UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

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: 000-26869

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

 

California	33-0761578
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
17782 Sky Park Circle
Irvine, CA	92614-6404
(Address of principal executive offices)	(Zip Code)

 

(714) 662-5565

(Telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]   No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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]

 

  

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

INDEX TO FORM 10 – Q

 

For the Quarterly Period Ended June 30, 2012

 

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets As of June 30, 2012 and March 31, 2012	F-1
Condensed Statements of Operations For the Three Months Ended June 30, 2012 and 2011	F-2
Condensed Statement of Partners’ Deficit For the Three Months Ended June 30, 2012	F-3
Condensed Statements of Cash Flows For the Three Months Ended June 30, 2012 and 2011	F-4
Notes to Condensed Financial Statements	F-5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3. Quantitative and Qualitative Disclosures about Market Risks	5
Item 4. Controls and Procedures	5
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	6
Item 1A. Risk Factors	6
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	6
Item 3. Defaults Upon Senior Securities	6
Item 4. Mine Safety Disclosures	6
Item 5. Other Information	6
Item 6. Exhibits	6
Signatures	7

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

CONDENSED BALANCE SHEETS

(Unaudited)

 

		June 30, 2012				March 31, 2012
ASSETS
Cash		$	7,112			$	5,112
Investments in Local Limited Partnerships, net (Notes 2 and 3)			9,902				54,147
Total Assets		$	17,014			$	59,259
LIABILITIES AND PARTNERS’ DEFICIT
Liabilities:
Accrued fees and expenses due to General Partner and affiliates (Note 3)		$	502,852			$	452,395
Total Liabilities			502,852				452,395
Partners’ Deficit:
General Partner			(174,688	)			(173,761	)
Limited Partners (25,000 Partnership Units authorized; 20,500 Partnership Units issued and outstanding)			(311,150	)			(219,375	)
Total Partners’ Deficit			(485,838	)			(393,136	)
Total Liabilities and Partners’ Deficit		$	17,014			$	59,259

 

See accompanying notes to condensed financial statements 

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF OPERATIONS

 

For the Three Months Ended June 30, 2012 and 2011

(Unaudited)

 

		2012				2011
		Three Months				Three Months
Reporting fees		$	2,000			$	500
Operating expenses and loss:
Amortization (Note 2)			785				1,601
Asset management fees (Note 3)			15,352				15,352
Impairment loss			43,460				250,984
Legal and accounting fees			30,254				3,955
Other			4,851				2,285
Total operating expenses and loss			94,702				274,177
Loss from operations			(92,702	)			(273,677	)
Equity in losses of Local
Limited Partnerships (Note 2)			-				(27,637	)
Net loss		$	(92,702	)		$	(301,314	)
Net loss allocated to:
General Partner		$	(927	)		$	(3,013	)
Limited Partners		$	(91,775	)		$	(298,301	)
Net loss per Partnership Unit		$	(4	)		$	(15	)
Outstanding weighted Partnership Units			20,500				20,500

 

See accompanying notes to condensed financial statements  

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

CONDENSED STATEMENT OF PARTNERS’ DEFICIT

 

For the Three Months Ended June 30, 2012

(Unaudited)

 

		General				Limited
		Partner				Partners				Total
Partners’ deficit at March 31, 2012		$	(173,761	)		$	(219,375	)		$	(393,136	)
Net loss			(927	)			(91,775	)			(92,702	)
Partners’ deficit at June 30, 2012		$	(174,688	)		$	(311,150	)		$	(485,838	)

 

See accompanying notes to condensed financial statements 

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF CASH FLOWS

 

For the Three Months Ended June 30, 2012 and 2011

(Unaudited)

 

		2012				2011
Cash flows from operating activities:
Net loss		$	(92,702	)		$	(301,314	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization			785				1,601
Impairment loss			43,460				250,984
Equity in losses of Local Limited Partnerships			-				27,637
Increase in accrued fees and expenses due to
General Partner and affiliates			50,457				21,592
Net cash provided by operating activities			2,000				500
Net increase in cash and cash equivalents			2,000				500
Cash, beginning of period			5,112				13,544
Cash, end of period		$	7,112			$	14,044
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Taxes paid		$	-			$	-

 

See accompanying notes to condensed financial statements 

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

General

 

The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2013. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s annual report on Form 10-K for the fiscal year ended March 31, 2012.

 

Organization

 

WNC Housing Tax Credit Fund VI, L.P., Series 6, a California Limited Partnership (the “Partnership”) was formed on March 3, 1997 under the laws of the State of California. 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 Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

The general partner is WNC & Associates, Inc. (“Associates” or the “General Partner”). The chairman and president of Associates own all the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership has no employees of its own.

