Attached files
file | filename |
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EX-31.2 - CAL 1 EXHIBIT 31.2 - WNC CALIFORNIA HOUSING TAX CREDITS LP | exhibit312.htm |
EX-32.1 - CAL 1 EXHIBIT 32.1 - WNC CALIFORNIA HOUSING TAX CREDITS LP | exhibit321.htm |
EX-32.2 - CAL 1 EXHIBIT 32.2 - WNC CALIFORNIA HOUSING TAX CREDITS LP | exhibit322.htm |
EX-31.1 - CAL 1 EXHIBIT 31.1 - WNC CALIFORNIA HOUSING TAX CREDITS LP | exhibit311.htm |
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 December 31, 2009
OR
[
] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ________ to ___________
Commission
file number: 0-21895
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
California
|
33-0316953
|
(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 No X
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer___ Accelerated filer___ Non-accelerated filer___X__ Smaller
reporting company___
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ___No
_X__
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
INDEX
TO FORM 10 – Q
For
the Quarterly Period Ended December 31, 2009
PART
I. FINANCIAL INFORMATION
|
|||||
Item
1.
|
Financial
Statements
|
||||
Balance
Sheets
|
|||||
As
of December 31, 2009 and March 31, 2009
|
3
|
||||
Statements
of Operations
|
|||||
For
the Three and Nine Months Ended December 31, 2009 and 2008
|
4
|
||||
Statement
of Partners' Equity (Deficit)
|
|||||
For
the Nine Months Ended December 31, 2009
|
5
|
||||
Statements
of Cash Flows
|
|||||
For
the Nine Months Ended December 31, 2009 and
2008
|
6
|
||||
Notes
to Financial Statements
|
7
|
||||
Item
2.
|
Management's
Discussion and Analysis of Financial
|
||||
Condition
and Results of Operations
|
15
|
||||
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risks
|
17
|
|||
Item
4T.
|
Controls
and Procedures
|
17
|
|||
PART
II. OTHER INFORMATION
|
|||||
Item
1.
|
Legal
Proceedings
|
18
|
|||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
|||
Item
3.
|
Defaults
Upon Senior Securities
|
18
|
|||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
18
|
|||
Item
5.
|
Other
Information
|
18
|
|||
Item
6.
|
Exhibits
|
18
|
|||
Signatures
|
19
|
2
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
BALANCE
SHEETS
(unaudited)
December
31, 2009
|
March
31, 2009
|
|||
ASSETS
|
||||
Cash
|
$
|
34,373
|
$
|
49,488
|
Investments
in Local Limited Partnerships, net (Note 2)
|
-
|
-
|
||
Total
Assets
|
$
|
34,373
|
$
|
49,488
|
LIABILITIES
AND PARTNERS' EQUITY (DEFICIT)
|
||||
Liabilities:
|
||||
Accrued
fees and expenses due to
|
||||
General
Partner and affiliates (Note 3)
|
$
|
1,976,017
|
$
|
1,895,560
|
Partners’
Deficit:
|
||||
General
Partner
|
(81,145)
|
(80,189)
|
||
Limited
Partners (10,000 Partnership Units authorized;
|
||||
7,450
Partnership Units issued and outstanding)
|
(1,860,499)
|
(1,765,883)
|
||
Total
Partners’ Deficit
|
(1,941,644)
|
(1,846,072)
|
||
Total
Liabilities and Partners’ Deficit
|
$
|
34,373
|
$
|
49,488
|
See
accompanying notes to financial statements
3
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
STATEMENTS
OF OPERATIONS
For
the Three and Nine Months Ended December 31, 2009 and 2008
(unaudited)
2009
|
2008
|
|||||||
|
Three
Months
|
Nine
Months
|
Three
Months
|
Nine
Months
|
||||
Reporting
fees
|
$
|
-
|
$
|
1,050
|
$
|
-
|
$
|
-
|
Distribution
income
|
-
|
-
|
1,584
|
6,393
|
||||
Total
operating income
|
1,050
|
1,584
|
6,393
|
|||||
Operating
expenses:
|
||||||||
Asset
management fees (Note 3)
|
15,020
|
49,312
|
22,983
|
68,949
|
||||
Legal
and accounting fees
|
3,421
|
81,100
|
3,490
|
11,243
|
||||
Other
|
1,331
|
6,219
|
2,009
|
9,604
|
||||
Total
operating expenses
|
19,772
|
136,631
|
28,482
|
89,796
|
||||
Loss
from operations
|
(19,772)
|
(135,581)
|
(26,898)
|
(83,403)
|
||||
Gain
on Sale of Local
|
||||||||
Limited
Partnerships (Note 2)
|
-
|
40,000
|
45,000
|
45,000
|
||||
Interest
income
|
1
|
9
|
7
|
306
|
||||
