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, 2013

 

OR

 

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

 

For the transition period from ________ to ________

 

Commission file number: 000-52841

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

 

California		20-2355224
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
17782 Sky Park Circle
Irvine, CA		92614-6404
(Address of principal executive offices)		(Zip Code)

 

(714) 662-5565

(Telephone number)

 

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

Yes [X] No [  ]

 

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

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [X] Smaller reporting company [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

  

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

INDEX TO FORM 10-Q

 

For the Quarterly Period Ended December 31, 2013

 

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements		F-1
		Condensed Balance Sheets As of December 31, 2013 and March 31, 2013		F-1
		Condensed Statements of Operations For the Three and Nine Months Ended December 31, 2013 and 2012		F-2
		Condensed Statement of Partners’ Equity (Deficit) For the Nine Months Ended December 31, 2013		F-3
		Condensed Statements of Cash Flows For the Nine Months Ended December 31, 2013 and 2012		F-4
		Notes to Condensed Financial Statements		F-5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3
	Item 3.	Quantitative and Qualitative Disclosures about Market Risks		6
	Item 4.	Controls and Procedures		6
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		7
	Item 1A.	Risk Factors		7
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		7
	Item 3.	Defaults Upon Senior Securities		7
	Item 4.	Mine Safety Disclosures		7
	Item 5.	Other Information		7
	Item 6.	Exhibits		7
	Signatures			8

 

  

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

CONDENSED BALANCE SHEETS

(Unaudited)

 

		December 31, 2013				March 31, 2013
ASSETS
Cash		$	17,408			$	161,924
Investments in Local Limited Partnerships, net (Notes 2 and 3)			5,546,408				7,636,679
Total Assets		$	5,563,816			$	7,798,603
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)
Liabilities:
Payables to Local Limited Partnerships (Note 5)		$	474,328			$	474,328
Accrued fees and expenses due to
General Partner and affiliates (Note 3)			2,362,757				1,018,170
Total Liabilities			2,837,085				1,492,498
Partners’ Equity (Deficit):
General Partner			(15,382	)			(11,803	)
Limited Partners (25,000 Partnership Units authorized; 20,971 Partnership Units issued and outstanding)			2,742,113				6,317,908
Total Partners’ Equity (Deficit)			2,726,731				6,306,105
Total Liabilities and Partners’ Equity (Deficit)		$	5,563,816			$	7,798,603

 

See accompanying notes to condensed financial statements

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF OPERATIONS

 

For the Three and Nine Months Ended December 31, 2013 and 2012

(Unaudited)

 

		2013								2012
		Three Months				Nine Months				Three Months				Nine Months
Reporting fees		$	3,558			$	3,558			$	-			$	216
Operating expenses and loss:
Amortization (Note 2)			-				18,805				17,175				51,525
Asset management fees (Note 3)			40,901				122,703				40,901				122,703
Legal and accounting fees			43,821				125,289				651				39,827
Impairment loss (Note 2)			-				1,876,679				-				339,689
Write off of advances to Local
Limited Partnerships (Note 5)			1,063,677				1,204,050				-				-
Asset management expenses			14,702				16,092				274				1,286
Other			16,679				26,826				3,596				10,445
Total operating expenses and loss			1,179,780				3,390,444				62,597				565,475
Loss from operations			(1,176,222	)			(3,386,886	)			(62,597	)			(565,259	)
Equity in losses of Local Limited Partnerships (Note 2)			(55,815	)			(192,537	)			(88,373	)			(265,119	)
Interest income			4				49				30				91
Net loss		$	(1,232,033	)		$	(3,579,374	)		$	(150,940	)		$	(830,287	)
Net loss allocated to:
General Partner		$	(1,232	)		$	(3,579	)		$	(151	)		$	(830	)
Limited Partners		$	(1,230,801	)		$	(3,575,795	)		$	(150,789	)		$	(829,457	)
Net loss per Partnership Unit		$	(59	)		$	(171	)		$	(7	)		$	(40	)
Outstanding weighted Partnership Units			20,971				20,971				20,981				20,981