 

The Partnership shall continue in full force and effect until December 31, 2052, 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 has concluded and 20,500 Partnership Units, representing subscriptions in the amount of $20,456,595, net of discounts of $27,305 for volume purchases and dealer discounts of $16,100 had been accepted. The General Partner has a 1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors in the Partnership (the “Limited Partners”) will be allocated the remaining 99% of these items in proportion to their respective investments.

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The proceeds from the disposition of any of the Local Limited Partnership properties 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 Partnership. 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 equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and the General Partner would then be entitled to receive proceeds equal to its 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, 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 “Compliance Period”), 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 a 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 the 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 Housing Complexes, and neighborhood conditions, among others.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

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 any Low Income Housing Tax Credits from the Local Limited Partnerships in the future.

 

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 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 August 31, 2013.

 

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 have completed their Compliance Periods.

 

Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met. None of the Housing Complexes have completed their 15-year Compliance Period as of June 30, 2012.

 

With that in mind, the General Partner is continuing its review of the Housing Complexes. 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.

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-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 as Low Income Housing Tax Credits are no longer available. 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 June 30, 2012.

 

As of March 31, 2012, the Partnership sold its Local Limited Partnership Interest in Trenton Village Apartments, L.P.

 

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 at least annually or 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 any 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 were being amortized over 30 years (see Note 2).

 

“Equity in losses of Local Limited Partnerships” for the periods ended June 30, 2012 and 2011 has been recorded by the Partnership. Management’s estimate for the three-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of Local Limited Partnerships allocated to the Partnership are not recognized to the extent that the investment balance would be adjusted below zero. 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 (see Note 2).

 

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership’s exposure to loss on these 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 guarantee against credit recapture to the investors in the Partnership.

 

Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of June 30, 2012, all of the investment balances 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 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. As of both June 30, 2012 and March 31, 2012, the Partnership had no cash equivalents.

 

Reporting Comprehensive Income

 

The Partnership had no items of other comprehensive income for all periods presented.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Income Taxes

 

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure.

 

Net Loss Per Partnership Unit

 

Net loss per Partnership Unit includes no dilution and is computed by dividing loss allocated to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required.

 

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 were being amortized over 30 years using the straight-line method. Amortization expense was $785 and $1,601 for the three months ended June 30, 2012 and 2011 respectively.

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnerships for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the three months ended June 30, 2012 and 2011, impairment loss related to investments in Local Limited Partnerships was $0 and $192,213, respectively.

 

The Partnership also evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investment. During the three months ended June 30, 2012 and 2011, impairment loss on the intangibles was $43,460 and $58,771, respectively.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

 

As of June 30, 2012 and March 31, 2012, the Partnership owns Local Limited Partnership interests in fourteen Local Limited Partnerships. All of these Local Limited Partnership’s own one Housing Complex consisting of an aggregate of 576 apartment units, respectively. The 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 99.98%, 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.

 

The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented below:

 

		For the Three Months Ended June 30, 2012				For the Year Ended March 31, 2012
Investments per balance sheet, beginning of period		$	54,147			$	339,938
Impairment loss			(43,460	)			(250,984	)
Equity in losses of Local Limited Partnerships			-				(30,851	)
Amortization of capitalized acquisition fees and costs			(785	)			(3,956	)
Investments per balance sheet, end of period		$	9,902			$	54,147

 

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

		For the Three Months Ended June 30, 2012				For the Year Ended March 31, 2012
Investments in Local Limited Partnerships, net		$	-			$	-
Acquisition fees and costs, net of accumulated amortization of $0 and $2,355			9,902				54,147
Investments per balance sheet, end of period		$	9,902			$	54,147

 

Selected financial information for the three months ended June 30, 2012 and 2011 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS

 

		2012				2011
Revenues		$	813,000			$	798,000
Expenses:
Interest expense			142,000				138,000
Depreciation and amortization			280,000				277,000
Operating expenses			576,000				571,000
Total expenses			998,000				986,000
Net loss		$	(185,000	)			(188,000	)
Net loss allocable to the Partnership		$	(184,000	)		$	(183,000	)
Net loss recorded by the Partnership		$	-			$	(28,000	)

 

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 may be required to sustain operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investments 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.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Troubled Housing Complexes

 

