease in impairment loss.
The unusually large decrease in impairment loss was due to one Local Limited
Partnership, Patten Towers, L.P., II, recognizing forgiveness of debt income of
$2,771,000 due to mortgage notes being forgiven for the year ended March 31,
2007. Prior to the year ended March 31, 2007 the Partnership's investment
balance in this Local Limited Partnership was zero. The Partnership recorded its
share of the forgiveness of debt and performed an impairment analysis which
showed that the investment in the Local Limited Partnership was impaired and as
such an impairment loss was recorded to bring the investment balance to zero.
There was no such forgiveness of debt and related impairment loss for the year
ended March 31, 2008. There was also a $1,312,000 decrease in write off of
advances to Local Limited Partnerships. During the year ended March 31, 2008
there were no advances made to Local Limited Partnerships compared to advances
during the year ended March 31, 2007 of $(1,312,000). The advances made to the
troubled Local Limited Partnerships can vary each year depending on the
operations of the individual Local Limited Partnerships. The accounting and
legal expense decreased by $16,000 for the year ended March 31, 2008 compared to
the year ended March 31, 2007, due to a timing issue of the accounting work
being performed. The other operating expenses decreased by $3,000 and
amortization decreased by $4,000 during the year ended March 31, 2008. The
decrease in amortization is due to the fact that when a Local Limited
Partnership's investment balance reaches zero the remaining net acquisition
costs and fees associated with that investment are written off. Reporting fees
and distribution income increased by $8,000 and $2,000, respectively, for the
year ended March 31, 2008 due to the fact that Local Limited Partnerships pay
the reporting fees and distribution income to the Partnership when the Local
Limited Partnership's cash flow will allow for the payment.
Year Ended March 31, 2007 Compared to Year Ended March 31, 2006 The
Partnership's net loss for the year ended March 31, 2007 was $(2,179,000),
reflecting a decrease of $250,000 from the net loss experienced for the year
ended March 31, 2006 of $(2,429,000). That decrease in net loss was largely due
to an increase in equity in income from Local Limited Partnerships of
$2,002,000, offset by an increase in loss from operations of $(1,752,000). The
change in loss from operations is partially due to a $(1,278,000) increase in
impairment loss. The increased loss from operations was largely due to an
unusually large increase in impairment loss due to one Local Limited
Partnership, Patten Towers, L.P., II, recognizing a forgiveness of debt income
of $2,771,000 due to mortgage notes being forgiven. Prior to the year ended
March 31, 2007 the Partnership's investment balance in this Local Limited
Partnership was zero. The Partnership recorded its share of the forgiveness of
debt and performed an impairment analysis which showed that the investment in
the Local Limited Partnership was impaired and as such an impairment loss was
recorded to bring the investment balance to zero. There was also a $(481,000)
increase in write off of advances to Local Limited Partnerships. During the year
ended March 31, 2007 there were advances for $(1,312,000) made to several Local
Limited Partnerships which were reserved for in full as of March 31, 2007
compared to advances during the year ended March 31, 2006 of $(831,000) and
fully reserved for in that year. The net difference of the reserves resulted in
the increase of $(482,000). The advances made to the troubled Local Limited
Partnerships can vary each year depending on the operations of the individual
Local Limited Partnerships. The accounting and legal expense increased by
$(17,000) for the year ended March 31, 2007 compared to the year ended March 31,
2006, due to a timing issue of the accounting work being performed. The other
operating expenses decreased by $3,000 and amortization decreased by $5,000
during the year ended March 31, 2007. The decrease in amortization is due to the
fact that when a Local Limited Partnership's investment balance reaches zero the
remaining net acquisition costs and fees associated with that investment are
written off. Reporting fees increased by $17,000 for the year ended March 31,
2007 due to the fact that Local Limited Partnerships pay the reporting fees to
the Partnership when the Local Limited Partnership's cash flow will allow for
the payment.
26
Liquidity and Capital Resources
Year Ended March 31, 2008 Compared to Year Ended March 31, 2007 The net increase
in cash during the year ended March 31, 2008 was $36,000 compared to a net
increase in cash for the year ended March 31, 2007 of $24,000. The net change of
$12,000 was due to the decrease in net cash used in operating activities of
$326,000, the decrease in net cash provided by investing activities of $(4,000)
and the decrease in net cash provided by financing activities of $(310,000).
During the year ended March 31, 2008 the Partnership made no advances to Local
Limited Partnerships compared to $1,312,000 that was advanced for the year ended
March 31, 2007. That netted to a decrease in cash used for the year ended March
31, 2008 of $1,312,000. The Partnership did not have excessive amounts of cash
therefore the change in accrued fees and expenses due to General Partner and
affiliates for the year ended March 31, 2007 was $1,070,000 compared to $43,000
during the year ended March 31, 2008. A large portion of the March 31, 2007
amount was advances made to the Partnership by the General Partner or an
affiliate that was then advanced to the Local Limited Partnerships that were
experiencing operational issues. The Partnership had an increase of $8,000 and
$2,000 in reporting fees and distribution income, respectively, received for the
year ended March 31, 2008 compared to March 31, 2007. Both the reporting fees
and the distributions can vary from year to year depending on the cash flow and
operations of the Local Limited Partnerships. Miscellaneous income also
increased by $12,000 for the year ended March 31, 2008. The cash provided by
investing activities decreased by $(4,000) due to distributions from Local
Limited Partnerships decreasing by that amount. The cash provided by financing
activities decreased by $(310,000) due to advances made during the year ended
March 31, 2007 that were forgiven by the General Partner or an affiliate and
converted to contributions by the General Partner. There was no additional
forgiveness of debt during the year ended March 31, 2008.
Year Ended March 31, 2007 Compared to Year Ended March 31, 2006 The net increase
in cash during the year ended March 31, 2007 was $24,000 compared to a net
decrease in cash for the year ended March 31, 2006 of $(6,000). The net change
of $30,000 was due to the increase in net cash used in operating activities of
$(283,000), the increase in net cash used in investing activities of $4,000 and
the increase in net cash provided by financing activities of $310,000. During
the year ended March 31, 2007 the Partnership advanced $1,312,000 to the Local
Limited Partnerships compared to $(831,000) that was advanced for the year ended
March 31, 2006. That netted to an increase in cash used for the year ended March
31, 2007 of $(481,000). The advances were due to several Local Limited
Partnerships experiencing cash flow issues. The Partnership also received
advances of $1,296,000 from the General Partner during the year ended March 31,
2007 to help the operations of Local Limited Partnerships compared to advances
of $806,000 received from General Partner during the year ended March 31, 2006,
which netted to a net increase of cash received of $490,000. The Partnership had
an increase of $17,000 in reporting fees received for the year ended March 31,
2007 compared to March 31, 2006 along with an increase in $4,000 in cash
distributions received from Local Limited Partnerships. Both the reporting fees
and the distributions can vary from year to year depending on the cash flow and
operations of the Local Limited Partnerships.
Accrued payables, which consist primarily of related party management fees due
to the General Partner, increased by approximately $43,000, $223,000 and
$874,000 for the years ended March 31, 2008, 2007 and 2006, respectively. The
General Partner does not anticipate that these accrued fees will be paid until
such time as capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
The Partnership currently has insufficient working capital to fund its
operations. Associates has agreed to continue providing advances sufficient
enough to fund the operations and working capital requirements of the
Partnership through November 30, 2010.
Other Matters
The Partnership had a 99% limited partnership investment in Cascade Pines, L.P.
II ("Cascade"). Cascade was a defendant in a wrongful death lawsuit and related
injury lawsuit. Cascade carries general liability and extended liability
insurance. The wrongful death claim and related injury lawsuit was settled,
released and dismissed. Liability insurance covered the settlement. Due to
continued operating deficits, an associate of WNC, Shelter Resource Corporation
(SRC) became the managing general partner of Cascade in November 2003.
Operations improved until late 2004 when the Atlanta Housing Authority ceased
all rental assistance contracts with Cascade thereby causing irreversible
operating problems. In January 2005 Cascade filed for and was granted bankruptcy
protection. In January 2007 Cascade successfully sold the apartment community
with the approval of the bankruptcy court. The property was sold to an investor
that was going to rent the affordable apartment units to market rate tenants
thereby creating an event of recapture for the Partnership as the limited
partner of Cascade.
27
Cumulative advances to one Local Limited Partnership, Cascade Pines, L.P., II
("Cascade Pines") totaled $1,155,728 at March 31, 2007. In prior years, the
Partnership had received cash advances from the General Partner or affiliates,
which were in turn advanced to Cascade Pines to aid the property with its
operational issues. When Cascade Pines was sold during the year ended March 31,
2007, there were no net cash proceeds and therefore the advances that were
previously made by the General Partner to the Partnership to fund the advances
to Cascade Pines were forgiven. The cancellation of that debt is considered a
capital contribution by the General Partner to the Partnership and as such it is
reflected in the statement of partners' equity (deficit) in the Partnership's
financial statements.
One Local Limited Partnership, Patten Towers L.P. II ("Patten Towers"), had a
less-than-satisfactory score from HUD on the 2006 and 2007 property inspection.
HUD currently has the authority to revoke their housing assistance program
("HAP") with Patten Towers and thereby suspend all rental assistance for the
tenants of Patten Towers. If HUD were to revoke the HAP contract then most of
the current tenants would be unable to make their rental payments thereby
denying Patten Towers with the necessary monthly revenue it needs to pay all
costs and expenses. Patten Towers requested and received approval from HUD to
participate in a follow-up inspection. As of January 2009, HUD re-inspected the
property and Patten Towers received an acceptable score from HUD thereby
allowing the property to continue to participate in the housing assistance
program. Patten Towers is currently listed for sale with a national brokerage
firm. The Partnership does not anticipate any proceeds from the sale. Any sale
transaction contemplated will require that the property maintain compliance with
the Section 42 tax credit provisions, thereby avoiding recapture of any
previously claimed tax credits.
The Partnership has a 99% limited partnership investment in Heritage Apartments,
L.P. ("Heritage"). Heritage is a defendant in several wrongful death lawsuits
and related injury lawsuits. Heritage carries general liability and extended
liability insurance. The management of Heritage has confirmed that the insurance
company is paying the remaining six claims which range from $500 - $2,000 each.
If for any reason Heritage is unsuccessful in its defense and the insurer denies
coverage or the insurance coverage proves to be inadequate, the Partnership may
be required to sell its investment or may otherwise lose its investment in
Heritage, which was $0 and $117,280, at March 31, 2008 and 2007, respectively.
Loss of the Heritage investment could result in the cessation and recapture of
tax credits and certain prior tax deductions.
Partnership's Future Contractual Cash Obligations
The following table summarizes the Partnership's future contractual cash
obligations as of March 31, 2008:
2009 2010 2011 2012 2013 Thereafter Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Asset management fees(1) $ 423,125 $ 49,500 $ 49,500 $ 49,500 $ 49,500 $ 1,831,500 $ 2,452,625
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total contractual cash
obligations $ 423,125 $ 49,500 $ 49,500 $ 49,500 $ 49,500 $ 1,831,500 $ 2,452,625
=========== =========== =========== =========== =========== =========== ===========
(1) Asset management fees are payable annually until termination of the
Partnership, which is to occur no later than December 31, 2050. The
estimate of the fees payable included herein assumes the retention of the
Partnership's interest in all Housing Complexes until December 31, 2050.
Amounts due to the General Partner as of March 31, 2008 have been included
in the 2009 column. The General Partner does not anticipate that these fees
will be paid until such time as capital reserves are in excess of the
aggregate of the existing contractual obligations and the anticipated
future foreseeable obligations of the Partnership.
For additional information regarding our asset management fees, see Notes 2 and
3 to the financial statements included elsewhere herein.
Off-Balance Sheet Arrangements
The Partnership has no off-balance sheet arrangements.
Exit Strategy
See Item 1 for information in this regard.
28
Impact of New Accounting Pronouncements
See footnote 1 to the audited financial statements.