 

See accompanying notes to condensed financial statements

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

CONDENSED STATEMENT OF PARTNERS’ EQUITY (DEFICIT)

 

For the Nine Months Ended December 31, 2013

(Unaudited)

 

		General				Limited
		Partner				Partners				Total
Partners’ equity (deficit) at March 31, 2013		$	(11,803	)		$	6,317,908			$	6,306,105
Net loss			(3,579	)			(3,575,795	)			(3,579,374	)
Partners’ equity (deficit) at December 31, 2013		$	(15,382	)		$	2,742,113			$	2,726,731

 

See accompanying notes to condensed financial statements

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF CASH FLOWS

 

For the Nine Months Ended December 31, 2013 and 2012

(Unaudited)

 

		2013				2012
Cash flows from operating activities:
Net loss		$	(3,579,374	)		$	(830,287	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization			18,805				51,525
Equity in losses of Local Limited Partnerships			192,537				265,119
Impairment loss			1,876,679				339,689
Increase in accrued fees and expenses due to General Partner and affiliates			280,911				174,262
Write off of advances to Local Limited Partnerships			1,204,050				-
Net cash provided by (used in) operating activities			(6,392	)			308
Cash flows from investing activities:
Advances to Local Limited Partnerships			(1,204,050	)			-
Capital contributions paid to Local Limited Partnerships			-				(5,500	)
Distributions received from Local Limited Partnerships			2,250				7,932
Net cash provided by (used in) investing activities			(1,201,800	)			2,432
Cash flows from financing activities:
Advances received from the general partner and affiliates			1,063,676				-
Net cash provided by financing activities			1,063,676				-
Net increase (decrease) in cash			(144,516	)			2,740
Cash, beginning of period			161,924				182,459
Cash, end of period		$	17,408			$	185,199
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Taxes paid		$	-			$	-

 

See accompanying notes to condensed financial statements

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

For the Quarterly Period Ended December 31, 2013

(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, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014. 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, 2013.

 

Organization

 

WNC Housing Tax Credit Fund VI, L.P., Series 13, a California Limited Partnership (the “Partnership”), was formed on February 7, 2005 under the laws of the State of California, and commenced operations on December 14, 2005. The Partnership was formed to invest primarily in other limited partnerships and limited liability companies (the “Local Limited Partnerships”) which own and operate multi-family housing complexes (the “Housing Complexes”) that are eligible for Low Income Housing Tax Credits. The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

The general partner of the Partnership is WNC National Partners, LLC (the “General Partner”). The general partner of the General Partner is WNC & Associates, Inc. (“Associates”). The chairman and the president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and General Partner have no employees of their own.

 

The Partnership shall continue in full force and effect until December 31, 2070, 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.

 

Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit. The required minimum offering amount of $1,400,000 was achieved by December 14, 2005. As of March 31, 2007 total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.” The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and tax credits. The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments. This offering was closed on September 21, 2006. As of December 31, 2013, a total of 20,971 Partnership Units remain outstanding.

 

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partner would then be entitled to receive proceeds equal to its capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.

 

Risks and Uncertainties

 

An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:

 

The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.

 

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or a non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar Housing Complexes, and neighborhood conditions, among others.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(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.

 

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, 2015.

 

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. A significant portion of the existing liabilities are the payables to Local Limited Partnerships and those payables are the first priority to be paid. If the Partnership does not have enough cash to pay those liabilities the General Partner or an affiliate will fund the necessary cash to pay the liabilities. The remaining portion of the payables is due to the General Partner or an affiliate. 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.

 

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.

 

Exit Strategy

 

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.

 

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

 

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership. 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, 2013.

 

With that in mind, as of December 31, 2013, except as indicated in the following two paragraphs, the General Partner has not begun reviewing the Housing Complexes for potential disposition, since none of the Housing Complexes have completed the Compliance Period. Once the Housing Complexes have done so, the review will take into consideration many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

During the year ended March 31, 2011, the Partnership sold two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P. (“Sierra’s Run”), in order to generate sufficient equity to complete the purchase of additional low income housing tax credits for Davenport Housing VII, L.P. (“Davenport).

