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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
OR
o 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: 0-23908
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0563307
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section
12(b) of the Act:
Title of Securities Exchanges on which Registered
NONE NOT APPLICABLE
Securities registered pursuant to section 12(g) of the Act:
NONE
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 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
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
2
Item 1. Business
Organization
- ------------
WNC California Housing Tax Credits III, L.P. ("CHTC III" or the "Partnership")
is a California limited partnership formed under the laws of the State of
California on October 5, 1992. The Partnership was formed to acquire limited
partnership interests in local limited partnerships ("Local Limited
Partnerships") which own multifamily apartment complexes that are eligible for
Federal and (in some cases) California low-income Low Income Housing Credits
(the "Low Income Housing Credit").
The general partner of the Partnership is WNC Tax Credits Partners III, L.P.
(the "General Partner" or "TCP III"). The general partner of TCP III is WNC &
Associates, Inc. ("Associates"). The business of the Partnership is conducted
primarily through Associates as neither TCP III nor the Partnership has
employees of its own.
On February 17, 1993, the Partnership commenced a public offering of 30,000
Units of Limited Partnership Interests ("Units"), at a price of $1,000 per Unit.
The Partnership closed its Offering July 22, 1994, with a total of 18,000 Units
representing $18,000,000 sold. Holders of Units are referred to herein as
"Limited Partners."
Description of Business
- -----------------------
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner in Local Limited
Partnerships each of which will own and operate an apartment complex ("Apartment
Complex") which will qualify for the Low Income Housing Credit. In general,
under Section 42 of the Internal Revenue Code, an owner of low-income housing
can receive the Low Income Housing Credit to be used against Federal taxes
otherwise due in each year of a ten year period. In general, under Section 17058
of the California Revenue and Taxation Code, an owner of low-income housing can
receive the Low Income Housing Credit to be used against California taxes
otherwise due in each year of a four year period. The Apartment Complex is
subject to a fifteen-year compliance period (the "Compliance Period").
In general, in order to avoid recapture of Low Income Housing 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 a Local Limited Partnership of any Apartment Complex prior to the end of the
applicable 15 year Compliance Period. Because of (i) the nature of the Apartment
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more year in the future, and (iii) the inability of the
Partnership to directly cause the sale of Apartment Complexes by the general
partners of the respective Local Limited Partnerships ("Local General
3
Partners"), but generally only to require such Local General Partners to use
their respective best efforts to find a purchaser for the Apartment Complexes,
it is not possible at this time to predict whether the liquidation of
substantially all of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership Agreement will be able to
be accomplished promptly at the end of the 15-year period. If a Local Limited
Partnership is unable to sell an Apartment Complex, it is anticipated that the
Local General Partner will either continue to operate such Apartment Complex or
take such other actions as the Local General Partner believes to be in the best
interest of the Local Limited Partnership. In addition, circumstances beyond the
control of the General Partner may occur during the Compliance Period which
would require the Partnership to approve the disposition of an Apartment Complex
prior to the end thereof.
As of December 31, 1997, CHTC III had invested in eighteen Local Limited
Partnerships. Each of these Local Limited Partnerships owns an Apartment Complex
that is or is expected to be eligible for the Low Income Housing Credit. All of
the Local Limited Partnerships also benefit or will benefit from government
programs promoting low or moderate income housing.
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low income housing and to the
management and ownership of multifamily residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and neither the
Partnership's investments nor the Apartment Complexes owned by Local Limited
Partnerships will be readily marketable. Additionally, there can be no assurance
that the Partnership will be able to dispose of its interests in Local Limited
Partnerships at the end of the Compliance Period. The value of the Partnership's
investments will be subject to changes in national and local economic
conditions, including unemployment conditions, which could adversely impact
vacancy levels, rental payment defaults and operating expenses. This, in turn,
could substantially increase the risk of operating losses for the Apartment
Complexes and the Partnership. The Apartment Complexes could be subject to loss
through foreclosure. In addition, each Local Limited Partnership is subject to
risks relating to environmental hazards which might be uninsurable. Because the
Partnership's ability to control its operations will depend on these and other
factors beyond the control of the General Partner and the general partners of
the Local Limited Partnerships, there can be no assurance that Partnership
operations will be profitable or that the anticipated Low Income Housing Credits
will be available to Limited Partners.
As of December 31, 1997, the eighteen Apartment Complexes acquired by CHTC III
were completed and in operation, the final one completed construction in May of
1995. The Apartment Complexes owned by the Local Limited Partnerships in which
CHTC III has invested were developed by the Local General Partners who acquired
the sites and applied for applicable mortgages and subsidies. CHTC III became
the principal limited partner in these Local Limited Partnerships pursuant to
arm's-length negotiations with the Local General Partners. As a limited partner,
CHTC III's liability for obligations of the Local Limited Partnership is limited
to its investment. The Local General Partner of the Local Limited Partnership
retains responsibility for developing, constructing, maintaining, operating and
managing the Apartment Complex.
4
The following is a schedule of the status as of December 31, 1997, of the
Apartment Complexes owned by Local Partnerships in which CHTC III was a limited
partner as of December 31, 1997.
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH CHTC III HAS AN INVESTMENT
AS OF DECEMBER 31, 1997
Percentage of
No. of Units Units Total Units
Units Completed Occupied Occupied
----- --------- -------- -----------
Name & Location
Almond Garden 34 34 34 100%
Delhi, California
Almond View 72 72 69 96%
Stockton, California
Buccaneer 48 48 46 96%
Fernandia Beach, Florida
Candleridge - Perry II 24 24 24 100%
Perry, Iowa
Colonial Village 56 56 54 97%
Roseville, California
Dallas County Housing 19 19 18 95%
Dallas, North Carolina
La Paloma del Sol 38 38 34 90%
Deming, New Mexico
Memory Lane 18 18 18 100%
Yankton, South Dakota
Neuva Sierra Vista 35 35 34 97%
Richgrove, California
Old Fort 40 40 40 100%
Hidalgo, Texas
Orosi 42 42 41 98%
Orosi, California
Parlier Garden 41 41 41 100%
Parlier, California
Rosewood Housing 20 20 19 95%
Superior, Wisconsin
Sun Manor 36 36 36 100%
Itta Bena, Mississippi
Tahoe Pines 56 56 56 100%
South Lake Tahoe, California
Venus Retirement 24 24 23 96%
Venus, Texas
Walnut Pixlie 22 22 22 100%
Orange, California
Winters Seniors 38 38 38 100%
Winters, California
--- --- --- ----
663 663 647 98%
=== === === ====
5
Item 2. Properties
Through its investment in Local Limited Partnerships CHTC III holds interests in
Apartment Complexes. See Item 1 for information pertaining to these Apartment
Complexes.