Item 7A. Quantitative and Qualitative Disclosures Above Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
WNC Housing Tax Credit Fund V, L.P., Series 3
We have audited the accompanying balance sheets of WNC Housing Tax Credit
Fund V, L.P., Series 3 (a California Limited Partnership) (the Partnership) as
of March 31, 2008 and 2007, and the related statements of operations, partners'
equity (deficit) and cash flows for each of the years in the three-year period
ended March 31, 2008. The Partnership's management is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statement of one local limited partnership for which investments represent $0
and $0, of the total Partnership assets as of March 31, 2008 and 2007,
respectively, and $0, $0 and $(264,638) of the total Partnership loss for the
years ended March 31, 2008, 2007 and 2006, respectively. That statement was
audited by another auditor, whose report was furnished to us, and our opinion,
insofar as it relates to that local limited partnership, is based solely on the
report of the other auditor.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership it is
not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership's internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC Housing Tax Credit Fund V, L.P., Series 3 (a
California Limited Partnership) as of March 31, 2008 and 2007, and the results
of its operations and its cash flows for each of the years in the three-year
period ended March 31, 2008, in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed under Item
15(a)(2) in the index related to years above are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied to the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial statement
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ Reznick Group, P.C.
-----------------------
Bethesda, Maryland
November 20, 2009
Reznick Group, P.C. Tel: (301) 652-9100
7700 Old Georgetown Road Fax: (301) 652-1848
Suite 400 www.reznickgroup.com
Bethesda, MD 20814-6224
INDEPENDENT AUDITOR'S REPORT
To the Partners
Blessed Rock of El Monte
We have audited the accompanying balance sheet of Blessed Rock of El
Monte (a California Limited Partnership) as of December 31, 2007, and the
related statements of operations, changes in partners' equity (deficit), and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and the standards applicable
to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Partnership has determined
that it is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Partnership's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Blessed Rock of El
Monte as of December 31, 2007, and the results of its operations and cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
Atlanta o Austin o Baltimore o Bethesda o Birmingham o Charlotte o Chicago
Los Angeles o Sacramento o Tysons Corner
As discussed more fully in note 8 of the financial statements, certain
errors resulting principally in the overstatement of depreciation and
amortization due to misallocation of building, deferred fees and organization
cost, in prior years, were discovered by management of the Partnership during
the current year. Accordingly, adjustments have been made to partners' equity
(deficit) as of January 1, 2007, to correct the errors.
/s/ Reznick Group, P.C.
-----------------------
Skokie, Illinois Taxpayer Identification Number
December 17, 2008 52-1088612
Lead Auditor: Jeff Dowd
Pailet, Meunier and LeBlank, L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
To the Partners
BROADWAY APARTMENTS, L.P.
Roswell, New Mexico
We have audited the accompanying balance sheets of BROADWAY APARTMENTS, L.P., as
of December 31, 2007 and 2006 and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BROADWAY APARTMENTS, L.P. as of
December 31, 2007 and 2006 and the results of its operations, changes in
partners' equity and cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/Pailet, Meunier and LeBlank, L.L.P.
--------------------------------------
Metairie, Louisiana
April 14, 2008
3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002
Telephone (504) 837-0770 . Fax (504) 837-7102
Member of
IGAF Worldwide - Member Firms In Principal Cities . PCAOB
- Public Company Accounting Oversight Board AICPA
Centers . Center for Public Company Audit Firms
(SEC)
Governmental Audit Quality Center . Private Companies Practice Section (PCPS)
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
BALANCE SHEETS
March 31,
-----------------------------------
2008 2007
-------------- -------------
ASSETS
Cash $ 83,448 $ 46,994
Investments in Local Limited Partnerships, net (Notes 2 and 3) 1,120,103 1,912,366
-------------- -------------
Total Assets $ 1,203,551 $ 1,959,360
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accrued expenses $ 4,000 $ 4,000
Accrued fees and advances due to General Partner and
affiliate (Note 3) 1,781,320 1,738,278
-------------- -------------
Total Liabilities 1,785,320 1,742,278
-------------- -------------
Partners' equity (deficit)
General Partner 962,861 970,850
Limited Partners (25,000 Partnership Units
authorized;18,000 Partnership Units issued and
outstanding) (1,544,630) (753,768)
-------------- -------------
Total Partners' Equity (Deficit) (581,769) 217,082
-------------- -------------
Total Liabilities and Partners' Equity (Deficit) $ 1,203,551 $ 1,959,360
============== =============
31
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended March 31,
-------------------------------------------------------------
2008 2007 2006
-------------- ----------------- ----------------
Reporting fees $ 31,608 $ 23,350 $ 6,000
Distribution income 1,738 - 168
Miscellaneous income 11,814 - -
-------------- ----------------- ----------------
Total income 45,160 23,350 6,168
-------------- ----------------- ----------------
Operating expenses:
Amortization (Notes 2 and 3) 12,287 16,200 21,436
Asset management fees (Note 3) 49,500 49,500 49,500
Impairment loss (Note 2) 559,408 2,336,855 1,058,869
Accounting and legal fees 7,538 23,482 6,128
Write off of advances to Local
Limited Partnerships (Note 5) - 1,312,135 830,577
Other 6,760 9,835 12,693
-------------- ----------------- ----------------
Total operating expenses 635,493 3,748,007 1,979,203
-------------- ----------------- ----------------
Loss from operations (590,333) (3,724,657) (1,973,035)
Equity in income (losses) of Local
Limited Partnerships (Note 2) (208,618) 1,545,903 (455,938)
Interest income 100 135 121
-------------- ----------------- ----------------
Net loss $ (798,851) $ (2,178,619) $ (2,428,852)
============== ================= ================
Net loss allocated to:
General Partner $ (7,989) $ (21,786) $ (24,289)
============== ================= ================
Limited Partners $ (790,862) $ (2,156,833) $ (2,404,563)
============== ================= ================
Net loss per Partnership Unit $ (43.94) $ (119.82) (133.59)
============== ================= ================
Outstanding weighted Partnership Units 18,000 18,000 18,000
============== ================= ================
32
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended March 31, 2008, 2007 and 2006
General Limited Total
Partner Partners
-------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2005 $ (138,803) $ 3,807,628 $ 3,668,825
Net loss (24,289) (2,404,563) (2,428,852)
-------------- --------------- ---------------
(163,092) 1,403,065 1,239,973
Partners' equity (deficit) at March 31, 2006
Contributions (Note 6) 1,155,728 - 1,155,728
Net loss (21,786) (2,156,833) (2,178,619)
-------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2007 970,850 (753,768) 217,082
Net loss (7,989) (790,862) (798,851)
-------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2008 $ 962,861 $ (1,544,630) $ (581,769)
============== =============== ===============
33
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended
March 31,
--------------------------------------------------
2008 2007 2006
--------------- ------------ -------------
Cash flows from operating activities:
Net loss $ (798,851) $(2,178,619) $ (2,428,852)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization 12,287 16,200 21,436
Impairment loss 559,408 2,336,855 1,058,869
Equity in (income) losses of
Local Limited Partnerships 208,618 (1,545,903) 455,938
Advances made to Local Limited Partnerships - (1,312,135) (830,577)
Write off of advances made to Local
Limited Partnerships - 1,312,135 830,577
Change in accrued fees and expenses due to
General Partner and affiliates 43,042 1,069,644 874,208
--------------- ------------ -------------
Net cash provided by (used in) operating
activities 24,504 (301,823) (18,401)
--------------- ------------ -------------
Cash flows from investing activities:
Distribution from Local Limited Partnerships 11,950 16,134 12,585
--------------- ------------ -------------
Net cash provided by investing activities 11,950 16,134 12,585
--------------- ------------ -------------
Cash flows from financing activities:
Contribution from General Partner - 309,523 -
--------------- ------------ -------------
Net cash provided by financing activities - 309,523 -
--------------- ------------ -------------
Net increase (decrease) in cash 36,454 23,834 (5,816)
Cash, beginning of year 46,994 23,160 28,976
--------------- ------------ -------------
Cash, end of year $ 83,448 $ 46,994 $ 23,160
=============== ============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Taxes paid $ 800 $ 800 $ 800
=============== ============ =============
NON-CASH FINANCING ACTIVITIES
Advances made to the Partnership by the
General Partner in prior years and
converted to equity $ - $ 846,205 $ -
=============== ============ =============
34
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Years Ended March 31 2008, 2007 and 2006
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
Organization
------------
WNC Housing Tax Credit Fund V, L.P., Series 3 (the "Partnership") is a
California Limited Partnership formed under the laws of the State of California
on March 28, 1995, and commenced operations on October 24, 1995. The Partnership
was formed to invest primarily in other limited partnerships ("Local Limited
Partnerships") which owns multi-family housing complexes ("Housing Complexes")
that are eligible for Federal low income housing tax credits ("Low Income
Housing Tax Credits"). The local general partners (the "Local General Partners")
of each Local Limited Partnership retain responsibility for maintaining,
operating and managing the Housing Complex. Each Local Limited Partnership is
governed by its agreement of limited partnership (the "Local Limited Partnership
Agreement").
The general partner of the Partnership is WNC & Associates, Inc. (the "General
Partner" or "Associates"). The chairman and the president of Associates own
substantially all of the outstanding stock of Associates. The business of the
Partnership is conducted primarily through the General Partner, as the
Partnership has no employees of its own.
The Partnership shall continue in full force and effect until December 31, 2050
unless terminated prior to that date pursuant to the partnership agreement or
law.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The partnership agreement authorized the sale of up to 25,000 units of limited
partnership interest ("Partnership Units") at $1,000 per Partnership Unit. The
offering of Partnership Units had concluded in January 1996, at which time
18,000 Partnership Units representing subscriptions in the amount of
$17,558,985, net of $441,015 of discounts for volume purchases, had been
accepted. The General Partner has a 1% interest in operating profits and losses,
taxable income and losses, cash available for distribution from the Partnership
and Low Income Housing Tax Credits of the Partnership. The investors (the
"Limited Partners") in the Partnership will be allocated the remaining 99% of
these items in proportion to their respective investments.
The proceeds from the disposition of any of the Housing Complexes will be used
first to pay debts and other obligations per the respective Local Limited
Partnership Agreement. Any remaining proceeds will then be paid to the partners
of the Local Limited Partnership, including the Partnership, in accordance with
the terms of the particular Local Limited Partnership Agreement. The sale of a
Housing Complex may be subject to other restrictions and obligations.
Accordingly, there can be no assurance that a Local Limited Partnership will be
able to sell its Housing Complex. Even if it does so, there can be no assurance
that any significant amounts of cash will be distributed to the Partnership.
Should such distributions occur, the Limited Partners will be entitled to
receive distributions from the proceeds remaining after payment of Partnership
obligations and funding reserves, equal to their capital contributions and their
return on investment (as defined in the Partnership Agreement). The General
Partners would then be entitled to receive proceeds equal to their capital
contributions from the remainder. Any additional sale or refinancing proceeds
will be distributed 90% to the Limited Partners (in proportion to their
respective investments) and 10% to the General Partner.
Risks and Uncertainties
-----------------------
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
35
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
-------------------------------------------------------------------------------
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low Income Housing Tax Credits rules are extremely complicated.
Noncompliance with these rules results in the loss of future Low Income Housing
Tax Credits and the fractional recapture of Low Income Housing Tax Credits
already taken. In most cases the annual amount of Low Income Housing Tax Credits
that an individual can use is limited to the tax liability due on the person's
last $25,000 of taxable income. The Local Limited Partnerships may be unable to
sell the Housing Complexes at a price which would result in the Partnership
realizing cash distributions or proceeds from the transaction. Accordingly, the
Partnership may be unable to distribute any cash to its Limited Partners. Low
Income Housing Tax Credits may be the only benefit from an investment in the
Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships.
Such limited diversity means that the results of operation of each single
Housing Complex will have a greater impact on the Partnership. With limited
diversity, poor performance of one Housing Complex could impair the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If
foreclosure were to occur during the first 15 years, the loss of any remaining
future Low Income Housing Tax Credits, a fractional recapture of prior Low
Income Housing Tax Credits, and a loss of the Partnership's investment in the
Housing Complex would occur. The Partnership is a limited partner or
non-managing member of each Local Limited Partnership. Accordingly, the
Partnership will have very limited rights with respect to management of the
Local Limited Partnerships. The Partnership will rely totally on th e Local
General Partners. Neither the Partnership's investments in Local Limited
Partnerships, nor the Local Limited Partnerships' investments in Housing
Complexes, are readily marketable. To the extent the Housing Complexes receive
government financing or operating subsidies, they may be subject to one or more
of the following risks: difficulties in obtaining tenants for the Housing
Complexes; difficulties in obtaining rent increases; limitations on cash
distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of interests in Local Limited Partnerships; limitations
on removal of Local General Partners; limitations on subsidy programs; and
possible changes in applicable regulations. Uninsured casualties could result in
loss of property and Low Income Housing Tax Credits and recapture of Low Income
Housing Tax Credits previously taken. The value of real estate is subject to
risks from fluctuating economic conditions, including employment rates,
inflation, tax, environmental, land use and zoning policies, supply and demand
of similar properties, and neighborhood conditions, among others.