 

Fernwood and Sierra’s Run will complete their Compliance Periods in 2022; therefore there is a risk of tax credit recapture. The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.58 per Partnership Unit in the aggregate. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its Compliance Period, and, accordingly, does not anticipate that there will be any recapture.

 

Method of Accounting for Investments in Local Limited Partnerships

 

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and 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 27.5 years (see Note 2).

 

“Equity in losses of Local Limited Partnerships” for the periods ended December 31, 2013 and 2012 has been recorded by the Partnership. Management’s estimate for the three and nine-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of Local Limited Partnerships allocated to the Partnership are not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended (see Note 2).

 

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

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

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

 

Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of December 31, 2013, four 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. For all periods presented, the Partnership had no cash equivalents.

 

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. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2009 remain open.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Net Loss Per Partnership Unit

 

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

 

Revenue Recognition

 

The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.

 

Amortization

 

Acquisition fees and costs were being amortized over 27.5 years using the straight-line method. Amortization expense for the nine months ended December 31, 2013 and 2012 was $18,805 and $51,525, respectively.

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the nine months ended December 31, 2013 and 2012, impairment loss related to investments in Local Limited Partnerships was $568,391 and $339,689, respectively.

 

The Partnership also evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investments. During the nine months ended December 31, 2013 and 2012, an impairment loss of $1,308,288 and $0, was recorded against related intangibles.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

 

As of December 31, 2013 and March 31, 2013, the Partnership owns Local Limited Partnership interests in eight Local Limited Partnerships. Each of these Local Limited Partnership’s own one Housing Complex consisting of an aggregate of 598 apartment units as of December 31, 2013 and March 31, 2013. The respective Local General Partners of the Local Limited Partnerships manage the day to day operations of the entities. Significant Local Limited Partnership business decisions require approval from the Partnership. The Partnership, as a limited partner, is generally entitled to 99.98%, as specified in the Local Limited Partnership Agreements, of the operating profits and losses, taxable income and losses, and Low Income Housing Tax Credits of the Local Limited Partnerships.

 

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

 

		For the Nine Months Ended December 31, 2013				For the Year Ended March 31, 2013
Investments per balance sheet, beginning of period		$	7,636,679			$	8,318,507
Distributions received from Local Limited Partnerships			(2,250	)			-
Equity in losses of Local Limited Partnerships			(192,537	)			(273,439	)
Impairment loss			(1,876,679	)			(339,689	)
Amortization of acquisition fees and costs			(18,796	)			(68,664	)
Amortization of warehouse interest and costs			(9	)			(36	)
Investments per balance sheet, end of period		$	5,546,408			$	7,636,679

 

		For the Nine Months Ended December 31, 2013				For the Year Ended March 31, 2013
Investments in Local Limited Partnerships, net		$	5,406,907			$	6,170,085
Acquisition fees and costs, net of accumulated amortization of $1,630 and $422,487			139,501				1,465,803
Capitalized warehouse costs and interest, net of accumulated amortization of $0 and $248			-				791
Investments per balance sheet, end of period		$	5,546,408			$	7,636,679

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Selected financial information for the nine months ended December 31, 2013 and 2012 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS

 

		2013				2012
Revenues		$	3,332,000			$	3,502,000
Expenses:
Interest expense			1,121,000				1,033,000
Depreciation and amortization			1,477,000				1,453,000
Operating expenses			2,808,000				2,628,000
Total expenses			5,406,000				5,114,000
Net loss		$	(2,074,000	)		$	(1,612,000	)
Net loss allocable to the Partnership		$	(2,073,000	)		$	(1,612,000	)
Net loss recorded by the Partnership		$	(193,000	)		$	(265,000	)

 

Certain Local Limited Partnerships have incurred significant operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership may be required to sustain operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investments in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

 

Troubled Housing Complexes

 

Davenport started construction in October 2006 and was scheduled to be completed in June 2008. Construction was delayed due to the original Local General Partner defaulting on his construction guarantee and resulting disputed mechanic liens on the property. In November 2008, the original Local General Partner was replaced with a new Local General Partner, Shelter Resource Corporation, due to restrictions implemented by the Iowa Finance Authority (“IFA”). Subsequently, with IFA’s approval, the defaulting original Local General Partner was removed from the Partnership leaving Shelter Resource Corporation as the sole Local General Partner.