On September 13, 2011, the Partnership was notified by legal counsel for the Local General Partner of United Development Co., L.P.-97.0 (“UD 97.0”) that the Local General Partner is being sued by the lender, Wells Fargo Bank (“Wells Fargo”) for being in default of past due property taxes. Wells Fargo confirmed that the loans were current, but due to the fact that the property taxes were past due, they were suing to call all the notes to be paid in full immediately. A meeting was held on November 22, 2011 with the county and city to review a new payment plan on the past due taxes. Associates has received a copy of the plan signed by the Local General Partner that provides for the payment of delinquent taxes and the refinancing of the property with the intention of removing Wells Fargo by 2015. As of the end of May 2012, the General Partner has continued to comply with the agreements to pay the delinquent property taxes. As of the date of this report a date has not been established for the receivership proceedings by Wells Fargo. A meeting was held by Associates July 25, 2012 to address the failure to pay the 2011 audits, tax returns, and ineffectiveness of the management company. The Partnership’s investment balance in this Local Limited Partnership was $0 as of both June 30, 2012 and March 31, 2012.

 

West Liberty Family Apartments (“West Liberty”) has been experiencing operational issues. The 20-unit family community is located in West Liberty, KY. As of the date of this report, physical occupancy has improved to 95%, but the Debt Coverage Ratio (DCR) remains below 1.0 but greater than 0.85. This is primarily due to repair and maintenance expenses over budget for the period. Storm damage in the fourth quarter prompted the need for additional repairs along with continued expenses from units turn over. Cash flow has remained negative for the past two quarters. The property has a history of operating with a cash flow deficit. Due to the Local General Partner’s past inability to fund these deficits, the Partnership has loaned over $20,000 to assist with payables and debt service. In the event that the Local General Partner is unable to fund future deficits, Associates is prepared to call for their removal and select a replacement.

 

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 the following fees:

 

(a)

Acquisition fees of up to 7% 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 acquisition fees of $1,435,000. Accumulated amortization of these capitalized costs was $0 and $2,355 as of June 30, 2012 and March 31, 2012, respectively. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investments. If an impairment loss related to the acquisition expenses is recorded, the accumulated amortization is reduced to zero at that time.

 

(b)

Reimbursement of costs incurred by the General Partner or an affiliate in connection with the acquisition of Local Limited Partnerships. These reimbursements have not exceeded 2% of the gross proceeds. As of the end of all periods presented, the Partnership incurred acquisition costs of $111,334, which have been included in investments in Local Limited Partnerships. The acquisition costs were fully amortized for all periods presented.

 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

 

For the Quarterly Period Ended June 30, 2012

(Unaudited)

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

 

(c)

An annual asset management fee equal to 0.2% of the invested assets of the Partnership, as defined. “Invested Assets” means the sum of the Partnership’s investment in Local Limited Partnership interests and the Partnership’s allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $15,352 were incurred during each of the three months ended June 30, 2012 and 2011, none of which was paid during either of the three months ended June 30, 2012 and 2011.

 

(d)

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 the three months ended June 30, 2012 and 2011, respectively.

 

(e)

A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 12% through December 31, 2008 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.

 

The accrued fees and expenses due to the General Partner and affiliates consisted of the following at:

 

		June 30, 2012				March 31, 2012
Expenses paid by the General Partner or affiliates  on behalf of the Partnership		$	204,773			$	169,668
Asset management fee payable			298,079				282,727
Total		$	502,852			$	452,395

 

The General Partner and affiliates do 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.

 

 

Item 2. 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-Q 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 Credit 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-Q and in other reports filed with the Securities and Exchange Commission.

 

The following discussion and analysis compares the results of operations for the three months ended June 30, 2012 and 2011, and should be read in conjunction with the condensed unaudited financial statements and accompanying notes included within this report.

 

Financial Condition

 

The Partnership’s assets at June 30, 2012 consisted of $7,000 in cash and aggregate investments in the fourteen Local Limited Partnerships of $10,000. Liabilities at June 30, 2012 consisted of $503,000of accrued fees and expenses payable to the General Partner and affiliates.

 

Results of Operations

 

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011. The Partnership’s net loss for the three months ended June 30, 2012 was $(93,000), reflecting a decrease of $208,000 from the $(301,000) net loss experienced for the three months ended June 30, 2011. The decrease was largely due to a decrease of $208,000 in impairment loss for the three months ended June 30, 2012. Impairment loss can vary from year to year depending on the operations of the Local Limited Partnerships and the amount of Low Income Housing Tax Credits that are allocated each year to the Partnership. The equity in losses of Local Limited Partnerships decreased by $28,000 for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The investment balances reached zero during the prior year, therefore no further equity in losses could be recorded. Accounting and legal expenses increased by $(26,000) for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 due to the timing of the accounting work performed. The reporting fees increased by $1,500 for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. Local Limited Partnerships pay reporting fees to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment.