The ability of Limited Partners to claim tax losses from the Partnership is
limited. The IRS may audit the Partnership or a Local Limited Partnership and
challenge the tax treatment of tax items. The amount of Low Income Housing Tax
Credits and tax losses allocable to the Limited Partners could be reduced if the
IRS were successful in such a challenge. The alternative minimum tax could
reduce tax benefits from an investment in the Partnership. Changes in tax laws
could also impact the tax benefits from an investment in the Partnership and/or
the value of the Housing Complexes.
No trading market for the Partnership Units exists or is expected to develop.
Limited Partners may be unable to sell their Partnership Units except at a
discount and should consider their Partnership Units to be a long-term
investment. Individual Limited Partners will have no recourse if they disagree
with actions authorized by a vote of the majority of Limited Partners.
The Partnership currently has insufficient working capital to fund its
operations. Associates has agreed to continue providing advances sufficient
enough to fund the operations and working capital requirements of the
Partnership through November 30, 2010.
36
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
-------------------------------------------------------------------------------
Substantially all of the Low Income Housing Tax Credits anticipated to be
realized from the Local Limited Partnership have been realized. The Partnership
does not anticipate being allocated a significant amount of Low Income Housing
Tax Credits from the Local Limited Partnerships in the future. Until the Local
Limited Partnerships have completed the 15 year Low Income Housing Tax Credit
compliance period ("Compliance Period") risks exist for potential recapture of
prior Low Income Housing Tax Credits received.
Anticipated future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership are payable to
the General Partner and/or its affiliates. Though the amounts payable to the
General Partner and/or its affiliates are contractually currently payable, the
Partnership anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual obligations until capital reserves are
in excess of the aggregate of then existing contractual obligations and then
anticipated future foreseeable obligations of the Partnership. The Partnership
would be adversely affected should the General Partner and/or its affiliates
demand current payment of the existing contractual obligations and or suspend
services for this or any other reason.
Exit Strategy
-------------
The Compliance Period for a Housing Complex is generally 15 years following
construction or rehabilitation completion. Associates was one of the first in
the industry to offer syndicated investments in Low Income Housing Tax Credits.
The initial programs are completing their Compliance Periods.
With that in mind, the General Partner is continuing its review of the Housing
Complexes, with special emphasis on the more mature Housing Complexes such as
any that have satisfied the IRS compliance requirements. The review considers
many factors, including extended use requirements (such as those due to mortgage
restrictions or state compliance agreements), the condition of the Housing
Complexes, and the tax consequences to the Limited Partners from the sale of the
Housing Complexes.
Upon identifying those Housing Complexes with the highest potential for a
successful sale, refinancing or syndication, the Partnership expects to proceed
with efforts to liquidate them. The objective is to maximize the Limited
Partners' return wherever possible and, ultimately, to wind down the
Partnership. Local Limited Partnership Interests may be disposed of any time by
the General Partner in its discretion. While liquidation of the Housing
Complexes continues to be evaluated, the dissolution of the Partnership was not
imminent as of March 31, 2008. As of March 31, 2008, none of the Housing
Complexes had completed the Compliance Period.
During the year ended March, 31, 2007 the partnership sold the Housing Complex
of one Local Limited Partnership, Cascade Pines II, L.P. ("Cascade Pines") and
the Local Limited Partnership was subsequently dissolved. Cascade Pines had not
completed its 15-year compliance period. The Partnership did not purchase a
recapture bond since the cost of the bond was equal to the amount of Low Income
Housing Tax Credits at risk for recapture. The Housing Complex was sold for the
same amount as the outstanding mortgage owed. The net investment balance in this
Local Limited Partnership was zero, since there was no distribution of cash
there was no gain or loss to the Partnership. The disposition was due to this
Local Limited Partnership experiencing operational and cash flow issues. As of
March 31, 2007 the Partnership had advanced approximately $1,155,728 to this
Local Limited Partnership which was not recovered and the advances were written
off as bad debt.
One Local Limited Partnership, Patten Towers L.P. II ("Patten Towers"), had a
less-than-satisfactory score from HUD on the 2006 and 2007 property inspection.
HUD currently has the authority to revoke their housing assistance program
("HAP") with Patten Towers and thereby suspend all rental assistance for the
tenants of Patten Towers. If HUD were to revoke the HAP contract then most of
the current tenants would be unable to make their rental payments thereby
denying Patten Towers with the necessary monthly revenue it needs to pay all
costs and expenses. Patten Towers requested and received approval from HUD to
participate in a follow-up inspection. As of January 2009, HUD re-inspected the
property and Patten Towers received an acceptable score from HUD thereby
37
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
-------------------------------------------------------------------------------
allowing the property to continue to participate in the housing assistance
program. Patten Towers is currently listed for sale with a national brokerage
firm. The Partnership does not anticipate any proceeds from the sale. Any sale
transaction contemplated will require that the property maintain compliance with
the Section 42 tax credit provisions, thereby avoiding recapture of any
previously claimed tax credits.
Method of Accounting For Investments in Local Limited Partnerships
------------------------------------------------------------------
The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnerships' results of operations
and for any contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by the estimated value derived by
management, generally consisting of the sum of the remaining future Low Income
Housing Tax Credits estimated to be allocable to the Partnership and the
estimated residual value to the Partnership. If an investment is considered to
be impaired, the Partnership reduces the carrying value of its investment in any
such Local Limited Partnership. The accounting policies of the Local Limited
Partnerships, generally, are expected to be consistent with those of the
Partnership. Costs incurred by the Partnership in acquiring the investments are
capitalized as part of the investment account and are being amortized over 30
years. (See Notes 2 and 3)
"Equity in losses of Local Limited Partnerships" for each year ended March 31
has been recorded by the Partnership based on nine months of reported results
provided by the Local Limited Partnerships for each year ended December 31 and
on three months of results estimated by management of the Partnership.
Management's estimate for the three-month period is based on either actual
unaudited results reported by the Local Limited Partnerships or historical
trends in the operations of the Local Limited Partnerships. In subsequent annual
financial statements, upon receiving the actual annual results reported by the
Local Limited Partnerships, management reverses its prior estimate and records
the actual results reported by the Local Limited Partnership. Equity in losses
from the Local Limited Partnerships allocated to the Partnership are not
recognized to the extent that the investment balance would be adjusted below
zero. As soon as the investment balance reaches zero, the related costs of
acquiring the investment are impaired (see Note 3). If the Local Limited
Partnerships report net income in future years, the Partnership will resume
applying the equity method only after its share of such net income equals the
share of net losses not recognized during the period(s) the equity method was
suspended.
The Partnership does not consolidate the accounts and activities of the Local
Limited Partnerships which are considered Variable Interest Entities under
Financial Accounting Standards Board Interpretation No. 46-Revised,
"Consolidation of Variable Interest Entities", because the Partnership is not
considered the primary beneficiary. The Partnership's balance in Investments in
Local Limited Partnerships, plus the risk of recapture of Low Income Housing Tax
Credits previously recognized on such investments, represents the maximum
exposure to loss in connection with such investments. The Partnership's exposure
to loss on the Local Limited Partnerships is mitigated by the condition and
financial performance of the underlying Housing Complexes as well as the
strength of the Local General Partners and their guarantees against Low Income
Housing Tax Credit recapture.
Distributions received from the Local Limited Partners are accounted for as a
reduction of the investment balance. Distributions received after the investment
has reached zero are recognized as distribution income. As of March 31, 2008,
fourteen investment accounts in Local Limited Partnerships had reached zero.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
38
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
-------------------------------------------------------------------------------
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could materially differ from those
estimates.
Cash and Cash Equivalents
-------------------------
The Partnership considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents. For all periods
presented, the Partnership had no cash equivalents.
Reporting Comprehensive Income
------------------------------
The Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income established standards for the reporting and display of
comprehensive income (loss) and its components in a full set of general-purpose
financial statements. The Partnership had no items of other comprehensive income
for all periods presented, as defined by SFAS No. 130.
Net Loss Per Partnership Unit
-----------------------------
Net loss per Partnership Unit is calculated pursuant to Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Net loss per Partnership Unit
includes no dilution and is computed by dividing loss allocated to Limited
Partners by the weighted average Partnership Units outstanding during the
period. Calculation of diluted net loss per Partnership Unit is not required.
Income Taxes
------------
No provision for income taxes has been recorded in the financial statements as
any liabilities and or benefits from income taxes flow to the partners of the
Partnership and are their obligations and/or benefits. For income tax purposes,
the Partnership reports on a calendar year basis.
In June 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48), an
interpretation of FASB Statement No. 109. FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Partnership's tax
returns to determine whether the tax positions are more-likely-than-not of being
sustained upon examination by the applicable tax authority, based on the
technical merits of the tax position, and then recognizing the tax benefit that
is more-likely-than-not to be realized. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax expense in the current
reporting period. As required, the Partnership adopted FIN 48 effective April 1,
2007 and concluded that the effect is not material to its financial statements.
Accordingly, no cumulative effect adjustment related to the adoption of FIN 48
was recorded.
Impact of New Accounting Pronouncements
---------------------------------------
In September 2006, the FASB issued SFAS No. 157 ("SFAS 157"), Fair Value
Measurements, which provides enhanced guidance for using fair value to measure
assets and liabilities. SFAS 157 also requires expanded information about the
extent to which the Partnership measures assets and liabilities at fair value,
the information used to measure fair value, and the effect of fair value
measurements on earnings. The standard applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value in any new circumstances. In 2009, the
FASB issued FASB Staff Position 157-2 ("FAS FSP 157-2"), Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), to fiscal years beginning after November 15, 2008, and interim
39
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
-------------------------------------------------------------------------------
periods within those fiscal years. The Partnership does not anticipate either of
these pronouncements will have a material impact on the Partnership's financial
statements.
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), The Fair Value
Option for Financial Assets and Financial Liabilities - Including an amendment
of FASB Statement No. 115. SFAS 159 permits the choice of measuring financial
instruments and certain other items at fair value. SFAS 159 is effective for
financial statements issued for fiscal years beginning after November 15, 2007.
The Partnership does not anticipate that this pronouncement will have a material
impact on the Partnership's financial statements.
In December 2007, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 141(R) ("SFAS 141R"), which amends SFAS No. 141, and provides
revised guidance for recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed, and any noncontrolling interest in the acquiree.
SFAS 141R is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively. SFAS 141R also requires changes to the accounting
for transaction costs, certain contingent assets and liabilities, and other
balances in a business combination. In addition, in partial acquisitions, when
control is obtained, the acquiring company must measure and record all of the
target's assets and liabilities, including goodwill, at fair value as if the
entire target company had been acquired. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The Partnership is currently
evaluating the impacts and disclosures of this pronouncement, but would not
expect SFAS 141R to have a material impact on the Partnership's financial
statements.
On December 4, 2007, the FASB issued SFAS No. 160 ("SFAS 160"), Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS
160 replaces the concept of minority interest with noncontrolling interests in
subsidiaries. Noncontrolling interests will now be reported as a component of
equity in the consolidated statement of financial position. Earnings
attributable to noncontrolling interests will continue to be reported as part of
consolidated earnings; however, SFAS 160 requires that income attributable to
both controlling and noncontrolling interests be presented separately on the
face of the consolidated income statement. In addition, SFAS 160 provides that
when losses attributable to noncontrolling interests exceed the noncontrolling
interest's basis, losses continue to be attributed to the noncontrolling
interest as opposed to being absorbed by the consolidating entity. SFAS 160
required retroactive adoption of the presentation and disclosure requirements
for existing minority interests. All other requirements of SFAS 160 shall be
applied prospectively. SAS 160 is effective for the first annual reporting
period beginning on or after December 15, 2008. The Partnership does not expect
SFAS 160 to have a material impact on the Partnership's financial statements.
In November 2008 the FASB ratified EITF No. 08-6, Equity Method Investment
Accounting Considerations, which clarifies the accounting for how to account for
certain transactions and impairment considerations involving equity method
investments. This Issue shall be effective in fiscal years beginning on or after
December 15, 2008, and interim periods within those fiscal years. This Issue
shall be applied prospectively. Earlier application by an entity that has
previously adopted an alternative accounting policy is not permitted. The
transition disclosures in paragraphs 17 and 18 of Statement 154 shall be
provided, if applicable. The Partnership does not expect this pronouncement to
have a material impact on the Partnership's financial statements.