 

As of March 31, 2010, the property was 100% completed and a certificate of occupancy was granted for both buildings in December 2009. The Partnership engaged all sub-contractors to sign new construction contracts, along with lien releases for any and all work done after their engagement. During the year ended March 31, 2010, the Partnership voluntarily advanced $846,175 to Davenport for construction related costs. There were no additional advances made to Davenport due to the additional investment made, as discussed below.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010. In June 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 90% to the date of this filing. Davenport has been awarded state historical tax credits from the State of Iowa, federal historical credits and federal Low Income Housing Tax Credits. The State historical credits are given in the form of a refund check from the State in conjunction with the State tax return filing. The net amount of the check after applicable federal taxes will be contributed back to the property to help fund construction shortfalls. Davenport was also allocated additional federal Low Income Housing Tax Credits as well as federal historical tax credits. Upon the Limited Partners’ approval of the dispositions of Sierra’s Run and Fernwood, the Partnership made the additional investment in Davenport. See the exit strategy in Note 1 regarding the dispositions of Sierra’s Run and Fernwood. On July 1, 2010, the Partnership committed additional capital to Davenport in the amount of $2,490,651. This additional commitment generated $408,710 of federal historic credits and $3,582,550 of additional federal Low Income Housing Tax Credits which was allocated to the partners of the Partnership.

 

Grove Village Limited Partnership (“Grove Village”) and Pleasant Village Limited Partnership (“Pleasant Village”) (collectively, “the properties”), both Texas limited partnerships in which the Partnership is a Limited Partner, were audited by the Internal Revenue Service (“IRS”) for tax years 2007, 2008 and 2009. In its findings of those audits, the IRS asserted that the Low Income Housing Tax Credits (“LIHTCs”) for the properties should not have been claimed for those three years even though the Local General Partner for each of the properties represented on the tax returns that the taking of the LIHTCs was permissible. The Partnership received notification that the IRS Appeals Division ruled in favor of the IRS findings. The Partnership does not expect the IRS to reverse its decision and as a result, it is expected that there will be a recapture of the LIHTCs taken for those years. In the event the 8609 Forms are not issued, management believes the maximum potential recapture for those years would be $3,548,480, or $169 per Partnership Unit, including interest and penalties.

 

The properties received failing inspection reports from The U.S. Department of Housing and Urban Development (“HUD”), and Texas Department of Housing and Community Affairs (“TDHCA”). The Partnership has commenced repairs at Pleasant Village with the financial support of Associates (the “Sponsor”). It is expected that once the repairs are completed in March 2014 that Pleasant Village will invite TDHCA to conduct a re-inspection.

 

The Local General Partner stopped making the mortgage payment for Grove Village and Pleasant Village in May 2013. To prevent the lender from commencing a foreclosure action against the properties and thereby eliminating any possibility of the properties obtain LIHTCs the Sponsor negotiated the purchase of notes. Due to the Sponsor’s purchase of the notes the properties are currently not in risk of foreclosure due to non-payment of the monthly mortgage payments.

 

In June 2013, the Partnership filed a lawsuit against the Local General Partner and the Guarantors. Discussions have commenced with the Local General Partner’s insurance carrier and counsel to determine whether a swift settlement of the claims can be reached. There is no guarantee that the Partnership will reach a settlement or receive any funds from the lawsuit.