 

Liquidity and Capital Resources

 

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011. The net increase in cash during the three months ended June 30, 2012 was $2,000 compared to a net increase in cash for the three months ended June 30, 2011 of $500. During the three months ended June 30,2012, the reporting fees increased by $1,500 compared to the three months ended June 30,2011 as discussed above.

 

During the three months ended June 30, 2012, accrued payables, which consist primarily of related party asset management fees and advances due to the General Partner, increased by $50,000. The General Partner does not anticipate that these accrued fees and advances will be paid until such time as capital reserves are in excess of foreseeable working capital requirements of the Partnership.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

The Partnership expects its future cash flows, together with its net available assets as of June 30, 2012, to be insufficient to meet all currently foreseeable future cash requirements. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through August 31, 2013.

 

Recent Accounting Changes

 

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs). The amended guidance modifies the consolidation model to one based on control and economics, and replaced quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment is effective for fiscal years beginning after November 15, 2009. The adoption of this guidance on April 1, 2010 did not have a material effect on the Partnership’s financial statements.

 

In May 2011, FASB issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update is effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not materially affect the Partnership’s condensed financial statements.

 

Other Matters

 

On September 13, 2011, the Partnership was notified by legal counsel for the Local General Partner of United Development Co., L.P.-97.0 (“UD 97.0”) that the Local General Partner is being sued by the lender, Wells Fargo Bank (“Wells Fargo”) for being in default of past due property taxes. Wells Fargo confirmed that the loans were current, but due to the fact that the property taxes were past due, they were suing to call all the notes to be paid in full immediately. A meeting was held on November 22, 2011 with the county and city to review a new payment plan on the past due taxes. Associates has received a copy of the plan signed by the Local General Partner that provides for the payment of delinquent taxes and the refinancing of the property with the intention of removing Wells Fargo by 2015. As of the end of May 2012, the General Partner has continued to comply with the agreements to pay the delinquent property taxes. As of the date of this report a date has not been established for the receivership proceedings by Wells Fargo. A meeting was held by Associates July 25, 2012 to address the failure to pay the 2011 audits, tax returns, and ineffectiveness of the management company. The Partnership’s investment balance in this Local Limited Partnership was $0 as of both June 30, 2012 and March 31, 2012.

 

West Liberty Family Apartments (“West Liberty”) has been experiencing operational issues. The 20-unit family community is located in West Liberty, KY. As of the date of this report, physical occupancy has improved to 95%, but the Debt Coverage Ratio (DCR) remains below 1.0 but greater than 0.85. This is primarily due to repair and maintenance expenses over budget for the period. Storm damage in the fourth quarter prompted the need for additional repairs along with continued expenses from units turn over. Cash flow has remained negative for the past two quarters. The property has a history of operating with a cash flow deficit. Due to the Local General Partner’s past inability to fund these deficits, the Partnership has loaned over $20,000 to assist with payables and debt service. In the event that the Local General Partner is unable to fund future deficits, Associates is prepared to call for their removal and select a replacement.

 

 

 Item 3. Quantitative and Qualitative Disclosures About Market Risks

 

NOT APPLICABLE

 

Item 4. 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)	Changes in internal controls
	There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended June 30, 2012 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

  

 

Part II.	Other Information
Item 1.	Legal Proceedings
	NONE
Item 1A.	Risk Factors
	No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	NONE
Item 3.	Defaults Upon Senior Securities
	NONE
Item 4.	Mine Safety Disclosures
	NOT APPLICABLE
Item 5.	Other Information
	NONE
Item 6.	Exhibits

 

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)
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Balance Sheets at June 30, 2012 and March 31, 2012, (ii) the Condensed Statements of Operations for the three-month periods ended June 30, 2012 and June 30, 2011, (iii) the Condensed Statements of Cash Flows for the three months ended June 30, 2012 and June 30, 2011 and (iv) the Notes to Condensed Financial Statements.
	Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

 

By: WNC & ASSOCIATES, INC. General Partner

 

By:

/s/ Wilfred N. Cooper, Jr.

Wilfred N. Cooper, Jr.

President and Chief Executive Officer of WNC & Associates, Inc.

 

Date: August 7, 2012

 

By:

/s/ Melanie R. Wenk

Melanie R. Wenk

Vice President – Chief Financial Officer of WNC & Associates, Inc.

 

Date: August 7, 2012