In December 2008, the FASB issue FASB Staff Position No. FAS 140-4 and
FIN46(R)-8 (the "FSP"), Disclosures by Public Entities (Enterprises) about
Transfers of Financial Assets and Interests in Variable Interest Entities. It
amends SFAS 140 to require public entities to provide additional disclosures
about transferors' continuing involvements with transferred financial assets.
The FSP is effective for public companies in their first reporting period
(interim or annual) that ends after December 15, 2008. The FSP also amends
FIN46R to require public enterprises, including sponsors that have a variable
interest in a variable interest entity, to provide additional disclosures about
their involvement with variable interest entities. The FSP also requires
disclosures by a public enterprise that is (a) a sponsor of a qualifying
special-purpose entity (SPE) that holds a variable interest in the qualifying
SPE but was not the transferor of financial assets to the qualifying SPE and (b)
40
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
-------------------------------------------------------------------------------
a servicer of a qualifying SPE that holds a significant variable interest in the
qualifying SPE but was not the transferor of financial assets to the qualifying
SPE. The Partnership does not expect the FSP to have a material impact on the
Partnership's financial statements.
In April 2009, the FASB issued FSP 107-1 and APB 28-1 "Interim Disclosures about
Fair Value of Financial Instruments." The FSP requires disclosure about the
method and significant assumptions used to establish the fair value of financial
instruments for interim reporting periods as well as annual statements. The FSP
is effective for the Partnership as of June 30, 2009 and will not impact the
Partnership's financial condition or results of operations.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events." This standard
incorporates into authoritative accounting literature certain guidance that
already existed within generally accepted auditing standards, with the
requirements concerning recognition and disclosure of subsequent events
remaining essentially unchanged. This guidance addresses events which occur
after the balance sheet date but before the issuance of financial statements.
Under SFAS No.165, as under previous practice, an entity must record the effects
of subsequent events that provide evidence about conditions that existed at the
balance sheet date and must disclose but not record the effects of subsequent
events which provide evidence about conditions that did not exist at the balance
sheet date. This standard added an additional required disclosure relative to
the date through which subsequent events have been evaluated and whether that is
the date on which the financial statements were issued. SFAS No. 165 is
effective for periods ending after June 15, 2009. The adoption of SFAS No. 165
is not expected to have a material impact on the Partnership's financial
condition or results of operations.
Revenue Recognition
-------------------
The Partnership is entitled to receive reporting fees from the Local Limited
Partnerships. The intent of the reporting fees is to offset (in part)
administrative costs incurred by the Partnership in corresponding with the Local
Limited Partnerships. Due to the uncertainty of the collection of these fees,
the Partnership recognizes reporting fees as collections are made.
Amortization
------------
Acquisition fees and costs are being amortized over 30 years using the
straight-line method. Amortization expense for the year ended March 31 2008,
2007 and 2006 was $12,287, $16,200 and $21,436, respectively. Estimated
amortization for the ensuing years through March 31, 2012 is $12,287 annually.
Impairment
----------
A loss in value of an investment in a Local Limited Partnership other than a
temporary decline is recorded as an impairment loss. Impairment is measured by
comparing the Partnership's carrying amount in the investment to the sum of the
total amount of the remaining future Low Income Housing Tax Credits estimated to
be allocated to the Partnership and the estimated residual value to the
Partnership. For the years ended March 31, 2008, 2007 and 2006, impairment
expense related to investments in Local Limited Partnerships was $559,408,
$2,336,855 and $1,058,869, respectively.
When the value of the Partnership's investment in a Local Limited Partnership
has been reduced to zero, the respective net acquisition fees and costs
component of investments in Local Limited Partnerships are impaired. For each of
the years ended March 31, 2008, 2007 and 2006, the acquisition fees and costs
written off totaled $104,054, $41,333 and $166,239, respectively.
41
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
--------------------------------------------------
As of March 31, 2008 and 2007, the Partnership owned Limited Partnership
interests in 16 Local Limited Partnerships, each of which owns one Housing
Complex, consisting of an aggregate of 744 apartment units. The respective Local
General Partners of the Local Limited Partnerships manage the day-to-day
operations of the entities. Significant Local Limited Partnership business
decisions require approval from the Partnership. The Partnership, as a limited
partner, is generally entitled to 99%, as specified in the Local Limited
Partnership agreements, of the operating profits and losses, taxable income and
losses and Low Income Housing Tax Credits of the Local Limited Partnerships,
except for one of the investments for which the Partnership is entitled to
49.49% of such amount.
The Partnership's Investments in Local Limited Partnerships as shown in the
balance sheets at March 31, 2008 and 2007, are approximately $(3,272,000) and
$92,000 respectively greater than (less than) the Partnership's equity at the
preceding December 31 as shown in the Local Limited Partnerships' combined
condensed financial statements presented below. This difference is primarily due
to acquisition, selection, and other costs related to the acquisition of the
investments which have been capitalized in the Partnership's investment account,
impairment losses recorded in the Partnership's investment account and capital
contributions payable to the Local Limited Partnerships which were netted
against partner capital in the Local Limited Partnership's financial statements.
The Partnership's equity in losses of Local Limited Partnerships is also lower
than the Partnership's equity as shown in the Local Limited Partnership's
combined condensed financial statements due to the estimated losses recorded by
the Partnership for the three month period ended March 31.
A loss in value from a Local Limited Partnership other than a temporary decline
would be recorded as an impairment loss. Impairment is measured by comparing the
investment's carrying amount to the sum of the total amount of the remaining
future Low Income Housing Tax Credits estimated to be allocated to the
Partnership and the estimated residual value to the Partnership. A loss in value
other than a temporary decline is recorded as an impairment loss. For the years
ended March 31, 2008, 2007 and 2006 impairment loss related to investments in
Local Limited Partnerships were $559,408, $2,336,855 and $1,058,869,
respectively.
At March 31 2008, the investment accounts in certain Local Limited Partnerships
have reached a zero balance. Consequently, a portion of the Partnership's
estimate of its share of losses for the years ended March 31 2008, 2007 and 2006
amounting to approximately $482,000, $301,000 and $1,247,000, respectively, have
not been recognized. As of March 31, 2008, the aggregate share of net losses not
recognized by the Partnership amounted to $1,583,000.
The following is a summary of the equity method activity of the investments in
the Local Limited Partnerships for the periods presented:
For The Years Ended
March 31,
-------------------------------------------------------
2008 2007 2006
------------- -------------- --------------
Investments per balance sheet, beginning
of period $ 1,912,366 $ 2,735,652 $ 4,284,480
Impairment loss (559,408) (2,336,855) (1,058,869)
Equity in income (losses) of Local Limited
Partnerships (208,618) 1,545,903 (455,938)
Amortization of paid acquisition fees and
costs (12,287) (16,200) (21,436)
Distributions received from Local Limited
Partnerships (11,950) (16,134) (12,585)
------------- -------------- --------------
Investment per balance sheet, end of period $ 1,120,103 $ 1,912,366 $ 2,735,652
============= ============== ==============
42
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued
-------------------------------------------------------------
For the Years
Ended March 31,
----------------------------------------------------
2008 2007 2006
--------------- --------------- --------------
Investments in Local Limited Partnerships, net $ 946,704 $ 1,622,624 $ 2,388,378
Acquisition fees and costs, net of accumulated
amortization of $1,147,894, $1,031,553 and $974,021 173,399 289,742 347,274
--------------- --------------- --------------
Investments per balance sheet, end of period $ 1,120,103 $ 1,912,366 $ 2,735,652
=============== =============== ==============
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted in
interest expense. Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
2007 2006
-------------------- --------------------
ASSETS
Buildings and improvements (net of
accumulated depreciation for 2007 and 2006
of $14,019,000 and $16,300,000,
respectively) $ 24,735,000 $ 31,409,000
Land 2,307,000 2,903,000
Other assets 2,719,000 3,215,000
-------------------- --------------------
Total assets $ 29,761,000 $ 37,527,000
==================== ====================
LIABILITIES
Mortgage and construction loans payable $ 17,800,000 $ 26,953,000
Due to affiliates 3,264,000 3,884,000
Other liabilities 986,000 1,775,000
-------------------- --------------------
Total liabilities 22,050,000 32,612,000
-------------------- --------------------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund V, L.P.,
Series 3 4,392,000 1,820,000
Other partners 3,319,000 3,095,000
-------------------- --------------------
Total partners' equity 7,711,000 4,915,000
-------------------- --------------------
Total liabilities and partners' equity $ 29,761,000 $ 37,527,000
==================== ====================
43
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued
-------------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2007 2006 2005
------------- ------------- ---------------
Revenues $ 5,417,000 $ 8,249,000 $ 5,317,000
------------- ------------- ---------------
Expenses:
Operating expenses 3,826,000 4,414,000 5,141,000
Interest expense 797,000 767,000 1,159,000
Depreciation and amortization 1,263,000 1,715,000 1,526,000
------------- ------------- ---------------
Total expenses 5,886,000 6,896,000 7,826,000
------------- ------------- ---------------
Net income (loss) $ (469,000) $ 1,353,000 $ (2,509,000)
============= ============= ===============
Net income (loss) allocable to the Partnership $ (481,000) $ 1,316,000 $ (2,477,000)
============= ============= ===============
Net income (loss) recorded by the Partnership $ (209,000) $ 1,546,000 $ (456,000)
============= ============= ===============
Certain Local Limited Partnerships have incurred significant operating losses
and/or have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partner may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
impaired, and the loss and recapture of the related Low Income Housing Tax
Credits could occur.
Troubled Housing Complexes
--------------------------
The Partnership has a 99% limited partnership investment in Cascade Pines, L.P.
II ("Cascade"). Cascade was a defendant in a wrongful death lawsuit and related
injury lawsuit. Cascade carries general liability and extended liability
insurance. The wrongful death claim and related injury lawsuit was settled,
released and dismissed. Liability insurance covered the settlement. Due to
continued operating deficits, an associate of WNC, Shelter Resource Corporation
(SRC) became the managing general partner of Cascade in November 2003.
Operations improved until late 2004 when the Atlanta Housing Authority ceased
all rental assistance contracts with Cascade thereby causing irreversible
operating problems. In January 2005 Cascade filed for and was granted bankruptcy
protection. In January 2007 Cascade successfully sold the apartment community
with the approval of the bankruptcy court. The property was sold to an investor
that was going to rent the affordable apartment units to market rate tenants
thereby creating an event of recapture for the Partnership as the limited
partner of Cascade.
One Local Limited Partnership, Patten Towers L.P. II ("Patten Towers"), had a
less-than-satisfactory score from HUD on the 2006 and 2007 property inspection.
HUD currently has the authority to revoke their housing assistance program
("HAP") with Patten Towers and thereby suspend all rental assistance for the
tenants of Patten Towers. If HUD were to revoke the HAP contract then most of
the current tenants would be unable to make their rental payments thereby
denying Patten Towers with the necessary monthly revenue it needs to pay all
costs and expenses. Patten Towers requested and received approval from HUD to
participate in a follow-up inspection. As of January 2009, HUD re-inspected the
property and Patten Towers received an acceptable score from HUD thereby
allowing the property to continue to participate in the housing assistance
program. Patten Towers is currently listed for sale with a national brokerage
44
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued
-------------------------------------------------------------
firm. Any sale transaction contemplated will require that the property maintain
compliance with the Section 42 tax credit provisions, thereby avoiding recapture
of any previously claimed tax credits.
The Partnership has a 99% limited partnership investment in Heritage Apartments,
L.P. ("Heritage"). Heritage is a defendant in several wrongful death lawsuits
and related injury lawsuits. Heritage carries general liability and extended
liability insurance. The management of Heritage has confirmed that the insurance
company is paying the remaining six claims which range from $500 - $2,000 each.
If for any reason Heritage is unsuccessful in its defense and the insurer denies
coverage or the insurance coverage proves to be inadequate, the Partnership may
be required to sell its investment or may otherwise lose its investment in
Heritage, which was $0 and $117,280, at March 31, 2008 and 2007, respectively.
Loss of the Heritage investment could result in the cessation and recapture of
tax credits and certain prior tax deductions.