Net
income (loss)
|
$
|
(19,771)
|
$
|
(95,572)
|
$
|
18,109
|
$
|
(38,097)
|
Net
income (loss) allocated to:
|
||||||||
General
Partner
|
$
|
(198)
|
$
|
(956)
|
$
|
181
|
$
|
(381)
|
Limited
Partners
|
$
|
(19,573)
|
$
|
(94,616)
|
$
|
17,928
|
$
|
(37,716)
|
Net
income (loss) per Partnership Unit
|
$
|
(3)
|
$
|
(13)
|
$
|
2
|
$
|
(5)
|
Outstanding
weighted
Partnership
Units
|
7,450
|
7,450
|
7,450
|
7,450
|
See
accompanying notes to financial statements
4
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
STATEMENT
OF PARTNERS’ DEFICIT
For
the Nine Months Ended December 31, 2009
(unaudited)
General
|
Limited
|
|||||
Partner
|
Partners
|
Total
|
||||
Partners’
deficit at March 31, 2009
|
$
|
(80,189)
|
$
|
(1,765,883)
|
$
|
(1,846,072)
|
Net
loss
|
(956)
|
(94,616)
|
(95,572)
|
|||
Partners’
deficit at December 31, 2009
|
$
|
(81,145)
|
$
|
(1,860,499)
|
$
|
(1,941,644)
|
See
accompanying notes to financial statements
5
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
STATEMENTS
OF CASH FLOWS
For
the Nine Months Ended December 31, 2009 and 2008
(unaudited)
2009
|
2008
|
||||
Cash
flows from operating activities:
|
|||||
Net
loss
|
$
|
(95,572)
|
$
|
(38,097)
|
|
Adjustments
to reconcile net loss to net
|
|||||
cash
provided by (used in) operating activities:
|
|||||
Change
in accounts payable
|
-
|
-
|
|||
Change
in due from Local Limited Partnership
|
-
|
-
|
|||
Change
in accrued fees and expenses due to
|
|||||
General
Partners and affiliates
|
80,457
|
(85,211)
|
|||
Gain
on sale of investment in Local Limited
Partnerships
|
(40,000)
|
(45,000)
|
|||
Net
cash provided by (used in) operating activities
|
(55,115)
|
(168,308)
|
|||
|
|||||
Cash
flows from investing activities:
|
|||||
Proceeds
from sale of investment in Local Limited
partnerships
|
40,000
|
45,000
|
|||
Net
cash provided by investing activities
|
40,000
|
45,000
|
|||
Net
decrease in cash
|
(15,115)
|
(123,308)
|
|||
Cash,
beginning of period
|
49,488
|
209,252
|
|||
Cash,
end of period
|
$
|
34,373
|
$
|
85,944
|
|
SUPPLEMENTAL
DISCLOSURE OF
CASH
FLOW INFORMATION
|
|||||
Taxes
paid
|
$
|
-
|
$
|
-
|
See
accompanying notes to financial statements
6
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS
For
the Quarterly Period Ended December 31, 2009
(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 nine months ended December 31,
2009 are not necessarily indicative of the results that may be expected for the
fiscal year ending March 31, 2010. 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,
2009.
Organization
WNC
California Housing Tax Credits, L.P., (the "Partnership"), is a California
Limited Partnership formed under the laws of the State of California on
September 15, 1988. The Partnership was formed to acquire limited
partnership interests in other limited partnerships (“Local Limited
Partnerships”) which own 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”).
WNC &
Associates, Inc., a California corporation (“Associates”), and Wilfred N.
Cooper, Sr., are general partners of the Partnership (collectively, the "General
Partner" or “General Partners”). The chairman and president of
Associates own substantially all of 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, 2037
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 10,000 units of Limited
Partnership interests (“Partnership Units”) at $1,000 per Partnership Unit. The
offering of Partnership Units concluded in October 1990 at which time 7,450
Partnership Units representing subscriptions in the amount of $7,450,000, had
been accepted. The General Partners have a 1% interest in operating
profits and losses, taxable income and losses, cash available for distribution
from the Partnership and Low Income Housing Tax Credits of the Partnership. The
investors (the “Limited Partners”) will be allocated the remaining 99% of these
items in proportion to their respective investments.