Item 3. Legal Proceedings
NONE.
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The 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 Unit. Units can be assigned only if certain
requirements in the Partnership's Agreement of Limited Partnership ("Partnership
Agreement") are satisfied.
(b) At December 31, 1997, there were 961 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships. The Limited Partners received Low
Income Housing Credits per Unit as follows
1997 1996
------ ------
Federal $113 $113
California 66 85
---- ----
$179 $198
==== ====
6
Item 6. Selected Financial Data
Years ended December 31
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Revenues $57,270 $74,947 $145,959 $ 156,271 $ 22,885
Partnership operating
expenses (262,855) (272,670) (251,382) (128,063) (7,204)
Equity in losses from
limited partnerships (1,028,617) (1,132,216) (1,115,114) (352,511) (33,260)
----------- ----------- ---------- -------- -------
Net loss $(1,234,193) ($1,329,939) $(1,260,537) $ (324,303) $ (17,579)
========= ============ ========= ========= ========
Net loss per weighted
limited partner unit $(68) $(73) $ (69) $ (49) $ (4)
== == === ===== ======
Total assets $11,854,033 $12,951,383 $14,948,952 $19,495,570 $ 11,068,449
========== =========== ========== ========== ===========
Investments in
limited partnerships $10,400,720 $11,447,928 $13,032,752 $14,368,908 $6,639,387
========== ========== ========== =========== =========
Payable to
limited partnerships $16,836 $16,836 $651,094 $ 4,400,927 $ 4,205,150
====== ======= ======= =========== ===========
Accrued fees and expenses
due to
affiliates $370,223 $233,380 $240,188 $ 0 $66,449
======= ======= ======= ===== =======
Due to Limited Partners $900,000 $ 0 $ 0 $ 0 $ 0
======= ===== ===== ===== =====
The Partnership was organized on October 5, 1992 and had only minimal activity
until July 19, 1993, the date the Partnership's minimum offering requirement was
satisfied. The Partnership's Offering of Units commenced on February 17, 1993.
Due to these factors and the nature of the Partnership's business (i.e., raising
capital and acquiring Local Limited Partnership Interests over the first several
years of its term), the data provided above will not be directly comparable from
year to year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Liquidity and Capital Resources
- -------------------------------
The Partnership raised approximately $18,000,000 from the sale of Units and
returned to its Limited Partners $900,000 ($50 per Unit) in January, 1998.
Approximately $14,400,000 of which has been committed to the purchase price and
acquisition fees and costs of investments in 18 Local Limited Partnership
Interests. The Partnership had made capital contributions to Local Limited
Partnerships in the amount of approximately $12,576,000 as of December 31, 1997
and an additional 17,000 has been so committed.
At December 31, 1997 the Partnership is indebted to an affiliate of the General
Partner in the amount of approximately $370,200. The component items of such
indebtedness are as follows: accrued management fees and advances for expenses
of approximately $369,500 and 700, respectively.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $47,000 for the year
ended December 31, 1997. This decrease in cash consists of cash used in the
Partnership's operating activities and investing activities of approximately
$7,000 and $40,000, respectively. Cash provided from investing activities
consisted of distributions from Local Limited Partnerships of approximately
$16,000 and cash used consisted primarily acquisition fees and costs of
approximately $56,000. Cash provided by operating activities consisted primarily
of interest income. Cash used consisted primarily of payments for operating fees
and expenses. The major components of all these activities are discussed in
greater detail below.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $418,200 for the year
ended December 31, 1996. This decrease in cash consists of cash used in the
Partnership's operating activities, investing activities and financing
activities of approximately $143,300, $248,300 and $26,600, respectively. Cash
provided from investing activities consisted of distributions from Local Limited
Partnerships of approximately $6,400 and cash used consisted primarily of
capital contributions to Local Limited Partnerships and acquisition costs and
fees of approximately $220,700 and 33,900, respectively. Cash used in financing
activities consisted payments of offering costs. Cash provided by operating
activities consisted primarily of interest income. Cash used consisted primarily
of payments for operating fees and expenses. The major components of all these
activities are discussed in greater detail below.
Prior to sale of the Apartment Complexes, it is not expected that any of the
Local Limited Partnerships in which the Partnership has invested or will invest
will generate cash sufficient to provide distributions to The Partnership of any
material amount. Distributions to the Partnership would first by used to meet
operating expenses of the Partnership, including the payment of the Asset
Management Fee to the General Partner. See Item 11 hereof. As a result, it is
not anticipated that the Partnership will provide distributions to the Limited
Partners prior to the same of the Apartment Complexes.
8
The Partnership's investments are not readily marketable and may be affected by
adverse general economic conditions which, in turn, could substantially increase
the risk of operating losses for the Apartment Complexes, the Local Limited
Partnerships and the Partnership. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Limited Partnership Interests is sufficient to fund the Partnership's
operations.
Upon completion of its public offering (July 22, 1994) the Partnership
established working capital reserves of approximately 3% of the Limited
Partners' capital contributions. This amount is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership including payment of the asset management fee as well as expenses
attendant to the preparation of tax returns and reports to the Limited Partners
and other investor servicing obligations of the Partnership. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnership's liquidity could also be affected by defaults
or delays in payment of the Limited Partners' promissory notes, from which a
portion of the working capital reserves is expected to be funded. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
of the Partnership, it is anticipated that additional funds would be sought
through bank loans or other institutional financing. The General Partner may
also apply any cash distributions received from the Local Limited Partnerships
for such purposes or to replenish or increase working capital reserves.
As part of its application for government assistance, each Local Limited
Partnership must establish to the satisfaction of the agency providing the
government assistance that the Local Limited Partnership will have sufficient
funds to complete construction or rehabilitation of its apartment complex. None
of the Local Limited Partnerships has any material capital commitments other
than the completion of its Apartment Complex.