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates for the following fees:

 

(a)

Acquisition fees of up to 7% of the gross proceeds from the sale of Partnership Units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships. At the end of all periods presented, the Partnership incurred acquisition fees of $1,468,670. Accumulated amortization of these capitalized costs was $0 and $328,617 as of December 31, 2013 and March 31, 2013, respectively. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership. If an impairment loss related to the acquisition fees is recorded, the accumulated amortization is reduced to zero at that time. As of December 31, 2013, the acquisition fees were fully amortized or impaired.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(Unaudited)

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

  

	(b)	A non-accountable acquisition costs of 2% of the gross proceeds from the sale of Partnership Units as an expense reimbursement in connection with the acquisition of Local Limited Partnerships. As of the end of all periods presented, the Partnership incurred acquisition costs of $419,620, which have been included in investments in Local Limited Partnerships. Accumulated amortization of these capitalized costs was $1,630 and $93,870 as of December 31, 2013 and March 31, 2013, respectively. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership. If an impairment loss related to the acquisition costs is recorded, the accumulated amortization is reduced to zero at that time.
	(c)	An annual asset management fee accrues in an amount equal to 0.5% of the Invested Assets of the Partnership. “Invested Assets” is defined as the sum of the Partnership’s Investment in Local Limited Partnerships, plus the reserves of the Partnership of up to 5% of gross Partnership Unit sales proceeds, and the Partnership’s allocable share of the amount of the mortgage loans and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $122,703 were incurred during each of the nine months ended December 31, 2013 and 2012. No payments were made during the nine months ended December 31, 2013 and 2012.
	(d)	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 paid were $10,000 and $38 during the nine months ended December 31, 2013 and 2012, respectively.
	(e)	A subordinated disposition fee will be paid 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 return on investment (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No disposition fees have been incurred for all periods presented.
	(f)	WNC Holding, LLC (“Holding”), a wholly owned subsidiary of Associates, acquires investments in Local Limited Partnerships using funds from a secured warehouse line of credit. Such investments are warehoused by Holding until transferred to syndicated partnerships as investors are identified. The transfer of the warehoused investments is typically achieved through the admittance of the syndicated partnership as the Limited Partner of the Local Limited Partnership and the removal of Holding as the Limited Partner. Consideration paid to Holding for the transfer of its interest in the Local Limited Partnership generally consists of cash reimbursement of capital contribution installment(s) paid to the Local Limited Partnerships by Holding, assumption of the remaining capital contributions payable due to the Local Limited Partnership and financing costs and interest charged by Holding. As of all periods presented, the Partnership incurred financing costs of $772 and interest of $267 which are included in investments in Local Limited Partnerships. The accumulated amortization of these financing costs and interest was $0 and $248 as of December 31, 2013 and March 31, 2013, respectively. As of December 31, 2013, the financing costs and interest were fully amortized and impaired.

 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

 

For the Quarterly Period Ended December 31, 2013

(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, 2013				March 31, 2013
Asset management fee payable		$	1,050,522			$	927,819
Advances made to the Partnership from the General Partner or affiliates			1,063,676				-
Operating expenses paid for by the General Partner or affiliates			248,559				90,351
Total		$	2,362,757			$	1,018,170

 

The General Partner and/or its affiliates does not anticipate that these accrued fees will be paid until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership.

 

NOTE 4 - PAYABLES TO LOCAL LIMITED PARTNERSHIPS

 

Payables to Local Limited Partnerships amounting to $474,328 at December 31, 2013 and March 31, 2013, represent amounts which are due at various times based on conditions specified in the Local Limited Partnership Agreements. These contributions are payable in installments and are generally due upon the Local Limited Partnerships achieving certain operating and development benchmarks (generally within two years of the Partnership’s initial investment). The payables to Local Limited Partnerships are subject to adjustment in certain circumstances.

 

NOTE 5 – ADVANCES TO LOCAL LIMITED PARTNERSHIPS

 

As of December 31, 2013 and March 31, 2013, the Partnership had voluntarily advanced $1,963,386 and $759,336, respectively, to Local Limited Partnerships. During the nine months ended December 31, 2013, the Partnership advanced $453,630 and $750,420 to Grove Village Limited Partnership and Pleasant Village Limited Partnership, respectively. All advances were reserved in full during the period they were advanced.