NOTE 3 - RELATED PARTY TRANSACTIONS
-----------------------------------
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partner or its affiliates for the following fees:
Acquisition fees of up to 7.5% of the gross proceeds from the sale of
Partnership Units as compensation for services rendered in connection with
the acquisition of Local Limited Partnerships. At the end of all periods
presented the Partnership incurred total acquisition fees of $1,200,785,
which have been included in investments in Local Limited Partnerships.
Accumulated amortization of these capitalized costs was $1,027,384, and
$911,043 as of March 31, 2008 and 2007, respectively, and $104,054, and
$41,333 of the related expense was reflected as equity in losses of Local
Limited Partnerships during the years ended March 31 2008 and 2007
respectively, to reduce the respective net acquisition fee component of
investments in Local Limited Partnerships to zero for those Local Limited
Partnerships which would otherwise be below a zero balance.
Reimbursement of costs incurred by of the General Partner or by an
affiliate of Associates in connection with the acquisition of Local Limited
Partnerships. These reimbursements have not exceeded 1% of the gross
proceeds. At the end of all periods presented, the Partnership incurred
acquisition costs of $120,510, which have been included in Investments in
Local Limited Partnerships. Accumulated amortization was $120,510 for all
periods presented.
An annual asset management fee equal to the greater amount of (i) $2,000
for each Housing complex, or (ii) 0.275% of gross proceeds. In either case,
the fee will be decreased or increased annually based on changes to the
Consumer Price Index. However, in no event will the maximum amount exceed
0.2% of the invested assets of the Local Limited Partnerships, including
the Partnership's allocable share of the mortgages. Management fees of
$49,500 was incurred during each of the years ended March 31 2008, 2007 and
2006, of which $0 was paid for all three years presented.
A subordinated disposition fee in an amount equal to 1% of the sale price
may be received in connection with the sale or disposition of a Housing
Complex or Local Limited Partnership interest. Payment of this fee is
subordinated to the Limited Partners receiving a preferred return of 14%
through December 31, 2006 and 6 % thereafter (as defined in the Partnership
Agreement) and is payable only if the General Partner or its affiliates
render services in the sales effort. No such fee was incurred for all
periods presented.
45
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
----------------------------------------------
The Partnership reimbursed the General Partner or its affiliates for
operating expenses incurred by the Partnership and paid for by the General
Partner or its affiliates on behalf of the Partnership. Operating expense
reimbursements were $0 during each of the years ended March 31, 2008, 2007
and 2006, respectively.
The accrued fees and expenses due to the General Partner and affiliates consist
of the following at:
March 31,
-----------------------------
2008 2007
------------- -------------
Asset management fee payable $ 373,625 $ 324,125
Expenses paid by the General Partner or an
affiliate on behalf of the Partnership 176,045 162,503
Advances made to the Partnership from the
General Partner or affiliates 1,231,650 1,251,650
------------- -------------
Total $ 1,781,320 $ 1,738,278
============= =============
The Partnership currently has insufficient working capital to fund its
operations. Associates has agreed to provide advances sufficient enough to fund
the operations and working capital requirements of the Partnership through
November 30, 2010.
NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
----------------------------------------------------
The following is a summary of the quarterly operations for the years ended March
31:
2008 June 30 September 30 December 31 March 31
----------- --------------- --------------- --------------- ---------------
Income $ - $ 33,000 $ 12,000 $ -
Operating expenses (553,000) (26,000) (19,000) (38,000)
Income (loss) from operations (553,000) 7,000 (7,000) (38,000)
Equity in losses of Local Limited
Partnerships (34,000) (26,000) (26,000) (123,000)
Net loss (587,000) (18,000) (33,000) (161,000)
Net loss available to Limited
Partners (581,000) (18,000) (33,000) (159,000)
Net loss per Partnership Unit (32) (1) (2) (9)
46
NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued
---------------------------------------------------------------
2007 June 30 September 30 December 31 March 31
--------- --------------- --------------- --------------- ---------------
Income $ 1,000 $ 20,000 $ - $ 2,000
Operating expenses (1,641,000) (783,000) (719,000) (605,000)
Loss from operations (1,640,000) (763,000) (719,000) (603,000)
Equity in income (losses) of
Local Limited Partnerships 541,000 541,000 541,000 (77,000)
Net loss (1,099,000) (222,000) (178,000) (680,000)
Net loss available to Limited
Partners (1,088,000) (220,000) (176,000) (673,000)
Net loss per Partnership Unit (60) (12) (10) (37)
2006 June 30 September 30 December 31 March 31
--------- --------------- --------------- --------------- ---------------
Income $ 2,000 $ 1,000 $ 2,000 $ 1,000
Operating expenses (1,095,000) (26,000) (288,000) (570,000)
Loss from operations (1,093,000) (25,000) (286,000) (569,000)
Equity in income (losses) of
Local Limited Partnerships (158,000) (123,000) (232,000) 57,000
Net loss (1,251,000) (148,000) (518,000) (512,000)
Net loss available to Limited
Partners (1,239,000) (147,000) (513,000) (506,000)
Net loss per Partnership Unit (69) (8) (29) (28)
NOTE 5 - ADVANCES TO LOCAL LIMITED PARTNERSHIPS
-----------------------------------------------
As of March 31, 2008 and 2007, the Partnership in total had advanced $1,449,417
to five Local Limited Partnerships, Hasting Apartments I, Alliance Apartments I,
Patten Towers L. P. II, Broadway Apartments, L.P. and Raymond S. King
Apartments, L.P. All advances were reserved in full in the year they were
advanced.
47
NOTE 6 - CAPITAL CONTRIBUTION BY GENERAL PARTNER
------------------------------------------------
Cumulative advances to one Local Limited Partnership, Cascade Pines, L.P., II
("Cascade Pines") totaled $1,155,728 at March 31, 2007. In prior years, the
Partnership had received cash advances from the General Partner or affiliates,
which were in turn advanced to Cascade Pines to aid the property with its
operational issues. When Cascade Pines was sold during the year ended March 31,
2007, there were no net cash proceeds and therefore the advances that were
previously made by the General Partner to the Partnership were forgiven. The
cancellation of that debt is considered a capital contribution by the General
Partner to the Partnership and as such it is reflected in the statement of
partners' equity (deficit) in the Partnership's financial statements.
NOTE 7 - SUBSEQUENT EVENTS
--------------------------
During the nine months ended December 31, 2008, the Partnership had $39,030 in
expenses paid by the General Partner or affiliates on its behalf. The General
Partner forgave the debt as it was deemed uncollectible. The cancellation of
that debt is considered a capital contribution by the General Partner to the
Partnership and as such it is reflected in the statement of partners' equity
(deficit) in the Partnership's financial statements. Additionally, the
Partnership was relieved of debt owed to the General Partner totaling
$1,432,824. The Partnership had received cash advances from the General Partner,
which were in turn advanced by the Partnership to certain Local Limited
Partnerships to help aid the Local Limited Partnerships with their operational
issues. The advances were deemed to be uncollectible by the General Partner, and
as such, the debt was forgiven. The cancellation of debt was recorded by the
Partnership as a capital contribution from the General Partner.
48
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NONE
Item 9A. Controls and Procedures
(a) Disclosure controls and procedures
-----------------------------------
As of the end of the period covered by this report, the Partnership's
General Partner, under the supervision and with the participation of
the Chief Executive Officer and Chief Financial Officer of Associates,
carried out an evaluation of the effectiveness of the Partnership's
"disclosure controls and procedures" as defined in Securities Exchange
Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of the period covered by this report, the
Partnership's disclosure controls and procedures were not effective to
ensure that material information required to be disclosed in the
Partnership's periodic report filings with SEC is recorded, processed,
summarized and reported within the time period specified by the SEC's
rules and forms, consistent with the definition of "disclosure
controls and procedures" under the Securities Exchange Act of 1934.
The Partnership must rely on the Local Limited Partnerships to provide
the Partnership with certain information necessary to the timely
filing of the Partnership's periodic reports. Factors in the
accounting at the Local Limited Partnerships have caused delays in the
provision of such information during past reporting periods, and
resulted in the Partnership's inability to file its periodic reports
in a timely manner.
Once the Partnership has received the necessary information from the
Local Limited Partnerships, the Chief Executive Officer and the Chief
Financial Officer of Associates believe that the material information
required to be disclosed in the Partnership's periodic report filings
with SEC is effectively recorded, processed, summarized and reported,
albeit not in a timely manner. Going forward, the Partnership will use
the means reasonably within its power to impose procedures designed to
obtain from the Local Limited Partnerships the information necessary
to the timely filing of the Partnership's periodic reports.
(b) Management's annual report on internal control over financial reporting
-----------------------------------------------------------------------
The management of Associates is responsible for establishing and
maintaining for the Partnership adequate internal control over
financial reporting as that term is defined in Securities Exchange Act
Rule 13a-15(f), and for performing an assessment of the effectiveness
of internal control over financial reporting as of March 31 2008, 2007
or 2006. The internal control process of Associates, as it is
applicable to the Partnership, was designed to provide reasonable
assurance to Associates regarding the preparation and fair
presentation of published financial statements, and includes those
policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and
dispositions of the assets of the Partnership;
(2) Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles
in the United States, and that the Partnership's receipts
and expenditures are being made only in accordance with
authorization of the management of Associates; and
(3) Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
the Partnership's assets that could have a material effect
on the financial statements.
All internal control processes, no matter how well designed, have
inherent limitations. Therefore, even those processes determined to be
effective can provide only reasonable assurance with respect to the
reliability of financial statement preparation and presentation.
Further, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with
the policies or procedures may deteriorate.
49
Management of Associates assessed the effectiveness of its internal
control over financial reporting, as it is applicable to the
Partnership, as of the end of the Partnership's most recent fiscal
year. In making this assessment, it used the criteria set forth in
Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on
its assessment, management of Associates concluded that, for the
reasons set forth above under "Disclosure controls and procedures",
the internal control over financial reporting, as it is applicable to
the Partnership, was not effective as of March 31 2008. This annual
report does not include an attestation report of the Partnership's
independent registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject
to attestation by the Partnership's independent registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Partnership to provide only
management's report in this annual report.
For purposes of the Securities Exchange Act of 1934, the term
"material weakness" is a deficiency, or a combination of deficiencies,
in a reporting company's internal control over financial reporting
such that there is a reasonable possibility that a material
misstatement of the company's annual or interim financial statements
will not be prevented or detected on a timely basis. For the reasons
discussed above in this Item 9A, sub-section (a) under the caption
"Disclosure Controls and Procedures," the Partnership's internal
control over financial reporting has not been effective in permitting
timely reporting of the Partnership's financial information.
Accordingly, the management of Associates believes that this inability
to generate timely reports constitutes a material weakness in its
internal control over financial reporting.
(c) Changes in internal controls
----------------------------
There were no changes in the Partnership's internal control over
financial reporting that occurred during the period ended March 31
2008, that materially affected, or are reasonably likely to materially
affect, the Partnership's internal control over financial reporting.
Item 9B. Other Information
NONE
PART III.
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors, (b) Identification of Executive Officers, (c)
---------------------------------------------------------------------------
Identification of Certain Significant Employees, (d) Family Relationships,
---------------------------------------------------------------------------
and (e) Business Experience
---------------------------
Neither the General Partner nor the Partnership has directors, executive
officers or employees of its own. The business of the Partnership is conducted
primarily through Associates. Associates is a California corporation which was
organized in 1971. The following biographical information is presented for the
officers and employees of Associates with principal responsibility for the
Partnership's affairs.
Wilfred N. Cooper, Sr. Chairman
Wilfred N. Cooper, Jr. President and Chief Executive Officer
David N. Shafer, Esq. Executive Vice President
Michael J. Gaber Executive Vice President
Sylvester P. Garban Senior Vice President - Institutional Investments
Thomas J. Riha, CPA Senior Vice President - Asset Management
Thomas J. Hollingsworth Vice President - Asset Management
Gregory S. Hand Vice President - Acquisitions
Melanie R. Wenk Vice President - Chief Financial Officer
Kay L. Cooper Director of WNC & Associates, Inc.
Jennifer E. Cooper Director of WNC & Associates, Inc.
In addition to Wilfred N. Cooper, Sr., the directors of Associates are Wilfred
N. Cooper, Jr., Kay L. Cooper, and Jennifer Cooper. The principal shareholders
of Associates are trusts established by the Coopers.