7
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
The
proceeds from the disposition of any of the Local Limited Partnership Housing
Complexes will be used first to pay debts and other obligations per the
respective Local Limited Partnership Agreement. Any remaining
proceeds will then be paid to the 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 Partners
would then be entitled to receive proceeds equal to their capital contributions
from the remainder. Any additional sale or refinancing proceeds will
be distributed 99% to the Limited Partners (in proportion to their respective
investments) and 1% to the General Partners.
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 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.
8
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
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.
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. Until the Local Limited Partnerships have
completed the 15 year Low Income Housing Tax Credit compliance period, risks
exist for potential recapture of prior Low Income Housing Tax
Credits
received.
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 February 28, 2011.
Anticipated
future and existing cash resources of the Partnership are not sufficient to pay
existing liabilities of the Partnership. However, substantially all
of the existing liabilities of the Partnership are payable to the General
Partner and/or its affiliates. Though the amounts payable to the
General Partner and/or its affiliates are contractually currently payable, the
Partnership anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual obligations until capital reserves are
in excess of the aggregate of then existing contractual obligations and then
anticipated future foreseeable obligations of the Partnership. The
Partnership would be adversely affected should the General Partner and/or its
affiliates demand current payment of the existing contractual obligations and or
suspend services for this or any other reason.
Exit
Strategy
The
Compliance Period for a Housing Complex is generally 15 years following
construction or rehabilitation completion. Associates was one of the first in
the industry to offer syndicated investments in Low Income Housing Tax
Credits. The initial programs are completing their Compliance
Periods.
With that
in mind, the General Partner is continuing its review of the Housing Complexes,
with special emphasis on the more mature Housing Complexes such as any that have
satisfied the IRS compliance requirements. The review considers many
factors, including extended use requirements (such as those due to mortgage
restrictions or state compliance agreements), the condition of the Housing
Complexes, and the tax consequences to the Limited Partners from the sale of the
Housing Complexes.
9
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
Upon
identifying those Housing Complexes with the highest potential for a successful
sale, refinancing or syndication, the Partnership expects to proceed with
efforts to liquidate them. The objective is to maximize the Limited Partners’
return wherever possible and, ultimately, to wind down the Partnership. Local
Limited Partnership interests may be disposed of any time by the General Partner
in its discretion. While liquidation of the Housing Complexes continues to be
evaluated, the dissolution of the Partnership was not imminent as of December
31, 2009.
During
the quarter ended September 30, 2009, the Partnership sold its Limited
Partnership interest in San Jacinto Associates (“San Jacinto”). San
Jacinto was appraised with a value of $1,360,000 and as of December 31, 2008 the
outstanding mortgage debt was $1,723,404. The Limited Partnership
interest was sold on August 17, 2009 to the Local General
Partner. The 15-year compliance period expired in 2004 therefore
there will be no recapture of Low Income Housing Tax
Credits. Although the appraised value was less than the outstanding
mortgage the Partnership received $40,000 for its Limited Partnership interest
in this Local Limited Partnership. The
$40,000 is being kept in the Partnership’s reserves to pay the costs incurred
related to the disposition and other operating expenses of the
Partnership. As the investment balance is zero, the Partnership
recorded a gain on the sale of the Local Limited Partnership interest for the
quarter ended December 31, 2009.
During
the quarter ended December 31, 2009, the Partnership has identified one Local
Limited Partnership, HPA Investors, (“HPA”) for disposition. HPA owns
the Hudson Park Apartments, II, located in Shafter, California (the
“Property”). Consistent with the investment objectives of the
Partnership, the Property qualified for Federal Low Income Housing Tax Credits
under the Internal Revenue Code for a 10-year period. The credit
period has expired, and no further credits are being generated by the
Property. The 15-year Federal Compliance Period has also expired, so
there would be no credit recapture upon a transfer of the
Property. On October 5, 2009, the Partnership filed a proxy with the
Securities and Exchange Commission (“SEC”) for the written consent of the
Limited Partners for the commencement of disposition. Definitive
materials were filed on November 10, 2009 which extended the deadline for
submitting ballots. As of November 16, 2009 the Partnership achieved
the 51% approval necessary for the disposition. The sale of HPA
Investors is estimated to close April 30, 2010. The sales price of $1,600,000
plus replacement reserves of $53,000 which remains with the seller will be
disbursed as follows: the General Partner of HPA will be paid
approximately $105,000 in sales preparation and refinancing fees and repayment
of loans previously made, $1,462,000 to pay down the existing mortgages and
approximately $16,000 in selling costs will be paid. The remaining
$70,000 will be distributed to the Partnership. The $70,000 in cash
proceeds will be used to fund the Partnership’s reserves and pay the General
Partner of the Partnership for operating expenses paid on its behalf and accrued
asset management fees.