 

  

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

 

Forward Looking Statements

 

With the exception of the discussion regarding historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other discussions elsewhere in this Form 10-Q contain forward looking statements. Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate.

 

Risks and uncertainties inherent in forward looking statements include, but are not limited to, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credit property market and the economy in general, as well as legal proceedings. Historical results are not necessarily indicative of the operating results for any future period.

 

Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-Q and in other reports filed with the SEC.

 

The following discussion and analysis compares the results of operations for the three and nine months ended December 31, 2013 and 2012, and should be read in conjunction with the condensed financial statements and accompanying notes included within this report.

 

Financial Condition

 

The Partnership’s assets at December 31, 2013 consisted of $17,000 in cash and aggregate investments in eight Local Limited Partnerships of $5,546,000. Liabilities at December 31, 2013 consisted of $474,000 of payables to Local Limited Partnerships and $2,363, 000 in accrued fees and expenses due to the General Partner and/or its affiliates.

 

Results of Operations

 

Three Months Ended December 31, 2013 Compared to Three Months Ended December 31, 2012 The Partnership’s net loss for the three months ended December 31, 2013 was $(1,232,000), reflecting an increase of $(1,081,000) from the $(151,000) net loss experienced for the three months ended December 31, 2012. The increase in net loss is partially due to an increase of $(43,000) in legal and accounting fees for the three months ended December 31, 2013. Legal and accounting expenses increased due to fees related to the Appellate Hearing with the IRS regarding the LIHTC’s for Pleasant Village and Grove Village. Additionally, there was a $(1,064,000) increase in write off of advances to Local Limited Partnerships for the three months ended December 31, 2013. The advances made to Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. Asset management expenses increased by $14,000 during the three months ended December 31, 2013. The asset management expenses increased due to site visits performed to Pleasant Village from asset managers during the three months ended December 31, 2013. There was an increase of $13,000 in other expenses during the three months ended December 31, 2013. The increase was due to consulting services the Local Limited Partnership incurred for Grove Village and Pleasant Village during the three months ended December 31, 2013. There was a $(17,000) decrease in amortization for the three months ended December 31, 2013 due to the fact that intangibles were partially impaired during the first quarter, thereby decreasing the future amortization expense. Equity in losses of Local Limited Partnerships decreased by $33,000 from the three months ended December 31, 2012 due to the operations underlying Housing Complexes fluctuating from period to period. Reporting fees increased by $4,000 for the three months ended December 31, 2013 due to the fact that Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payments.

 

 

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

 

Nine Months Ended December 31, 2013 Compared to the Nine Months Ended December 31, 2012 The Partnership’s net loss for the nine months ended December 31, 2013 was $(3,579,000), reflecting an increase of approximately $(2,749,000) from the $(830,000) net loss experienced for the nine months ended December 31, 2012. Legal and accounting fees increased by $(85,000) due to expenses related to the Appellate Hearing with the IRS regarding the LIHTC’s for Pleasant Village and Grove Village. There was a $(1,204,000) write off of advances to Local Limited Partnerships during the nine months ended December 31, 2013. The advances made to Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. During the nine months ended December 31, 2013 other expenses increased by $(16,000) due to consulting expenses incurred for Grove Village and Pleasant Village. Impairment loss increased by $(1,537,000) for the nine months ended December 31, 2013. Impairment loss varies from year to year depending on the operations of the Local Limited Partnerships and the amount of Low Income Housing Tax Credits that are allocated each year to the Partnership. There was a $(15,000) increase in asset management expenses during the nine months ended December 31, 2013. Asset management expenses increase due to the site visits performed to Pleasant Village. Also, amortization decreased by $33,000 during the nine months ended December 31, 2013 due to the fact that intangibles were partially impaired during the first quarter, therefore decreasing the future amortization expense. Equity in losses of Local Limited Partnerships decreased by $73,000 from the nine months ended December 31, 2012 due to the operations of the underlying Housing Complexes fluctuating from period to period. Reporting fees increased by $3,000 for the three months ended December 31, 2013 due to the reason stated above.