Under its partnership agreement the Partnership does not have the ability to
assess its partners for additional capital contributions to provide capital if
needed by the Partnership or Local Limited Partnerships. Accordingly, if
circumstances arise that cause the Local Limited Partnerships to require capital
in addition to that contributed by the Partnership and any equity of the local
general partners, the only sources from which such capital needs will be able to
be satisfied (other than the limited reserves available at the Partnership
level) will be (i) third-party debt financing (which may not be available, if,
as expected, the apartment complexes owned by the local limited partnerships are
already substantially leveraged), (ii) additional equity contributions or
advances of the local general partners, (iii) other equity sources (which could
adversely affect the Partnership's interest in tax credits, cash flow and/or
proceeds of sale or refinancing of the apartment complexes and result in adverse
tax consequences to the limited partners), or (iv) the sale or disposition of
the apartment complexes (which could have the same adverse effects as discussed
in (iii) above). There can be no assurance that funds from any of such sources
would be readily available in sufficient amounts to fund the capital requirement
of the local limited partnerships in question. If such funds are not available,
the Local Limited Partnerships would risk foreclosure on their apartment
complexes if they were unable to renegotiate the terms of their first mortgages
and any other debt secured by the apartment complexes to the extent the capital
requirements of the local limited partnerships relate to such debt.
The Partnership's capital needs and resources are expected to undergo major
changes at least through 1994 as a result of the completion of its offering of
Units and its acquisition of investments. Thereafter, the Partnership's capital
needs and resources are expected to be relatively stable over the holding
periods of the investments.
9
Item 8. Financial Statements and Supplementary Data
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
FINANCIAL STATEMENTS
For The Years Ended December 31, 1997, 1996 and 1995
with
INDEPENDENT AUDITORS' REPORT THEREON
INDEPENDENT AUDITORS' REPORT
To the Partners
WNC California Housing Tax Credits III, L.P.
We have audited the accompanying balance sheets of WNC California Housing Tax
Credits III, L.P. (a California Limited Partnership) (the "Partnership") as of
December 31, 1997 and 1996, and the related statements of operations, partners'
equity (deficit) and cash flows for the years ended December 31, 1997, 1996 and
1995. 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 did not audit the financial statements of the
limited partnerships in which WNC California Housing Tax Credits III, L.P. is a
limited partner. These investments as discussed in Note 2 to the financial
statements are accounted for by the equity method. The investments in these
limited partnerships represented 88% of the total assets of WNC California
Housing Tax Credits III, L.P. at December 31, 1997 and 1996. Substantially all
of the financial statements of the limited partnerships were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for those limited partnerships, is based solely
on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits and the reports of other auditors 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 California Housing Tax Credits III, L.P. (a
California Limited Partnership) as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
/s/Corbin & Wertz
-----------------
CORBIN &WERTZ
Irvine, California
April 6, 1998
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
1997 1996
----------------- ------------------
ASSETS
Cash and cash equivalents $ 1,451,071 $ 1,498,036
Investments in limited partnerships (Note 2) 10,400,720 11,447,928
Other assets 2,242 5,419
---------------- -----------------
$ 11,854,033 $ 12,951,383
================ =================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 4) $ 16,836 $ 16,836
Due to General Partner and affiliates (Note 3) 370,223 233,380
Due to limited partners (Note 7) 900,000 -
---------------- -----------------
Total liabilities 1,287,059 250,216
---------------- -----------------
Partners' equity (deficit):
General partners (64,461) (52,119)
Limited partners (30,000 units authorized; 18,000
units issued and outstanding at December 31, 1997
and 1996) 10,631,435 12,753,286
---------------- -----------------
Total partners' equity 10,566,974 12,701,167
---------------- -----------------
$ 11,854,033 $ 12,951,383
================ =================
See accompanying notes to financial statements
FS-2
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
----------------- ------------------ ------------------
Interest income $ 57,279 $ 74,947 $ 145,959
----------------- ---------------- -----------------
Operating expenses:
Amortization 58,596 57,933 57,466
Partnership management fees (Note 3) 186,166 186,422 173,406
Bad debt expense - 8,680 -
Office 18,093 19,635 20,510
----------------- ---------------- -----------------
Total operating expenses 262,855 272,670 251,382
----------------- ---------------- -----------------
Loss from operations (205,576) (197,723) (105,423)
Equity in losses from limited partnerships
(Note 2) (1,028,617) (1,132,216) (1,155,114)
----------------- ---------------- -----------------
Net loss $ (1,234,193) $ (1,329,939) $ (1,260,537)
================= ================ ================
Net loss allocable to:
General partner $ (12,342) $ (13,300) $ (12,605)
================= ================ ================
Limited partners $ (1,221,851) $ (1,316,639) $ (1,247,932)
================= ================ ================
Net loss per weighted limited partner
units $ (67.88) $ (73.15) $ (69.33)
================ ================ ===============
Outstanding weighted limited partner
units 18,000 18,000 18,000
================ ================ ===============
See accompanying notes to financial statements
FS-3
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1997, 1996 and 1995
General Partner Limited Partners
Total
----------------- ------------------ ------------------
Equity (deficit) - January 1, 1995 $ (26,804) $ 15,121,447 $ 15,094,643
Capital contributions - 10,000 10,000
Collection of notes receivable (Note 6) - 205,000 205,000
Offering costs 856 7,708 8,564
Net loss (12,605) (1,247,932) (1,260,537)
----------------- ---------------- -----------------
Equity (deficit) - December 31, 1995 (38,553) 14,096,223 14,057,670
Offering costs (266) (26,298) (26,564)
Net loss (13,300) (1,316,639) (1,329,939)
----------------- ---------------- -----------------
Equity (deficit) - December 31, 1996 (52,119) 12,753,286 12,701,167
Return of capital (Note 7) - (900,000) (900,000)
Net loss (12,342) (1,221,851) (1,234,193)
----------------- ---------------- -----------------
Equity (deficit) - December 31, 1997 $ (64,461) $ 10,631,435 $ 10,566,974
================= ================ =================
See accompanying notes to financial statements
FS-4
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
----------------- ------------------ ------------------
Cash flows from operating activities:
Net loss $ (1,234,193) $ (1,329,939) $ (1,260,537)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Amortization 58,596 57,933 57,466
Bad debt - 8,680 -
Equity in loss of limited partnerships 1,028,617 1,132,216 1,155,114
Change in other assets 3,177 (5,419) 19,960
Change in receivable from affiliate - - 216,645
Change in accrued fees and expenses
due to general partner and affiliate 136,843 (6,808) 248,752
----------------- ---------------- -----------------
Net cash provided by (used in) operating
activities (6,960) (143,337) 437,400
----------------- ---------------- -----------------
Cash flows from investing activities:
Investments in limited partnerships, net - (220,733) (3,636,150)
Capitalized acquisition costs and fees (55,994) (33,906) -
Change in cash in escrow - - 2,090,570
Distributions from limited partnerships 15,989 6,376 9,893
----------------- ---------------- -----------------
Net cash used in investing activities (40,005) (248,263) (1,535,687)
----------------- ---------------- -----------------
Cash flows from financing activities:
Capital contributions from limited
partnerships - - 215,000
Offering costs - (26,564) -
----------------- ---------------- -----------------
Net cash (used in) provided by financing
activities - (26,564) 215,000
----------------- ---------------- -----------------
Net decrease in cash and cash equivalents (46,965) (418,164) (883,287)
Cash and cash equivalents, beginning of
year 1,498,036 1,916,200 2,799,487
----------------- ---------------- -----------------
Cash and cash equivalents, end of year $ 1,451,071 $ 1,498,036 $ 1,916,200
================= ================ =================
Continued
See accompanying notes to financial statements
FS-5
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
----------------- ------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid $ - $ - $ -
================ =============== ================
Taxes paid $ 800 $ 800 $ 800
================= ================ =================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
During 1996 and 1995, the Partnership had $422,205 and $140,766,
respectively, of investments in limited partnerships returned through tax
credit adjustments reflected as a reduction in the payables to limited
partnerships.