Method of Accounting for
Investments in Local Limited Partnerships
The
Partnership accounts for its investments in Local Limited Partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnerships’ results of operations
and for any contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be
recoverable. Recoverability of such investment is measured by the
estimated value derived by management, generally consisting of the sum of the
remaining future Low Income Housing Tax Credits estimated to be allocable to the
Partnership and the estimated residual value to the
Partnership. If an investment is considered to be impaired, the
Partnership reduces the carrying value of its investment in any such Local
Limited Partnership. The
accounting policies of the Local Limited Partnerships, generally, are expected
to be consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (see Note
2).
10
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
“Equity
in losses of Local Limited Partnerships” for the periods ended December 31, 2009
and 2008 have been recorded by the Partnership. Management’s estimate for the
nine-month period is based on either actual unaudited results reported by the
Local Limited Partnerships or historical trends in the operations of the Local
Limited Partnerships. In subsequent annual financial statements, upon receiving
the actual annual results reported by the Local Limited Partnerships, management
reverses its prior estimate and records the actual results reported by the Local
Limited Partnerships. Equity in losses 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 reported 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. A VIE is a legal structure used to conduct activities or hold assets, and
a VIE must be consolidated by a company if it is the primary beneficiary because
a primary beneficiary absorbs the majority of the entity’s expected losses, the
majority of the expected residual returns, or both. The Local Limited
Partnerships in which the Partnership invests are VIEs. However, management does
not consolidate the Partnership’s interests in these VIE’s as the Partnership is
not considered the primary beneficiary. The Partnership’s balance in its
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 may be subject to additional losses to the
extent of any financial support that the Partnership voluntarily provides to the
Local Limited Partnerships in the future.
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 December 31, 2009, 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 December 31, 2009 and March 31, 2009, the
Partnership had no cash equivalents.
11
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
Reporting Comprehensive
Income
The
Partnership had no items of other comprehensive income for all periods
presented.
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.
NOTE 2 - INVESTMENTS IN
LOCAL LIMITED PARTNERSHIPS
As of the
periods presented, the Partnership owns Local Limited Partnership interests in
six and seven Local Limited Partnerships, respectively. All of these
Local Limited Partnership’s own one Housing Complex consisting of an aggregate
of 234 and 272 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%, as specified in the Local Limited Partnership governing
agreements, of the operating profits and losses, taxable income and losses, and
Low Income Housing Tax Credits of the Local Limited Partnerships.
Selected
financial information for the nine months ended December 31, 2009 and 2008 from
the unaudited combined condensed financial statements of the Local Limited
Partnerships in which the Partnership has invested is as
follows:
12
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
NOTE 2 - INVESTMENTS IN
LOCAL LIMITED PARTNERSHIPS, continued
COMBINED
CONDENSED STATEMENTS OF OPERATIONS
|
||||||
2009
|
2008
|
|||||
Revenues
|
$
|
1,107,000
|
$
|
1,617,000
|
||
Expenses
|
||||||
Interest
expense
|
143,000
|
224,000
|
||||
Depreciation
and amortization
|
329,000
|
439,000
|
||||
Operating
expenses
|
770,000
|
1,181,000
|
||||
Total
expenses
|
1,242,000
|
1,844,000
|
||||
Net
loss
|
$
|
(135,000)
|
$
|
(182,000)
|
||
Net
loss allocable to the Partnership
|
$
|
(133,000)
|
$
|
(180,000)
|
||
Net
loss recorded by the Partnership
|
$
|
-
|
$
|
-
|
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.