 

Liquidity and Capital Resources

 

Nine Months Ended December 31, 2013 Compared to Nine Months Ended December 31, 2012 The net decrease in cash during the nine months ended December 31, 2013 was $(145,000) compared to a net increase in cash during the nine months ended December 31, 2012 of $3,000. The change is due primarily to the fact that during the nine months ended December 31, 2013, the Partnership advanced $1,204,000 to Local Limited Partnerships compared to no advance made during nine months ended December 31, 2012. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. Also, the Partnership paid $(10,000) to the General Partner or an affiliate as reimbursement for operating expenses that were paid on the Partnerships behalf during the nine months ended December 31, 2013, compared to no reimbursements made during the nine months ended December 31, 2012. Such payments can vary depending on the cash position of the Partnership. During the nine months ended December 31, 2013, the Partnership received $1,064,000 of advances from the General Partner or an affiliate. The fund was in turn used to advance the Local Limited Partnership that was experiencing operational issues. The Partnership collected $6,000 less in distributions for the nine months ended December 31, 2013 compared to the nine months ended December 31, 2012. Reporting fees increased by $4,000 for the nine months ended December 31, 2013. The Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payments.

 

During the nine months ended December 31, 2013, accrued payables, which consist primarily of related party asset management fees and advances due to the General Partner and affiliates, increased by $1,345,000. The General Partner does not anticipate that these accrued fees and advances will be paid until such time as capital reserves are in excess of foreseeable working capital requirements of the Partnership.

 

The Partnership expects its future cash flows, together with its net available assets as of December 31, 2013, 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, 2015.

 

Recent Accounting Changes

 

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

 

 

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

 

Other Matters

 

Davenport started construction in October 2006 and was scheduled to be completed in June 2008. Construction was delayed due to the original Local General Partner defaulting on his construction guarantee and resulting disputed mechanic liens on the property. In November 2008, the original Local General Partner was replaced with a new Local General Partner, Shelter Resource Corporation, due to restrictions implemented by the Iowa Finance Authority (“IFA”). Subsequently, with IFA’s approval, the defaulting original Local General Partner was removed from the Partnership leaving Shelter Resource Corporation as the sole Local General Partner. As of March 31, 2010, the property was 100% completed and a certificate of occupancy was granted for both buildings in December 2009. The Partnership engaged all sub-contractors to sign new construction contracts, along with lien releases for any and all work done after their engagement. During the year ended March 31, 2010, the Partnership voluntarily advanced $846,175 to Davenport for construction related costs. There were no additional advances made to Davenport due to the additional investment made, as discussed below.

 

The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010. In June 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 90% to the date of this filing. Davenport has been awarded state historical tax credits from the State of Iowa, federal historical credits and federal Low Income Housing Tax Credits. The State historical credits are given in the form of a refund check from the State in conjunction with the State tax return filing. The net amount of the check after applicable federal taxes will be contributed back to the property to help fund construction shortfalls. Davenport was also allocated additional federal Low Income Housing Tax Credits as well as federal historical tax credits. Upon the Limited Partners’ approval of the dispositions of Sierra’s Run and Fernwood, the Partnership made the additional investment in Davenport. See the exit strategy in Note 1 regarding the dispositions of Sierra’s Run and Fernwood. On July 1, 2010, the Partnership committed additional capital to Davenport in the amount of $2,490,651. This additional commitment generated $408,710 of federal historic credits and $3,582,550 of additional federal Low Income Housing Tax Credits which were allocated to the partners of the Partnership.