During 1996 and 1995, the Partnership adjusted offering costs and accrued
fees and expenses due to General Partner and affiliates by $(26,564) and
$8,564, respectively (see Note 1).
See accompanying notes to financial statements
FS-6
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC California Housing Tax Credits III, L.P. (the "Partnership") was formed
under the California Revised Limited Partnership Act on October 5, 1992 and
began operations on July 19, 1993. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that qualify for low income housing credits.
The general partner is WNC California Tax Credit Partners III, L.P. (the
"General Partner"), a California limited partnership. WNC & Associates, Inc. is
the general partner of the General Partner. The Cooper Trust owns 70% of the
outstanding stock of WNC & Associates, Inc. John B. Lester is the original
limited partner of the Partnership and owns, through the Lester Family Trust,
30% of the outstanding stock of WNC & Associates, Inc.
The Partnership Agreement authorized the sale of up to 30,000 units of Limited
Partnership Interests at $1,000 per Unit ("Units"). The offering of Units
concluded in July 1994 at which time 17,990 Units in the amount of $17,990,000
had been accepted. During 1995, an additional 10 units amounting to $10,000 was
collected on subscriptions accepted and previously deemed uncollectible. The
general partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and the General Partner has
received a subordinated disposition fee (as described in Note 3), 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.
The Partnership's investments in limited partnerships are subject to the risks
incident to the management and ownership of multifamily residential real estate,
and include the risks that neither the Partnership's investments nor the
apartment complexes owned by the limited partnerships will be readily
marketable. Additionally there can be no assurance that the Partnership will be
able to dispose of its interests in the limited partnerships. The value of the
Partnership's investments will be subject to changes in national and local
economic conditions, including unemployment conditions, which could adversely
impact vacancy levels, rental payment defaults and operating expenses. This, in
turn, could substantially increase the risk of operating losses for the
apartment complexes and the Partnership. The apartment complexes could be
subject to loss through foreclosure. In addition, each limited partnership is
subject to risks relating to environmental hazards which might be uninsurable.
Because the Partnership's ability to control its operations will depend on these
and other factors beyond the control of the General Partner and the general
partners of the limited partnerships, there can be no assurance that Partnership
operations will be profitable or that the anticipated housing tax credits will
be available to limited partners.
FS-7
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Method of Accounting For Investments in Limited Partnerships
- ------------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of each limited partnership's results of operations and
for any distributions received. The accounting policies of the limited
partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments in limited partnerships are capitalized
as part of the investment account and are being amortized over 30 years (see
Note 2).
Losses from operating partnerships allocated to the Partnership are not
recognized to the extent that the investment balance would be adjusted below
zero.
Cash and Cash Equivalents
- -------------------------
The partnership considers highly liquid investments with remaining maturities of
three months or less when purchased to be cash equivalents. At December 31, 1997
and 1996, the Partnership had cash equivalents totaling $942,685 and $1,291,287,
respectively.
Concentration of Credit Risk
- ----------------------------
At December 31, 1997, the Partnership maintained cash balances at certain
financial institutions in excess of the federally insured amounts.
Offering Costs
- --------------
Offering costs consist of underwriting commissions, legal fees, printing, filing
and recordation fees, and other costs incurred with selling units. The General
Partner is obligated to pay all offering and organization costs in excess of 15%
(including sales commissions) of the total offering proceeds. Offering costs are
reflected as a reduction of partners' capital. Through December 31, 1997, the
Partnership had recorded offering and selling expenses of $926,564 and
$1,440,000, respectively.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
FS-8
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Net Loss Per Weighted Limited Partner Units
Net loss per weighted limited partner units was computed by dividing the limited
partners' share of net loss by the weighted number of limited partner units
outstanding during the respective periods.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of December 31, 1997, the Partnership had acquired limited partnership
interests in eighteen limited partnerships, which own and operate apartment
complexes consisting of 663 apartment units. The respective general partners of
the limited partnerships manage the day-to-day operations of the limited
partnerships. Significant limited partnership business decisions require
approval from the Partnership. The Partnership, as a limited partner, is
generally entitled to 99% of the operating profits and losses of the limited
partnerships.
The Partnership's investments in limited partnerships as shown in the
accompanying balance sheets at December 31, 1997 and 1996 are approximately
$1,640,000 and $1,637,000, respectively, greater than the Partnership's equity
as shown in the limited partnerships' combined financial statements,
respectively. This difference is due to unrecorded losses, as discussed below,
and to acquisition costs related to the acquisition of the investments that have
been capitalized in the Partnership's investment account and capital
contributions accrued but not paid by the Partnership. The capitalized
acquisition costs are being amortized over 30 years (see Note 3).
Equity in losses of limited partnerships is recognized in the financial
statements until the related investment account is reduced to a zero balance.
Losses incurred after the investment account is reduced to zero are not
recognized. If the 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.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income.
At December 31, 1997, the investment accounts in certain limited partnerships
have reached a zero balance. Consequently, the Partnership's share of losses
during the year ended December 31, 1997 amounting to approximately $15,000 have
not been recognized. As of December 31, 1997, the aggregate share of net losses
not recognized by the Partnership amounted to $15,000.