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)
|
An
annual asset management fee equal to 0.5% 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. Fees of $49,312 and $68,949 were incurred during
the nine months ended December 31, 2009 and 2008,
respectively. The Partnership paid the General Partners and or
their affiliates $2,500 and $77,350 of those fees during the nine months
ended December 31, 2009 and 2008,
respectively.
|
(b)
|
The
Partnership reimburses 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 $53,673 and $97,658 during the nine months ended
December 31, 2009 and 2008,
respectively.
|
(c)
|
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 14% through December 31,
2006 and 6% thereafter (as defined in the Partnership Agreement) and is
payable only if the General Partner or its affiliates
render services
in the sales effort. No such fees were incurred for all periods
presented.
|
|
13
WNC
CALIFORNIA HOUSING TAX CREDITS, L.P.
(A
California Limited Partnership)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
For
the Quarterly Period Ended December 31, 2009
(unaudited)
NOTE 3 - RELATED PARTY
TRANSACTIONS, continued
The
accrued fees and expenses due to the General Partner and affiliates consist of
the following at:
December
31, 2009
|
March
31, 2009
|
|||
Expenses
paid by the General Partner or affiliates
on
behalf of the Partnership
|
$
|
90,538
|
$
|
56,893
|
Asset
management fee payable
|
1,885,479
|
1,838,667
|
||
Total
|
$
|
1,976,017
|
$
|
1,895,560
|
The
General Partner and/or its 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.
NOTE 4 – SUBSEQUENT
EVENTS
Events
that occur after the balance sheet date but before the financial statements were
available to be issued must be evaluated for recognition or disclosure. The
effects of subsequent events that provide evidence about conditions that existed
at the balance sheet date are recognized in the accompanying financial
statements. Subsequent events, which provide evidence about conditions that
existed after the balance sheet date, require disclosure in the accompanying
notes. Management evaluated the activity of the Partnership through (FILING
DATE) and concluded that no subsequent events have occurred that would require
recognition in the financial.
14
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 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 should
be read in conjunction with the condensed unaudited financial statements and the
notes thereto included elsewhere in this filing.
The
following discussion and analysis compares the results of operations for the
three and nine months ended December 31, 2009 and 2008, 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 December 31, 2009 consisted of $34,000 in
cash. Liabilities at December 31, 2009 consisted of $1,976,000 of
accrued asset management fees and amount due for expenses paid by the General
Partner and/or its affiliates.
Results
of Operations
Three Months Ended December 31, 2009
Compared to the Three Months Ended December 31, 2008. The
Partnership’s net loss for the three months ended December 31, 2009 was
$(20,000), reflecting a decrease of approximately $(38,000) from the $18,000 net
income experienced for the three months ended December 31, 2008. The decrease in
net loss is due to the $8,000 decrease in Asset management fees. These fees are
calculated based on the Invested Assets. As Local Limited Partnerships are sold,
the Invested Assets decrease thereby decreasing the asset management fees that
are incurred. There was also a decrease of approximately
$(1,000) in distribution income as distribution income and reporting fees
fluctuate from year to year due to the fact that Local Limited Partnerships pay
those fees to the Partnership when the Local Limited Partnership’s cash flow
will allow for the payment. There was no gain on sale of investment in Local
Limited Partnerships for the three months ended December 31, 2009 compared to
$45,000 gain on sale of investment in Local Limited Partnerships for the three
months ended December 31, 2008. The Partnership is in the disposition
phase but the number of dispositions will vary from year to year depending on
the economic conditions. The gain recorded by the Partnership can
vary depending on the sales prices and values of the Housing Complexes that are
being sold.
Nine Months Ended December 31, 2009
Compared to the Nine Months Ended December 31, 2008. The
Partnership’s net loss for the nine months ended December 31, 2009 was
$(96,000), reflecting an increase of approximately $(58,000) from the $(38,000)
net loss experienced for the nine months ended December 31, 2008. The
increase in primarily due to an increase of $(70,000) in legal and accounting
fees due to the timing of the accounting work being performed. There
was a decrease of $20,000 in asset management fees. These fees are
calculated based on the Invested Assets. As Local Limited Partnerships are sold,
the Invested Assets decrease thereby decreasing the asset management fees that
are incurred. The
distribution income and reporting fees (decreased) increased by approximately
$(6,000) and $1,000, respectively for the nine months ended December 31,
2009. Distribution income and reporting fees
15
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
can
fluctuate from year to year due to the fact that Local Limited Partnerships pay
those fees to the Partnership when the Local Limited Partnership’s cash flow
will allow for the payment. There was a $40,000 gain on sale of investment in
Local Limited Partnerships for the nine months ended December 31, 2009 compared
to $45,000 gain on sale of investment in Local Limited Partnerships for the nine
months ended December 31, 2008. The Partnership is in the disposition
phase but the number of dispositions will vary from year to year depending on
the economic conditions. The gain recorded by the Partnership can
vary depending on the sales prices and values of the Housing Complexes that are
being sold.