50
Wilfred N. Cooper, Sr., age 78, is the founder and Chairman of the Board of
Directors of Associates, a Director of WNC Capital Corporation, and a general
partner in some of the partnerships previously sponsored by Associates. Mr.
Cooper has been actively involved in the affordable housing industry since 1968.
Previously, during 1970 and 1971, he was founder and a principal of Creative
Equity Development Corporation, a predecessor of Associates, and of Creative
Equity Corporation, a real estate investment firm. For 12 years before that, Mr.
Cooper was employed by Rockwell International Corporation, last serving as its
manager of housing and urban developments where he had responsibility for
factory-built housing evaluation and project management in urban planning and
development. He has testified before committees of the U.S. Senate and the U.S.
House of Representatives on matters pertaining to the affordable housing
industry. Mr. Cooper is a Life Director of the National Association of Home
Builders, a National Trustee for NAHB's Political Action Committee, and a past
Chairman of NAHB's Multifamily Council. He is a Life Trustee of the National
Housing Conference, and a founder and Director of the California Housing
Consortium. He is the husband of Kay Cooper and the father of Wilfred N. Cooper,
Jr. Mr. Cooper graduated from Pomona College in 1956 with a Bachelor of Arts
degree.
Wilfred N. Cooper, Jr., age 45, is President, Chief Executive Officer,
Secretary, a Director and a member of the Acquisition Committee of Associates.
He is President and a Director of, and a registered principal with, WNC Capital
Corporation. He has been involved in real estate investment and acquisition
activities since 1988 when he joined Associates. Previously, he served as a
Government Affairs Assistant with Honda North America in Washington, D.C. Mr.
Cooper serves on the Board of Trustees of the National Housing Conference, and
is a member of the Editorial Advisory Board of LIHTC Monthly Report, a Steering
Member of the Housing Credit Group of the National Association of Home Builders,
a member of the Tax Policy Council for the National Trust for Historic
Preservation, a member of the Advisory Board of the New York State Association
for Affordable Housing, a member of the Urban Land Institute, a member of the
Orange County Advisory Board of US Bank, and a member of Vistage International,
a global network of business leaders and chief executives. He is the son of
Wilfred Cooper, Sr. and Kay Cooper. Mr. Cooper graduated from The American
University in 1985 with a Bachelor of Arts degree.
David N. Shafer, age 56, is an Executive Vice President, a member of the
Acquisition Committee of, and oversees the New Markets Tax Credit operations of,
Associates, and is responsible for the business development activities of WNC
Community Preservation Partners. Mr. Shafer has been active in the real estate
industry since 1984. Before joining Associates in 1990, he was engaged as an
attorney in the private practice of law with a specialty in real estate and
taxation. Mr. Shafer is a Director and past President of the California Council
of Affordable Housing, and a member of the State Bar of California. Mr. Shafer
graduated from the University of California at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor degree cum laude and from the University of San Diego in 1986 with a
Master of Law degree in Taxation.
Michael J. Gaber, age 42, is an Executive Vice President, oversees the
Originations, and the Acquisitions Departments, and is a member of the
Acquisition Committee of Associates. Mr. Gaber has been involved in real estate
acquisition, valuation and investment activities since 1989 and has been
associated with Associates since 1997. Prior to joining Associates, he was
involved in the valuation and classification of major assets, restructuring of
debt and analysis of real estate taxes with H.F. Ahmanson & Company, parent of
Home Savings of America. Mr. Gaber graduated from the California State
University, Fullerton in 1991 with a Bachelor of Science degree in Business
Administration - Finance.
Sylvester P. Garban, age 62, is Senior Vice President - Institutional
Investments of Associates and a registered principal with WNC Capital
Corporation. Mr. Garban has been involved in domestic and multinational
institutional real estate investment activities since 1978. Before joining
Associates in 1989, he served as Executive Vice President with MRW, Inc., a
commercial real estate development and management firm. He was previously
involved in operations management with The Taubman Company, an international
regional mall developer. Mr. Garban is a member of the National Association of
Affordable Housing Lenders and the Financial Planning Association. He graduated
from Michigan State University in 1967 with a Bachelor of Science degree in
Business Administration.
Thomas J. Riha, age 54, is Senior Vice President - Asset Management and a member
of the Acquisition Committee and the Commercial Real Estate Group of Associates
and Vice President, Treasurer and a Director of WNC Management, Inc. He has been
involved in real estate acquisition and investment activities since 1979. Before
joining Associates in 1994, Mr. Riha was employed by Trust Realty Advisor, a
51
real estate acquisition and management company, last serving as Vice President -
Operations. He is a founding member of the Housing Credit Certified Professional
Board of Governors, a national professional certification program administered
by the NAHB and the National Affordable Housing Management Association. Mr. Riha
graduated from the California State University, Fullerton in 1977 with a
Bachelor of Arts degree cum laude in Business Administration with a
concentration in Accounting and is a Certified Public Accountant and a member of
the American Institute of Certified Public Accountants.
Thomas J. Hollingsworth, age 58, is Vice President - Asset Management of
Associates and oversees WNC's asset management group. Mr. Hollingsworth has been
involved in real estate acquisitions, operations and syndication of multifamily
properties for over 25 years. Prior to joining WNC in 2005, he was the senior
workout specialist at Key Corporation Housing Management, Inc., a division of
Key Bank. He has also been responsible for structuring several tax sheltered
multifamily acquisitions during his career. Mr. Hollingsworth graduated from the
University of Utah in 1973 with a Bachelor of Science degree (cum laude) in
Business Administration.
Gregory S. Hand, age 45, is Vice President - Acquisitions of, and oversees the
property underwriting activities of, Associates. Mr. Hand has been involved in
real estate analysis, development and management since 1987. Prior to the
Partnership is obligated to the General Partners or its affiliates for the
following fees: joining WNC in 1998, he was a portfolio asset manager with a
national Tax Credit sponsor with responsibility for the management of $200
million in assets. Prior to that, he was a finance manager with The Koll Company
and a financial analyst with The Irvine Company. Mr. Hand graduated from Iowa
State University in 1987 with a Bachelor of Business Administration degree in
finance.
Melanie R. Wenk, CPA, age 41, is Vice President-Chief Financial Officer of
Associates. She is responsible for overseeing institutional and retail fund
portfolio management, including partnership accounting, SEC reporting, quarterly
and annual investor reporting, monitoring investment returns for all stabilized
WNC institutional funds, and corporate accounting. Prior to joining WNC in 2003,
Ms. Wenk was associated as a public accountant with BDO Seidman, LLP. She
graduated from the California Polytechnic State University, Pomona, in 1999 with
a Bachelor of Science degree in accounting.
Kay L. Cooper, age 72, is a Director of WNC & Associates, Inc. and has not
otherwise been engaged in business activities during the previous five years.
Kay Cooper was the sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products from 1975 until its sale in 1998. She is the wife of
Wilfred Cooper, Sr. and the mother of Wilfred Cooper, Jr. Ms. Cooper graduated
from the University of Southern California in 1958 with a Bachelor of Science
degree.
Jennifer E. Cooper, age 46, is a Director of WNC & Associates, Inc. and has not
otherwise been engaged in business activities during the previous five years.
She is the wife of Wilfred Cooper, Jr. and attended the University of Texas from
1981 to 1986.
(f) Involvement in Certain Legal Proceedings
----------------------------------------
None.
(g) Promoters and Control Persons
-----------------------------
Inapplicable.
(h) Audit Committee Financial Expert, and (i) Identification of the audit
---------------------------------------------------------------------------
Committee
---------
Neither the Partnership nor Associates has an audit committee.
(j) Changes to Nominating Procedures
--------------------------------
Inapplicable.
(k) Compliance With Section 16(a) of the Exchange Act
-------------------------------------------------
None.
(l) Code of Ethics
--------------
Associates has adopted a Code of Ethics which applies to the Chief
Executive Officer and Chief Financial Officer of Associates. The Code of
Ethics will be provided without charge to any person who requests it. Such
requests should be directed to: Investor Relations at (714)662-5565
extension 187.
Item 11. Executive Compensation
The General Partner and its affiliates are not permitted under Section 5.6
of the Partnership's Agreement of Limited Partnership (the "Agreement,"
incorporated as Exhibit 3.1 to this report) to receive any salary, fees,
profits, distributions or allocations from the Partnership or any Local
Limited Partnership in which the Partnership invests except as expressly
allowed by the Agreement. The compensation and other economic benefits to
the General Partner and its affiliates provided for in the Agreement are
summarized below.
(a) Compensation for Services
For services rendered by the Managing General Partner or an Affiliate of
the Managing General Partner in connection with the administration of the
affairs of the Partnership, the Managing General Partner or any such
Affiliate may receive an annual Asset Management Fee equal to the greater
of (i) $2,000 for each Housing Complex, or (ii) 0.275% of gross proceeds.
In either case, the fee will be decreased or increased annually based on
changes to the Consumer Price Index. However, in no event will the maximum
amount exceed 0.2% of the invested assets of the Local Limited
Partnerships, including the Partnership's allocable share of the mortgages.
The Asset Management Fee is payable with respect to the previous calendar
quarter on the first day of each calendar quarter during the year. Accrued
but unpaid Asset Management Fees for any year are deferred without interest
and are payable in subsequent years from any funds available to the
Partnership after payment of all other costs and expenses of the
Partnership, including any capital reserves then determined by the Managing
General Partner to no longer be necessary to be retained by the
Partnership, or from the proceeds of a sale or refinancing of Partnership
assets. Fees of $49,500 were incurred during each of the years ended March
31, 2008, 2007 and 2006, of which $0 was paid for each of the years ended
March 31, 2008, 2007 and 2006.
Subject to a number of terms and conditions set forth in the Agreement, the
General Partner and its Affiliates may be entitled to compensation for
services actually rendered or to be rendered in connection with (i)
selecting, evaluating, structuring, negotiating and closing the
Partnership's investments in Local Limited Partnership Interests, (ii) the
acquisition or development of Properties for the Local Limited
Partnerships, or (iii) property management services actually rendered by
the General Partners or their Affiliates respecting the Properties owned by
Local Limited Partnerships. The Partnership has completed its investment
stage, so no compensation for the services in (i) or (ii) has been paid
during the period covered by this report and none will be paid in the
future. None of the services described in (iii) were rendered and no such
compensation was payable for such services during the periods covered by
this report.
(b) Operating Expenses
Reimbursement to a General Partner or any of its Affiliates of Operating
Cash Expenses is subject to specific restrictions in Section 5.3.3 of the
Partnership's Agreement of Limited Partnership (the "Agreement,"
incorporated as Exhibit 3.1 to this report). The Agreement defines
"Operating Cash Expenses" as
" . . . the amount of cash disbursed by the Partnership . . . in the
ordinary course of business for the payment of its operating expenses, such
as expenses for management, utilities, repair and maintenance, insurance,
investor communications, legal, accounting, statistical and bookkeeping
services, use of computing or accounting equipment, travel and telephone
expenses, salaries and direct expenses of Partnership employees while
engaged in Partnership business, and any other operational and
administrative expenses necessary for the prudent operation of the
Partnership. Without limiting the generality of the foregoing, Operating
Cash Expenses shall include fees paid by the Partnership to any General
53
Partner or any Affiliate of a General Partner permitted by this Agreement
and the actual cost of goods, materials and administrative services used
for or by the Partnership, whether incurred by a General Partner, an
Affiliate of a General Partner or a non-Affiliated Person in performing the
foregoing functions. As used in the preceding sentence, actual cost of
goods and materials means the actual cost of goods and materials used for
or by the Partnership and obtained from entities not Affiliated with a
General Partner, and actual cost of administrative services means the pro
rata cost of personnel (as if such persons were employees of the
Partnership) associated therewith, but in no event to exceed the
Competitive amount."
The Agreement provides that no such reimbursement shall be permitted for
services for which a General Partner or any of its Affiliates is entitled
to compensation by way of a separate fee. Furthermore, no such
reimbursement is to be made for (a) rent or depreciation, utilities,
capital equipment or other such administrative items, and (b) salaries,
fringe benefits, travel expenses and other administrative items incurred or
allocated to any "controlling person" of a General Partner or any Affiliate
of a General Partner. For the purposes of Section 5.3.4, "controlling
person" includes, but is not limited to, any person, however titled, who
performs functions for a General Partner or any Affiliate of a General
Partner similar to those of: (1) chairman or member of the board of
directors; (2) executive management, such as president, vice president or
senior vice president, corporate secretary or treasurer; (3) senior
management, such as the vice president of an operating division who reports
directly to executive management; or (4) those holding 5% or more equity
interest in such General Partner or any such Affiliate of a General Partner
or a person having the power to direct or cause the direction of such
General Partner or any such Affiliate of a General Partner, whether through
the ownership of voting securities, by contract or otherwise.