FS-9
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
Following is a summary of the equity method activity of the investments in
limited partnerships for the years ended December 31:
1997 1996
----------------- ------------------
Investments, beginning of year $ 11,447,928 $ 13,032,752
Tax credit adjustments - (422,205)
Capitalized acquisition costs and acquisition fees 55,994 33,906
Losses in equity of limited partnerships (1,028,617) (1,132,216)
Distributions (15,989) (6,376)
Amortization of capitalized acquisition costs and fees (58,596) (57,933)
---------------- -----------------
Investments, end of year $ 10,400,720 $ 11,447,928
================ =================
The financial information from the individual financial statements of the
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 limited partnerships as of December 31
and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
ASSETS 1997 1996
----------------- ------------------
Buildings and improvements, net of accumulated depreciation
for 1997 and 1996 of $4,188,000 and $2,968,000,
respectively $ 31,657,000 $ 32,866,000
Land 2,380,000 2,380,000
Other assets 1,746,000 1,660,000
---------------- -----------------
Total assets $ 35,783,000 $ 36,906,000
================ =================
LIABILITIES
Mortgage and construction loans payable $ 24,528,000 $ 24,593,000
Other liabilities (including due to related parties
of $715,000 and $762,000 as of December 31,
1997 and 1996, respectively) 1,495,000 1,496,000
---------------- -----------------
Total liabilities 26,023,000 26,089,000
---------------- -----------------
PARTNERS' CAPITAL
WNC California Housing Tax Credits III, L.P. 8,761,000 9,811,000
Other partners 999,000 1,006,000
--------------- -----------------
Total partners' capital 9,760,000 10,817,000
--------------- -----------------
$ 35,783,000 $ 36,906,000
================ =================
FS-10
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1997 1996 1995
--------------- ---------------- ----------------
Total revenues $ 2,895,000 $ 2,786,000 $ 2,622,000
-------------- -------------- ---------------
Expenses:
Operating expenses 1,779,000 1,689,000 1,509,000
Interest expense 950,000 968,000 1,066,000
Depreciation and amortization 1,220,000 1,273,000 1,214,000
-------------- -------------- ---------------
Total expenses 3,949,000 3,930,000 3,789,000
-------------- -------------- ---------------
Net loss $ (1,054,000) $ (1,144,000) $ (1,167,000)
============== ============== ===============
Net loss allocable to the Partnership $ (1,044,000) $ (1,132,000) $ (1,155,000)
============== ============== ===============
Certain limited partnerships have incurred significant operating losses and have
working capital deficiencies. In the event these limited partnerships continue
to incur significant operating losses, additional capital contributions by the
Partnership may be required to sustain the operations of such limited
partnerships. If additional capital contributions are not made when they are
required, the Partnership's investment in certain of such limited partnerships
could be impaired.
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 items:
Acquisition fees equal to 9% of the gross proceeds from the sale of
partnership units as compensation to the General Partner for services
rendered to the Partnership in connection with the acquisition of
limited partnerships. As of December 31, 1997 and 1996, acquisition
fees of $1,620,000 have been incurred and included in the
Partnership's investment in limited partnerships. Accumulated
amortization amounted to $203,029 and $149,033 as of December 31, 1997
and 1996, respectively.
FS-11
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
Reimbursement of costs incurred by an affiliate of the General Partner
in connection with the acquisition of limited partnerships. These
reimbursements have not exceeded 1.5% of the gross proceeds. As of
December 31, 1997 and 1996, the Partnership has incurred acquisition
costs of $194,019 and $138,025, respectively, which have been included
in the Partnership's investment in limited partnerships. Accumulated
amortization amounted to $12,723 and $8,123 as of December 31, 1997
and 1996, respectively.
An annual management fee equal to 0.5% of the invested assets of the
limited partnerships, including the Partnership's allocable share of
the mortgages. Fees of $186,166, $186,422 and $173,406 were incurred
for 1997, 1996 and 1995, respectively. Fees of $50,000 and $200,000
were paid during 1997 and 1996, respectively. No amounts were paid
during 1995.
A subordinated disposition fee in an amount equal to 1% of the sales
price of any property sold. Payment of this fee to the General Partner
is subordinated to the limited partners receiving a 6% preferred
return (as defined in the partnership agreement) and is payable only
if the General Partner or its affiliates render services.
Due to General Partner and affiliates as of December 31, 1997 and 1996 consist
of the following:
1997 1996
----------------- ------------------
Working capital advances due to affiliate $ 688 $ 11
Annual management fees accrued 369,535 233,369
---------------- -----------------
$ 370,223 $ 233,380
================ =================
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
- -----------------------------------------
Payables to limited partnerships at December 31, 1997 and 1996, represent
amounts which are due at various times based on conditions specified in the
respective limited partnership agreements. These contributions are payable in
installments and are generally due upon the limited partnerships achieving
certain operating and development benchmarks and are expected to be paid
generally within two years of the Partnership's initial investment.
NOTE 5 - INCOME TAXES
- ---------------------
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
FS-12
NOTE 6 - INVESTOR NOTES RECEIVABLE
- ----------------------------------
As of December 31, 1994, the Partnership had received notes receivable of
$205,000 in connection with the sale of partnership units. Limited partners who
subscribed for ten or more units of limited partnership interest ($10,000) could
elect to pay 50% of the purchase price in cash upon subscription and the
remaining 50% by the delivery of a promissory note payable, together with
interest at the rate of 11% per annum, due no later than 13 months after the
subscription date. Since such notes were not collected prior to the issuance of
the Partnerships' financial statements, the balance was reflected as a reduction
of partners' equity in previous financial statements. During 1995, the
Partnership collected the $205,000 of notes receivable.
NOTE 7 - DUE TO LIMITED PARTNERS
- --------------------------------
Due to limited partners at December 31, 1997, represents a return of capital to
Unit holders of $50 per Unit. Such amounts were paid in January 1998.
FS-13
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NONE
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc.
The directors of Associates are Wilfred N. Cooper, Sr., who serves as Chairman
of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N. Cooper, Jr. and
Kay L. Cooper. Substantially all of the shares of Associates are owned by
Wilfred N. Cooper, Sr., through the Cooper Revocable Trust, and John B. Lester,
Jr., through the Lester Family Trust.