Liquidity
and Capital Resources
Nine Months Ended December 31, 2009
Compared to Nine Months Ended December 31, 2008. The net
decrease in cash during the nine months ended December 31, 2009 was $(15,000)
compared to a net decrease in cash for the nine months ended December 31, 2008
of $(123,000). The variance in net change in cash is largely due to
the fact that during the nine months ended December 31, 2009 the Partnership
paid $(3,000) of accrued asset management fees to the General Partners or its
affiliates compared to $(77,000) paid during the nine months ended December 31,
2008 along with $(54,000) paid to the General Partners for reimbursements of
expenses paid by the General Partner on behalf of the Partnership during the
nine months ended December 31, 2009 compared to $(98,000) paid during the nine
months ended December 31, 2008. In addition, during the nine months
ended December 31, 2009 the Partnership received $40,000 in proceeds from the
sale of one Local Limited Partnership compared to $45,000 in proceeds received
from sales during the nine months ended December 31, 2008.
During
the nine months ended December 31, 2009, accrued payables, which consist
primarily of related party management fees and advances due to the General
Partner, increased by $80,000. The General Partner does not
anticipate that the balance of the accrued fees and advances will be paid until
such time as capital reserves are in excess of foreseeable working capital
requirements of the Partnership.
The
Partnership expects its future cash flows, together with its net available
assets as of December 31, 2009, 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 February 28, 2011.
Recent Accounting
Changes
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.
one year
implementation of the guidance as it pertains to certain non-financial assets
and liabilities The Partnership does not anticipate this guidance to have
a material impact on the Partnership’s financial statements.
16
In April
2009, the FASB issued GAAP for Interim Disclosures about Fair Value of Financial
Instruments. This requires disclosure about the method and
significant assumptions used to establish the fair value of financial
instruments for interim reporting periods as well as annual
statements. It was effective for the Partnership as of June 30, 2009
and has no impact on the Partnership’s financial condition or results of
operations.
In May
2009, the FASB issued GAAP for Subsequent Events. It establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. It is effective for the Partnership as of September 30,
2009, and has no material impact on the Partnership’s financial condition or
results of operations.
In
November 2008, the FASB issued GAAP on Equity Method Investment Accounting
Considerations, which clarifies the accounting for how to account for certain
transactions and impairment considerations involving equity method
investments. This guidance is effective in fiscal years beginning on
or after December 15, 2008, and interim periods within those fiscal
years. The Partnership adopted the guidance for the interim quarterly period
beginning April 1, 2009. The impact of adopting it does not have a material
impact on the Partnership’s financial condition or results of
operations.
In June
2009, the 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 replaces the current 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 is not expected to have a material effect on the
Partnership’s financial statements.
In June
2009, the FASB issued the Accounting Standards Codification
(Codification). Effective July 1, 2009, the Codification is the single
source of authoritative accounting principles recognized by the FASB to be
applied by non-governmental entities in the preparation of financial statements
in conformity with U.S. generally accepted accounting principles (GAAP).
The Codification is intended to reorganize, rather than change, existing
GAAP. Accordingly, all references to currently existing GAAP have been
removed and have been replaced with plain English explanations of the
Partnership’s accounting
policies. The adoption of the Codification did not have a material impact
on the Partnership’s financial position or results of operations.
Item
3. Quantitative and Qualitative Disclosures About Market Risks
NOT
APPLICABLE
Item
4T. 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.
17
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 December 31, 2009 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
2. Unregistered
Sales of Equity Securities and Use of Proceeds
NONE
Item
3. Defaults
Upon Senior Securities
NONE
Item
4. Submission
of Matters to a Vote of Security Holders
NONE
Item
5. Other
Information
NONE
Item
6. Exhibits
31.1
|
Certification
of the Principal 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 Principal 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)
|
18
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
CALIFORNIA HOUSING TAX CREDITS, L.P.
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: February
16, 2010
By: /s/ Melanie R.
Wenk
Melanie
R. Wenk
Vice-President
- Chief Financial Officer of WNC & Associates, Inc.
Date: February
16, 2010
19