The unpaid operating expenses reimbursable to the General Partner or
its affiliates were $13,542, $33,317 and $18,806 for the year ended
March 31, 2008, 2007 and 2006, respectively. The Partnership
reimbursed the General Partner or its affiliates for operating
expenses of $0 during each of the years ended March 31, 2008, 2007 and
2006.
(c) Interest in Partnership
The General Partner receives 1% of the Partnership's allocated Low
Income Housing Tax Credits, which approximated $9,113, $16,453 and
$23,761 for the years ended December 31, 2007, 2006 and 2005,
respectively. The General Partner is also entitled to receive 1% of
the Partnership's operating income or losses, gain or loss from the
sale of property and operating cash distributions. There were no
distributions of operating cash to the General Partner during the
years ended March 31, 2008, 2007 and 2006. The General Partner has an
interest in sale or refinancing proceeds as follows: after the Limited
Partners have received a return of their capital, General Partner may
receive an amount equal to its capital contribution, less any prior
distribution of such proceeds, then the General Partner may receive 1%
and the Limited Partners 99% of any remaining proceeds. There were no
such distributions of cash to the General Partner during the years
ended March 31, 2008, 2007 and 2006.
(d) Subordinated Disposition Fee
A subordinated disposition fee in an amount equal to 1% of the sale
price may be received in connection with the sale or disposition of a
Housing Complex or Local Limited Partnership interest. Payment of this
fee is subordinated to the Limited Partners receiving a preferred
return of 14% through December 31, 2006 and 6 % thereafter (as defined
in the Partnership Agreement) and is payable only if the General
Partner or its affiliates render services in the sales effort. No such
fee was incurred for all periods presented.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
(a) Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------
The Partnership has no compensation plans under which interests in the
Partnership are authorized for issuance.
54
(b) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The following are the only limited partners known to the General Partner to
own beneficially in excess of 5% of the outstanding Partnership Units for
the years ended March 31, 2008 and 2007.
Name and Address of Beneficial Amount of Units
Title of Class Owner Controlled Percent of Class
------------------------------- ---------------------------------- ------------------- -------------------
Units of Limited Partnership Sempra Section 42, LLC 4,560 units 25.3%
Interests P.O. Box 126943
San Diego, CA 92113-6943
Units of Limited Partnership Western Financial Savings Bank 1,068 units 5.9%
Interests 23 Pasteur
Irvine, CA 92718
(c) Security Ownership of Management
--------------------------------
Neither the General Partner, Associates, its affiliates, nor any of the
officers or directors of the General Partner, Associates, or its affiliates
own directly or beneficially any Partnership Units.
(d) Changes in Control
------------------
The management and control of the General Partner and of Associates may be
changed at any time in accordance with their respective organizational
documents, without the consent or approval of the Limited Partners. In
addition, the Partnership Agreement provides for the admission of one or
more additional and successor General Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of any
other General Partner or the Limited Partners, (i) substitute in its stead
as General Partner any entity which has, by merger, consolidation or
otherwise, acquired substantially all of its assets, stock or other
evidence of equity interest and continued its business, or (ii) cause to be
admitted to the Partnership an additional General Partner or Partners if it
deems such admission to be necessary or desirable so that the Partnership
will be classified a partnership for Federal income tax purposes. Finally,
a majority-in-interest of the Limited Partners may at any time remove the
General Partner of the Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions, and Director
Independence
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership, reimbursement of expenses,
and the General Partner's interests in the Partnership, as discussed in Item 11
and in the notes to the Partnership's financial statements.
55
Item 14. Principal Accountant Fees and Services
The following is a summary of fees paid to the Partnership's principal
independent registered public accounting firm for the years ended March 31:
2008 2007
---------- -------------
Audit Fees $ - $ -
Audit-related Fees - -
Tax Fees 2,755 2,625
All Other Fees - -
---------- -------------
TOTAL $ 2,755 $ 2,625
========== =============
The Partnership has no Audit Committee. All audit services and any permitted
non-audit services performed by the Partnership's independent auditors are
preapproved by the General Partner.
56
PART IV.
Item 15. Exhibits and Financial Statement Schedules
(a)(1) List of Financial statements included in Part II hereof
-------------------------------------------------------
Balance Sheets, March 31, 2008 and 2007
Statements of Operations for the years ended March 31, 2008, 2007 and
2006
Statements of Partners' Equity (Deficit) for the years ended March 31,
2008, 2007 and 2006
Statements of Cash Flows for the years ended March 31, 2008, 2007 and
2006
Notes to Financial Statements
(a)(2) List of Financial statement schedules included in Part IV hereof:
-----------------------------------------------------------------
Schedule III, Real Estate Owned by Local Limited Partnerships
(a)(3) Exhibits.
---------
3.1 Articles of incorporation and by-laws: The registrant is not
incorporated. The Partnership Agreement is included as Exhibit B to
the Prospectus, filed as Exhibit 28.1 to Form 10-K dated December 31,
1995 is hereby incorporated herein by reference as exhibit 3.1.
31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14
and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14
and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
32.1 Section 1350 Certification of the Chief Executive Officer. (filed
herewith)
32.2 Section 1350 Certification of the Chief Financial Officer. (filed
herewith)
99.1 Amended and Restated Agreement of Limited Partnership of Evergreen
Apartments I Limited Partnership filed as exhibit 10.1 to Form 8-K
dated November 14, 1995 is hereby incorporated herein by reference as
exhibit 99.1.
99.2 Amended and Restated Agreement of Limited Partnership of Shepherd
South Apartments I, Ltd. filed as exhibit 10.1 to Form 8-K dated
December 14, 1995 is hereby incorporated herein by reference as
exhibit 99.2.
99.3 Amended and Restated Agreement of Limited Partnership of Patten
Towers, L.P. II filed as exhibit 10.1 to Form 8-K dated December 21,
1995 is hereby incorporated herein by reference as exhibit 99.3.
99.4 Second Amended and Restated Agreement of Limited Partnership of
Alliance Apartments I Limited Partnership filed as exhibit 10.7 to
Post-Effective Amendment No.2 to Registration Statement on Form S-11
of the Partnership is hereby incorporated herein by reference as
exhibit 99.4.
99.5 Amended and Restated Agreement of Limited Partnership of Hastings
Apartments I Limited Partnership filed as exhibit 10.8 to
Post-Effective Amendment No.2 to Registration Statement on Form S-11
of the Partnership is hereby incorporated herein by reference as
exhibit 99.5.
99.6 Agreement of Limited Partnership of Raymond S. King Apartments I
Limited Partnership filed as exhibit 10.9 to Post-Effective Amendment
No. 2 to Registration Statement on Form S-11 of the Partnership is
hereby incorporated herein by reference as exhibit 99.6
57
99.7.1 Amended and Restated Agreement of Limited Partnership of Talladega
County Housing, Ltd. filed as exhibit 10.10 to Post-Effective
Amendment No. to Registration Statement on Form S-11 of the
Partnership is hereby incorporated herein by reference as exhibit
99.7.
99.8 Amended and Restated Agreement of Limited Partnership of The Willows
Limited Partnership filed as exhibit 10.11 to Post-Effective Amendment
No. to Registration Statement on Form S-11 of the Partnership is
hereby incorporated herein by reference as exhibit 99.8
99.9 Amended and Restated Agreement of Limited Partnership of Cascade Pines
L.P. II filed as exhibit 10.1 to Form 8-K dated April 26, 1996 is
hereby incorporated herein by reference as exhibit 99.9
99.10 Amended and Restated Agreement of Limited Partnership of Rosedale
Limited Partnership filed as exhibit 10.2 to Form 8-K dated April 26,
1996 is hereby incorporated herein by reference as exhibit 99.10
99.11 Amended and Restated Agreement of Limited Partnership of Blessed Rock
of El Monte filed as exhibit 10.1 to Form 8-K dated September 17, 1996
is hereby incorporated herein by reference as exhibit 99.11
99.12.1 Amended and Restated Agreement of Limited Partnership of Broadway
Apartments, Limited Partnership filed as exhibit 10.1 to Form 8-K
dated April 10, 1997 is hereby incorporated herein by reference as
exhibit 99.12
99.13 Financial statements of Blessed Rock of El Monte, for the years ended
December 31, 2007, 2006, and 2005, together with Independent Auditors'
Report thereon; filed as exhibit 99.13 in Form 10-K (filed herewith)
(d) Financial statement schedules follow, as set forth in subsection
---------------------------------------
(a)(2) hereof.
58
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2008
---------------------------------------- -------------------------------------------------------
As of March 31, 2008 As of December 31, 2007
---------------------------------------- -------------------------------------------------------
Total Mortgage
Investment in Amount of Balances of Building
Local Limited Local Limited Investment Local Limited and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Land Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
Alliance Apts. I Alliance, $ 604,000 $ 604,000 $ 323,000 $ 148,000 $ 1,401,000 $ 480,000 $ 1,069,000
L.P. Nebraska
Blessed Rock El Monte, 2,511,000 2,511,000 3,444,000 1,271,000 8,095,000 2,140,000 7,226,000
of El Monte California
Broadway Apts., Hobbs, 2,029,000 2,029,000 1,210,000 70,000 3,430,000 1,372,000 2,128,000
L.P. New Mexico
Curtis Assoc. Curtis, 88,000 88,000 412,000 10,000 531,000 216,000 325,000
I, L.P. Nebraska
Escatawpa Village Escatawpa, 249,000 249,000 869,000 40,000 1,378,000 551,000 867,000
Assoc., L.P. Mississippi
Hastings Apts.I, Hastings, 542,000 542,000 148,000 32,000 1,303,000 462,000 873,000
L.P. Nebraska
Heritage Apts. Berkeley, 752,000 752,000 641,000 105,000 1,593,000 616,000 1,082,000
I, L.P. Missouri
Hillcrest Assoc. Ontario, 354,000 354,000 1,261,000 96,000 1,605,000 546,000 1,155,000
a L.P. Oregon
Patten Towers, Chattanooga, 2,154,000 2,154,000 4,283,000 290,000 11,357,000 4,731,000 6,916,000
L.P. II (I) Tennessee
59
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2008
---------------------------------------- -------------------------------------------------------
As of March 31, 2008 As of December 31, 2007
---------------------------------------- -------------------------------------------------------
Total Mortgage
Investment in Amount of Balances of Building
Local Limited Local Limited Investment Local Limited and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Land Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
Prairieland Syracuse, 85,000 85,000 304,000 25,000 493,000 203,000 315,000
Properties of Kansas
Syracuse II, L.P.
Raymond S. King Greensboro, 437,000 437,000 781,000 10,000 1,090,000 345,000 755,000
Apts. L.P. North Carolina
Rosedale L.P. Silver City, 309,000 309,000 1,285,000 44,000 1,728,000 713,000 1,059,000
New Mexico
Shepherd South Shepherd, 121,000 121,000 536,000 12,000 755,000 270,000 497,000
Apts I, Ltd. Texas
Solomon Assoc. Solomon, 138,000 138,000 555,000 16,000 719,000 323,000 412,000
I, L.P. Kansas
Talladega County Talladega, 653,000 653,000 735,000 62,000 1,447,000 487,000 1,022,000
Housing Ltd. Alabama
The Willows Apts. Morganton, 841,000 841,000 1,013,000 76,000 1,829,000 564,000 1,341,000
L.P. North Carolina ---------- ---------- ---------- --------- ----------- ---------- -----------
$ 11,867,000 $ 11,867,000 $17,800,000 $ 2,307,000 $38,754,000 $14,019,000 $27,042,000
============ ============ =========== =========== =========== =========== ===========
1) This Local Limited Partnership is currently listed for sale.