WILFRED N. COOPER, SR., age 67, has been the principal shareholder and a
Director of WNC & ASSOCIATES, INC. since its organization in 1971, of SHELTER
RESOURCE CORPORATION since its organization in 1981 and of WNC RESOURCES, INC.
from its organization in 1988 through its acquisition by WNC & ASSOCIATES, INC.
in 1991, serving as President of those companies until 1992 and as Chief
Executive Officer since 1992, and has been a Director of WNC CAPITAL CORPORATION
since its organization. He is also a general partner with WNC & ASSOCIATES, INC.
in WNC FINANCIAL GROUP, L.P. and WNC TAX CREDIT PARTNERS, L.P. During 1970 and
1971 he was a principal of Creative Equity Development Corporation, a
predecessor of WNC & ASSOCIATES, INC., and of Creative Equity Corporation, a
real estate investment firm. For 12 years prior to that, Mr. Cooper was employed
by Rockwell International Corporation, last serving as its manager of housing
and urban developments. Previously, he had responsibility for new business
development including factory-built housing evaluation and project management in
urban planning and development. Mr. Cooper is a Director of the Executive
Committee of the National Association of Home Builders (NAHB) and a past
Chairman of the NAHB's Rural Housing Council, a Director of the National Housing
Conference, a Director of the Affordable Housing Tax Credit Coalition, a past
President of the California Council of Affordable Housing (CCAH) (formerly Rural
Builders Council of California), and a past President of Southern California
Chapter II of the Real Estate Syndication and Securities Institute (RESSI) of
the National Association of Realtors (NAR). Mr. Cooper graduated from Pomona
College in 1956 with a Bachelor of Arts degree.
JOHN B. LESTER, JR., age 64, has been a shareholder, a Director and Secretary of
WNC & ASSOCIATES, INC. since 1986, Executive Vice President from 1986 to 1992,
and President and Chief Operating Officer since 1992, and has been a Director of
WNC CAPITAL CORPORATION since its organization. He was a shareholder, Executive
Vice President, Secretary and a Director of WNC RESOURCES, INC. from 1988
through its acquisition by WNC & ASSOCIATES, INC. in 1991. From 1973 to 1986 he
was Chairman of the Board and Vice President or President of E & L Associates,
Inc., a provider of engineering and construction services to the oil refinery
and petrochemical industries which he co-founded in 1973. Mr. Lester is a former
Director of the Los Angeles Chapter of the Associated General Contractors of
California. His responsibilities at WNC & ASSOCIATES, INC. include property
acquisitions and company operations. Mr. Lester graduated from the University of
Southern California in 1956 with a Bachelor of Science degree in Mechanical
Engineering.
11
DAVID N. SHAFER, age 45, has been a Director of WNC & ASSOCIATES, INC. since
1997, a Senior Vice President since 1992, and General Counsel since 1990, and
served as Asset Management Director from 1990 to 1992, and has been a Director
and Secretary of WNC Management, Inc. since its organization. Previously he was
employed as an associate attorney by the law firms of Morinello, Barone, Holden
& Nardulli from 1987 until 1990, Frye, Brandt & Lyster from 1986 to 1987 and
Simon and Sheridan from 1984 to 1986. Mr. Shafer is a Director and President of
CCAH, a member of NAHB's Rural Housing Council, a past President of Southern
California Chapter II of RESSI, a past Director of the Council of Affordable and
Rural Housing and Development 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 and from the University of San Diego in 1986 with a Master
of Law degree in Taxation.
WILFRED N. COOPER, JR., age 35, has been employed by WNC & ASSOCIATES, INC.
since 1988 and has been a Director since 1997 Executive Vice President since
1998, and a Senior Vice President since 1992. Mr. Cooper heads the Acquisition
Originations department at WNC, has been President of, and a registered
principal with, WNC CAPITAL CORPORATION, a member firm of the NASD, since its
organization, and has been a Director of WNC Management Inc. since its
organization. Previously, he was employed as a government affairs assistant by
Honda North America from 1987 to 1988, and as a legal assistant with respect to
Federal legislative and regulatory matters by the law firm of Schwartz, Woods
and Miller from 1986 to 1987. Mr. Cooper is an alternate director and member of
NAHB's Rural Housing Council and serves as Chairman of its Membership Committee.
Mr. Cooper graduated from The American University in 1985 with a Bachelor of
Arts degree.
THEODORE M. PAUL, age 42, has been Vice President - Finance of WNC & ASSOCIATES,
INC. since 1992 and Chief Financial Officer since 1990, and has been a Director
and Chief Financial Officer of WNC Management Inc. since its organization.
Previously, he was a Vice President and Chief Financial Officer of National
Partnership Investments Corp., a sponsor and general partner of syndicated
partnerships investing in affordable rental housing qualified for tax credits,
from 1986 until 1990, and was employed as an associate by the accounting firms
of Laventhol & Horwath, during 1985, and Mann & Pollack Accountants, from 1979
to 1984. Mr. Paul is a member of the California Society of Certified Public
Accountants and the American Institute of Certified Public Accountants. His
responsibilities at WNC & ASSOCIATES, INC. include supervision of investor
partnership accounting and tax reporting matters and monitoring the financial
condition of the Local Limited Partnerships in which the Partnership will
invest. Mr. Paul graduated from the University of Illinois in 1978 with a
Bachelor of Science degree and is a Certified Public Accountant in the State of
California.
THOMAS J. RIHA, age 43, has been Vice President - Asset Management of WNC &
ASSOCIATES, INC. since 1994, and has been a Director and Chief Executive Officer
of WNC Management Inc. since its organization. He has more than 17 years'
experience in commercial and multi-family real estate investment and management.
Previously, Mr. Riha was employed by Trust Realty Advisor, a real estate
acquisition and management company, from 1988 to 1994, last serving as Vice
President - Operations. His responsibilities at WNC & ASSOCIATES, INC. include
monitoring the operations and financial performance of, and regulatory
compliance by, properties in the WNC portfolio. 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 in the State of California and a member of the
American Institute of Certified Public Accountants.
12
SY P. GARBAN, age 52, has 20 years' experience in the real estate securities and
syndication industry. He has been associated with WNC & ASSOCIATES, INC., since
1989, serving as National Sales Director through 1992 and as Vice President -
National Sales since 1992. Previously, he was employed as Executive Vice
President by MRW, Inc., Newport Beach, California from 1980 to 1989, a real
estate development and management firm. Mr. Garban is a member of the
International Association of Financial Planners. He graduated from Michigan
State University in 1967 with a Bachelor of Science degree in Business
Administration.
CARL FARRINGTON, age 55, has been associated with WNC & ASSOCIATES, INC. since
1993, and has served as Director - Originations since 1994. Mr. Farrington has
more than 12 years' experience in finance and real estate acquisitions.
Previously, he served as Acquisitions Director for The Arcand Company from 1991
to 1993, and as Treasurer and Director of Finance and Administrator for Polytron
Corporation from 1988 to 1991. Mr. Farrington is a member and Director of the
Council of Affordable and Rural Housing and Development. Mr. Farrington
graduated from Yale University with a Bachelor of Arts degree in 1966 and from
Dartmouth College with a Master of Business Administration in 1970.
DAVID TUREK, age 43, has been Director - Originations of WNC & ASSOCIATES, INC.
since 1996. He has 23 years' experience in real estate finance and acquisitions.
Previously, from 1995 to 1996 Mr. Turek served as a consultant for a national
Low Income Housing Credit sponsor where he was responsible for on-site
feasibility studies and due diligence analyses of Low Income Housing Credit
properties, from 1992 to 1995 he served as Executive Vice President for Levcor,
Inc., a multi-family development company, and from 1990 to 1992 he served as
Vice President for the Paragon Group where he was responsible for Low Income
Housing Credit development activities. Mr. Turek graduated from Southern
Methodist University in 1976 with a Bachelor of Business Administration degree.
N. PAUL BUCKLAND, age 36, has been employed by WNC & ASSOCIATES, INC. since 1994
and currently serves as Vice President Acquisitions. He has 11 years' experience
in analysis pertaining to the development of multi-family and commercial
properties. Previously, from 1986 to 1994 he served on the development team of
the Bixby Ranch which constructed more than 700 apartment units and more than
one million square feet of "Class A" office space in California and neighboring
states, and from 1984 to 1986 he served as a land acquisition coordinator with
Lincoln Property Company where he identified and analyzed multi-family
developments. Mr. Buckland graduated from California State University, Fullerton
in 1992 with a Bachelor of Science degree in Business Finance.
MICHELE M. TAYLOR, age 43, has been employed by WNC & ASSOCIATES, INC. since
1986, serving as a paralegal and office manager, and currently is the Investor
Services Director. Previously she was self-employed between 1982 and 1985 in
non-financial services activities and from 1978 to 1981 she was employed as a
paralegal by a law firm which specialized in real estate limited partnership
transactions. Ms. Taylor graduated from the University of California, Irvine in
1976 with a Bachelor of Arts degree.
13
THERESA I. CHAMPANY, age 40, has been employed by WNC & ASSOCIATES, INC. since
1989 and currently is the Marketing Services Director and a registered principal
with WNC CAPITAL CORPORATION. Previously, she was employed as Manager of
Marketing Services by August Financial Corporation from 1986 to 1989 and as
office manager and Assistant to the Vice President of Real Estate Syndications
by McCombs Securities Co., Inc. from 1979 to 1986. Ms. Champany attended
Manchester (Conn.) Community College from 1976 to 1978.
KAY L. COOPER, age 61, has been an officer and Director of WNC & ASSOCIATES,
INC. since 1971 and of WNC RESOURCES, INC. from 1988 through its acquisition by
WNC & ASSOCIATES, INC. in 1991. Mrs. Cooper has also been the sole proprietor of
Agate 108, a manufacturer and retailer of home accessory products, since 1975.
She is the wife of Wilfred N. Cooper, Sr., the mother of Wilfred N. Cooper, Jr.
and the sister of John B. Lester, Jr. Mrs. Cooper graduated from the University
of Southern California in 1958 with a Bachelor of Science degree.
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates for the following fees:
(a) Organization and Offering Expenses. The Partnership paid the General Partner
or its affiliates as of December 31, 1997 $2,366,564, consisting of commissions
and other fees and expenses of the Partnership's offering of Units of $1,440,000
and $926,564, respectively. Of the total paid to the General Partner or its
affiliates, all of the amount of $2,366,564 was paid (reallowed) to unaffiliated
persons participating in the Partnership's offering or rendering other services
in connection with the Partnership's offering.
(b) Acquisition fees in an amount equal to 9% of the gross proceeds of the
Partnership's offering ("Gross Proceeds"). Through December 31, 1997, the
aggregate amount of acquisition fees of $1,620,000 have been paid or are due to
the General Partner or its affiliates.
(c) The Partnership reimbursed the General Partner or its affiliates as of
December 31, 1997 for acquisition expenses which have not exceeded 1.5% of Gross
Proceeds, expended by such persons on behalf of the Partnership in the amount of
approximately $194,000.
(d) An annual asset management fee in an amount equal to 0.5% of invested assets
(the sum of the Partnership's Investment in Local Limited Partnership Interests
and the Partnership's allocable share of the amount of the mortgage loans on and
other debts related to, the Apartment Complexes owned by such Local Limited
Partnerships.). Fees of $186,166, $186,422 and $173,406 were incurred for 1997,
1996, and 1995, respectively. The Partnership paid the General Partner or its
affiliates $50,000 and $200,000 of those fees in 1997 and 1996, respectively. No
amounts were paid in 1995.
(e) A subordinated disposition fee in an amount equal to 1% of the sale price
received in connection with the sale or disposition of an Apartment Complex or
Local Limited Partnership Interest. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital contributions
and payment of the Return on Investment to the Limited Partners. "Return on
Investment" means an annual, cumulative but not compounded, "return" to the
Limited Partners (including Low Income Housing Credits) as a class on their
adjusted capital contributions commencing for each Limited Partner on the last
day of the calendar quarter during which the Limited Partner's capital
contribution is received by the Partnership, calculated at the following rates:
(i) 16% through December 31, 2003, and (ii) 6% for the balance of the
Partnerships term. No disposition fees have been paid.
(f) The General Partner was allocated federal and California Housing Tax Credits
as follows:
1997 1996
---- ----
Federal $20,481 $20,481
California 11,975 15,391
-------- --------
Total $32,456 $35,872
======= =======
14
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
No person is known to the General Partner to own beneficially in excess of 5% of
the outstanding Units.
Security Ownership of Management
- --------------------------------
(a) Security Ownership of Certain Beneficial Owners
No person is known to own beneficially in excess of 5% of the outstanding
Limited Partnership Interests.
(b) Security Ownership of Management
Neither the General Partner, its affiliates nor any of the officers or
directors of Associates or its affiliates own directly or beneficially any
limited partnership interests in the Partnership.