60
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2008
---------------------------------------------------------------------------------
For the year ended December 31, 2007
---------------------------------------------------------------------------------
Year Estimated
Net Income Investment Useful Life
Local Limited Partnership Name Rental Income (Loss) Status Acquired (Years)
--------------------------------------------------------------------------------------------------------------------------
Alliance Apartments I L.P. $ 91,000 $ 257,000 Completed 1997 40
Blessed Rock of El Monte 938,000 37,000 Completed 1997 40
Broadway Apartments, L.P. 395,000 (106,000) Completed 1997 40
Curtis Associates I, L.P. 52,000 (19,000) Completed 1997 27.5
Escatawpa Village Associates, L.P. 180,000 (45,000) Completed 1997 27.5
Hastings Apartments I, L.P. 70,000 154,000 Completed 1996 40
Heritage Apartments I, L.P. 135,000 (63,000) Completed 1997 27.5
Hillcrest Associates, A L.P. 201,000 (22,000) Completed 1997 40
Patten Towers, L.P. II (1) 1,446,000 (511,000) Completed 1996 27.5
Prairieland Properties of Syracuse II, 46,000 (1,000) Completed 1997 27.5
L.P.
Raymond S. King Apartments L.P. 82,000 (34,000) Completed 1997 30
Rosedale Limited Partnership 151,000 (41,000) Completed 1997 30
Shepherd South Apartments I, Ltd. 103,000 7,000 Completed 1996 40
Solomon Associates I, L.P. 79,000 - Completed 1997 27.5
Talladega County Housing Ltd. 101,000 (35,000) Completed 1996 40
The Willows Apartments L.P. 148,000 (47,000) Completed 1997 40
---------- ---------
$4,218,000 $(469,000)
========== ==========
(1) This Local Limited Partnership is currently listed for sale.
61
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2007
---------------------------------------- -------------------------------------------------------
As of March 31, 2007 As of December 31, 2006
---------------------------------------- -------------------------------------------------------
Total Mortgage
Investment in Amount of Balances of Building
Local Limited Local Limited Investment Local Limited and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Land Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
Alliance Apts. I Alliance, $ 604,000 $ 604,000 $ 594,000 $ 148,000 $ 1,401,000 $ 443,000 $ 1,106,000
L.P. Nebraska
Blessed Rock El Monte, 2,511,000 2,511,000 3,494,000 1,271,000 8,085,000 1,933,000 7,423,000
of El Monte California
Broadway Apts., Hobbs, 2,029,000 2,029,000 1,223,000 70,000 3,431,000 1,246,000 2,255,000
L.P. New Mexico
Cascade Pines, Atlanta, - - 8,623,000 600,000 9,417,000 3,506,000 6,511,000
L.P. II (1) Georgia
Curtis Assoc. Curtis, 88,000 88,000 414,000 10,000 527,000 194,000 343,000
I, L.P. Nebraska
Escatawpa Village Escatawpa, 249,000 249,000 873,000 40,000 1,378,000 501,000 917,000
Assoc., L.P. Mississippi
Hastings Apts.I, Hastings, 542,000 542,000 338,000 32,000 1,303,000 423,000 912,000
L.P. Nebraska
Heritage Apts. Berkeley, 752,000 752,000 577,000 105,000 1,592,000 557,000 1,140,000
I, L.P. Missouri
Hillcrest Assoc. Ontario, 354,000 354,000 1,261,000 96,000 1,605,000 508,000 1,193,000
a L.P. Oregon
Patten Towers, Chattanooga, 2,154,000 2,154,000 4,300,000 290,000 10,970,000 4,331,000 6,929,000
L.P. II (I) Tennessee
62
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2007
---------------------------------------- -------------------------------------------------------
As of March 31, 2007 As of December 31, 2006
---------------------------------------- -------------------------------------------------------
Total Mortgage
Investment in Amount of Balances of Building
Local Limited Local Limited Investment Local Limited and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Land Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
Prairieland Syracuse, 85,000 85,000 310,000 25,000 490,000 185,000 330,000
Properties of Kansas
Syracuse II, L.P.
Raymond S. King Greensboro, 437,000 437,000 782,000 10,000 1,090,000 320,000 780,000
Apts. L.P. North Carolina
Rosedale L.P. Silver City, 309,000 309,000 1,290,000 40,000 1,695,000 648,000 1,087,000
New Mexico
Shepherd South Shepherd, 121,000 121,000 542,000 12,000 748,000 250,000 510,000
Apts I, Ltd. Texas
Solomon Assoc. Solomon, 138,000 138,000 557,000 16,000 717,000 294,000 439,000
I, L.P. Kansas
Talladega County Talladega, 653,000 653,000 747,000 62,000 1,432,000 448,000 1,045,000
Housing Ltd. Alabama
The Willows Apts. Morganton, 841,000 841,000 1,028,000 76,000 1,828,000 513,000 1,391,000
L.P. North Carolina ---------- ---------- ---------- --------- ----------- ---------- -----------
$ 11,867,000 $ 11,867,000 $26,953,000 $2,903,000 $47,709,000 $16,300,000 $34,311,000
============ ============ =========== =========== =========== =========== ===========
(1) The Housing Complex was sold on January 3, 2007 and the Local Limited
Partnership was subsequently dissolved.
63
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2007
---------------------------------------------------------------------------------
For the year ended December 31, 2006
---------------------------------------------------------------------------------
Year Estimated
Net Income Investment Useful Life
Local Limited Partnership Name Rental Income (Loss) Status Acquired (Years)
--------------------------------------------------------------------------------------------------------------------------
Alliance Apartments I L.P. $ 88,000 $ (35,000) Completed 1997 40
Blessed Rock of El Monte 872,000 28,000 Completed 1997 40
Broadway Apartments, L.P. 356,000 (115,000) Completed 1997 40
Cascade Pines, L.P. II 1,224,000 (555,000) Completed 1997 40
Curtis Associates I, L.P. 52,000 (20,000) Completed 1997 27.5
Escatawpa Village Associates, L.P. 163,000 (44,000) Completed 1997 27.5
Hastings Apartments I, L.P. 74,000 (6,000) Completed 1996 40
Heritage Apartments I, L.P. 136,000 (49,000) Completed 1997 27.5
Hillcrest Associates, A L.P. 119,000 (23,000) Completed 1997 40
Patten Towers, L.P. II (1) 1,360,000 2,301,000* Completed 1996 27.5
Prairieland Properties of Syracuse II, 49,000 5,000 Completed 1997 27.5
L.P.
Raymond S. King Apartments L.P. 85,000 (36,000) Completed 1997 30
Rosedale Limited Partnership 130,000 (33,000) Completed 1997 30
Shepherd South Apartments I, Ltd. 125,000 6,000 Completed 1996 40
Solomon Associates I, L.P. 81,000 (7,000) Completed 1997 27.5
Talladega County Housing Ltd. 93,000 (35,000) Completed 1996 40
The Willows Apartments L.P. 147,000 (29,000) Completed 1997 40
---------- ---------
$5,154,000 $1,353,000
========== ==========
(*) The net income includes $2,770,708 of forgiveness of debt.
64
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2006
---------------------------------------- -------------------------------------------------------
As of March 31, 2006 As of December 31, 2005
---------------------------------------- -------------------------------------------------------
Total Mortgage
Investment in Amount of Balances of Building
Local Limited Local Limited Investment Local Limited and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Land Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
Alliance Apts. I Alliance, $ 604,000 $ 604,000 $ 583,000 $ 148,000 $ 1,401,000 $ 406,000 $ 1,143,000
L.P. Nebraska
Blessed Rock El Monte, 2,511,000 2,511,000 3,541,000 1,271,000 8,047,000 1,728,000 7,590,000
of El Monte California
Broadway Apts., Hobbs, 2,029,000 2,029,000 1,235,000 70,000 3,431,000 1,120,000 2,381,000
L.P. New Mexico
Cascade Pines, Atlanta, 1,347,000 1,347,000 8,623,000 600,000 8,925,000 3,184,000 6,341,000
L.P. II (1) Georgia
Curtis Assoc. Curtis, 88,000 88,000 416,000 10,000 521,000 173,000 358,000
I, L.P. Nebraska
Escatawpa Village Escatawpa, 249,000 249,000 877,000 40,000 1,378,000 451,000 967,000
Assoc., L.P. Mississippi
Hastings Apts.I, Hastings, 542,000 542,000 495,000 32,000 1,303,000 384,000 951,000
L.P. Nebraska
Heritage Apts. Berkeley, 752,000 752,000 591,000 105,000 1,590,000 498,000 1,197,000
I, L.P. Missouri
Hillcrest Assoc. Ontario, 354,000 354,000 1,273,000 96,000 1,605,000 470,000 1,231,000
a L.P. Oregon
Patten Towers, Chattanooga, 2,154,000 2,154,000 6,025,000 290,000 10,825,000 3,936,000 7,179,000
L.P. II (I) Tennessee
65
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2006
---------------------------------------- -------------------------------------------------------
As of March 31, 2006 As of December 31, 2005
---------------------------------------- -------------------------------------------------------
Total Mortgage
Investment in Amount of Balances of Building
Local Limited Local Limited Investment Local Limited and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Land Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
Prairieland Syracuse, 85,000 85,000 315,000 25,000 490,000 167,000 348,000
Properties of Kansas
Syracuse II, L.P.
Raymond S. King Greensboro, 437,000 437,000 782,000 10,000 1,090,000 294,000 806,000
Apts. L.P. North Carolina
Rosedale L.P. Silver City, 309,000 309,000 1,296,000 40,000 1,707,000 592,000 1,155,000
New Mexico
Shepherd South Shepherd, 121,000 121,000 547,000 12,000 742,000 230,000 524,000
Apts I, Ltd. Texas
Solomon Assoc. Solomon, 138,000 138,000 559,000 16,000 714,000 265,000 465,000
I, L.P. Kansas
Talladega County Talladega, 653,000 653,000 758,000 62,000 1,431,000 409,000 1,084,000
Housing Ltd. Alabama
The Willows Apts. Morganton, 841,000 841,000 1,041,000 76,000 1,829,000 462,000 1,443,000
L.P. North Carolina ---------- ---------- ---------- --------- ----------- ---------- -----------
$ 13,214,000 $ 13,214,000 $28,957,000 $2,903,000 $47,029,000 $14,769,000 $35,163,000
============ ============ =========== =========== =========== =========== ===========
66
WNC Housing Tax Credit Fund V, L.P., Series 3
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2006
---------------------------------------------------------------------------------
For the year ended December 31, 2005
---------------------------------------------------------------------------------
Year Estimated
Net Income Investment Useful Life
Local Limited Partnership Name Rental Income (Loss) Status Acquired (Years)
--------------------------------------------------------------------------------------------------------------------------
Alliance Apartments I L.P. $ 65,000 $ 10,000 Completed 1997 40
Blessed Rock of El Monte 861,000 (70,000) Completed 1997 40
Broadway Apartments, L.P. 341,000 (394,000) Completed 1997 40
Cascade Pines, L.P. II 1,181,000 (1,208,000) Completed 1997 40
Curtis Associates I, L.P. 39,000 (26,000) Completed 1997 27.5
Escatawpa Village Associates, L.P. 154,000 (23,000) Completed 1997 27.5
Hastings Apartments I, L.P. 73,000 (56,000) Completed 1996 40
Heritage Apartments I, L.P. 139,000 (41,000) Completed 1997 27.5
Hillcrest Associates, A L.P. 193,000 (16,000) Completed 1997 40
Patten Towers, L.P. II (1) 1,436,000 (502,000) Completed 1996 27.5
Prairieland Properties of Syracuse II, 47,000 (2,000) Completed 1997 27.5
L.P.
Raymond S. King Apartments L.P. 61,000 (67,000) Completed 1997 30
Rosedale Limited Partnership 145,000 (41,000) Completed 1997 30
Shepherd South Apartments I, Ltd. 130,000 4,000 Completed 1996 40
Solomon Associates I, L.P. 60,000 (20,000) Completed 1997 27.5
Talladega County Housing Ltd. 95,000 (26,000) Completed 1996 40
The Willows Apartments L.P. 140,000 (31,000) Completed 1997 40
---------- ----------
$5,160,000 $(2,509,000)
========== ==========
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
By: WNC & Associates, Inc.,
General Partner
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
President of WNC & Associates, Inc.
Date: November 24, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
Chief Executive Officer, President and Director of WNC & Associates, Inc.
(principal executive officer)
Date: November 24, 2009
By: /s/ Melanie R. Wenk
-------------------
Melanie R. Wenk
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
(principal financial officer and principal accounting officer)
Date: November 24, 2009
By: /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr.,
Chairman of the Board of WNC & Associates, Inc.
Date: November 24, 2009
By: /s/ Kay L. Cooper
-----------------
Kay L. Cooper
Director of WNC & Associates, Inc.
Date: November 24, 2009
68