(c) Changes in Control
The management and control of the General Partners 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 anytime remove the General
Partner of the Partnership and elect a successor General Partner
15
Item 13. Certain Relationships and Related Transactions
All of the Partnership's affairs are managed by the General Partner, through
Associates. The transactions with the General Partner and Associates are
primarily in the form of fees paid by the Partnership for services rendered to
the Partnership, as discussed in Item 11 and in the notes to the accompanying
financial statements.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Financial Statements:
Report of independent public accountants.
Balance sheet as of December 31, 1997 and 1996.
Statements of Operations for the years ended December 31, 1997, 1996, and 1995.
Statement of Partners' Equity for the years ended December 31, 1997, 1996, and
1995.
Statements of Cash Flows for the years ended December 31, 1997, 1996, and 1995.
Notes to Financial Statements.
Financial Statement Schedules:
N/A
Exhibits (3): 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 for the year ended December
31, 1994.
(10) Material contracts:
10.1 Amended and Restated Agreement of Limited Partnership of Colonial Village
Roseville (1) filed as exhibit 10.1 to Form 8-K/A Amendment No. 1 to
Current Report dated December 27, 1993 is hereby incorporated herein by
reference as exhibit 10.1.
10.2 Amended and Restated Agreement of Limited Partnership of Almond Garden
Apartment Associates filed as exhibit 10.2 to Form 8-K/A Amendment No. 1 to
Current Report dated December 27, 1993 is hereby incorporated herein by
reference as exhibit 10.2.
10.3 Amended and Restated Agreement of Limited Partnership of Winters Investment
Group filed as exhibit 10.3 to Form 8-K/A Amendment No. 1 to Current Report
dated December 27, 1993 is hereby incorporated herein by reference as
exhibit 10.3.
10.4 Third Amended and Restate Articles of Limited Partnership of Buccaneer
Associates, Limited filed as exhibit 10.2 to Post-Effective Amendment No. 2 to
Form S-11 dated September 17, 1993 is hereby incorporated herein by reference as
exhibit 10.4.
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10.5 Amended and Restated Agreement and Certificate of Limited Partnership of
Dallas County Housing, Ltd. filed as exhibit 10.3 to Post-Effective
Amendment No. 2 to Form S-11 dated September 17, 1993 is hereby
incorporated herein by reference as exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of La Paloma Del Sol
Phase II Limited Partnership filed as exhibit 10.4 to Post-Effective
Amendment No. 2 to Form S-11 dated September 17, 1993 is hereby
incorporated herein by reference as exhibit 10.6.
10.7 Second Amended and Restated Agreement of Limited Partnership of Old Fort
Limited Partnership filed as exhibit 10.5 to Post-Effective Amendment No. 2
to Form S-11 dated September 17, 1993 is hereby incorporated herein by
reference as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Orosi Apartments,
Ltd. filed as exhibit 10.6 to Post-Effective Amendment No. 2 to Form S-11
dated September 17, 1993 is hereby incorporated herein by reference as
exhibit 10.8.
10.9 Amended and Restated Agreement of Limited Partnership of Sun Manor, L.P.
filed as exhibit 10.7 to Post-Effective Amendment No. 2 to Form S-11 dated
September 17, 1993 is hereby incorporated herein by reference as exhibit
10.9.
10.10Amended and Restated Agreement of Limited Partnership of Venus Retirement
Village, Ltd. filed as exhibit 10.8 to Post-Effective Amendment No. 2 to
Form S-11 dated September 17, 1993 is hereby incorporated herein by
reference as exhibit 10.10.
10.11Second Amended and Restated Agreement of Limited Partnership of
Walnut-Pixley, L.P. filed as exhibit 10.9 to Post-Effective Amendment No. 2
to Form S-11 dated September 17, 1993 is hereby incorporated herein by
reference as exhibit 10.11.
10.12Amended and Restated Agreement of Limited Partnership of Almond View
Apartments, Ltd. filed as exhibit 10.11 to Form 10K dated December 31, 1993
is hereby incorporated herein by reference as exhibit 10.12.
10.13Amended and Restated Agreement of Limited Partnership of Candleridge
Apartments of Perry, L.P. II filed as exhibit 10.1 to Form 8-K dated May
26, 1994 is hereby incorporated herein by reference as exhibit 10.13.
10.14Second Amended and Restated Agreement of Limited Partnership of Parlier
Garden Apts. filed as exhibit 10.2 to Form 8-K dated May 26, 1994 is hereby
incorporated herein by reference as exhibit 10.14.
10.15Agreement of Limited Partnership of Rosewood Apartments Limited
Partnership filed as exhibit 10.3 to Form 8-K dated May 26, 1994 is hereby
incorporated herein by reference as exhibit 10.15.
10.16Agreement of Limited Partnership of Limited Partnership of Nueva Sierra
Vista Associates filed as exhibit 10.4 to Form 8-K/A Amendment No. 1 to
Current Report dated May 26, 1994 is hereby incorporated herein by
reference as exhibit 10.16.
10.17Amended and Restated Agreement of Limited Partnership of Memory Lane
Limited Partnership filed as exhibit 10.1 to Form 8-K dated July 7, 1994 is
hereby incorporated herein by reference as exhibit 10.17.
10.18Second Amended and Restated Agreement of Limited Partnership of Tahoe
Pines Apartments filed as exhibit 10.1 to Form 8-K dated July 27, 1994 is
hereby incorporated herein by reference as exhibit 10.18.
Reports on Form 8-K
No reports of Form 8-K were filed during the fourth quarter ended December 31,
1997.
17
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 CALIFORNIA HOUSING TAX CREDITS III, L.P.
By: WNC California Tax Credit Partners III, L.P. General Partner
of the Registrant
By: WNC & Associates, Inc. General Partner of
WNC California Tax Credit Partners III, L.P.
By: /s/ John B. Lester, Jr.
- -----------------------------------------------------
John B. Lester, Jr. President of WNC & Associates, Inc.
Date: April 14, 1998
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice-President Finance of WNC & Associates, Inc.
Date: April 14, 1998
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, Sr.
- -----------------------------------------------------
Wilfred N. Cooper, Sr. Director and Chairman of the Board
WNC & Associates, Inc.
Date: April 14, 1998
By: /s/ John B. Lester, Jr.
- -----------------------------------------------------
John B. Lester, Jr. Director and Secretary of the Board
WNC & Associates, Inc.
Date: April 14, 1998
By: /s/ David N. Shafer
- -----------------------------------------------------
David N. Shafer Director of WNC & Associates, Inc.
Date: April 14, 1998
18