 

Grove Village Limited Partnership (“Grove Village”) and Pleasant Village Limited Partnership (“Pleasant Village”) (collectively, “the properties”), both Texas limited partnerships in which the Partnership is a Limited Partner, were audited by the Internal Revenue Service (“IRS”) for tax years 2007, 2008 and 2009. In its findings of those audits, the IRS asserted that the Low Income Housing Tax Credits (“LIHTCs”) for the properties should not have been claimed for those three years even though the Local General Partner for each of the properties represented on the tax returns that the taking of the LIHTCs was permissible. The Partnership received notification that the IRS Appeals Division ruled in favor of the IRS findings. The Partnership does not expect the IRS to reverse its decision and as a result, it is expected that there will be a recapture of the LIHTCs taken for those years. In the event the 8609 Forms are not issued, management believes the maximum potential recapture for those years would be $3,548,480, or $169 per Partnership Unit, including interest and penalties.

 

The properties received failing inspection reports from The U.S. Department of Housing and Urban Development (“HUD”), and Texas Department of Housing and Community Affairs (“TDHCA”). The Partnership has commenced repairs at Pleasant Village with the financial support of Associates (the “Sponsor”). It is expected that once the repairs are completed in March 2014 that Pleasant Village will invite TDHCA to conduct a re-inspection.

 

The Local General Partner stopped making the mortgage payment for Grove Village and Pleasant Village in May 2013. To prevent the lender from commencing a foreclosure action against the properties and thereby eliminating any possibility of the properties obtain LIHTCs the Sponsor negotiated the purchase of notes. Due to the Sponsor’s purchase of the notes the properties are currently not in risk of foreclosure due to non-payment of the monthly mortgage payments.

 

 

In June 2013, the Partnership filed a lawsuit against the Local General Partner and the Guarantors. Discussions have commenced with the Local General Partner’s insurance carrier and counsel to determine whether a swift settlement of the claims can be reached. There is no guarantee that the Partnership will reach a settlement or receive any funds from the lawsuit.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risks

 

NOT APPLICABLE

 

Item 4. Controls and Procedures

 

(a)	Disclosure controls and procedures

 

As of the end of the period covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

 

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary to the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

 

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Chief Executive Officer and the Chief Financial Officer of Associates believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

 

(b)	Changes in internal controls

 

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended December 31, 2013 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
	The Partnership is a limited partner in each of Pleasant Village Limited Partnership (“Pleasant Village”), and Grove Village Limited Partnership (“Grove Village”), Texas limited partnerships. WNC Housing, L.P. is the special limited partner in Pleasant Village and Grove Village. Pleasant Village and Grove Village each owns and operates an apartment project.   On June 7, 2013, the Partnership and WNC Housing, L.P. filed with the federal District Court for Dallas County, Texas, a Verified Original Petition and Ex Parte Application for Temporary Restraining Order, Temporary Injunction, and Application for Appointment of Receiver, complaining of defendants Walker Guardian LLC (“Walker Guardian”), Guardian Management LLC (“Guardian Management”), Thomas B. Brenneke (“Brenneke”), Rob Walker (“Walker”), and nominal defendants Pleasant Village and Grove Village.   Walker Guardian is the general partner of each of Pleasant Village and Grove Village. Walker Guardian hired its affiliate Guardian Management to be the onsite property manager of the apartment projects, responsible for leasing, maintenance, security, and day-to-day management of the apartments. Brenneke is a principal of both Walker Guardian and Guardian Management, and a guarantor of certain tax credit and operating results. Walker is also a guarantor.   The first cause of action is for breach of contract as a result of, among other things, failing to fund operating deficits and the latest mortgage payment, failing to keep the apartment projects safe, sanitary and in good repair and condition, and failing to perform obligations to take all actions necessary to obtain the low income housing tax credits (“LIHTCs”) reserved for the apartments projects by Texas Department of Housing & Community Affairs (“TDHCA”). Additional causes of action include breach of fiduciary duty, specific performance, temporary restraining order and temporary injunction.   A brief description of the factual basis underlying the legal proceeding is as follows: Grove Village and Pleasant Village were audited by the IRS for tax years 2007, 2008 and 2009. In its findings of those audits, the IRS asserted that the LIHTCs for the apartment projects should not have been claimed for those three years although Walker Guardian represented on the tax returns that the taking of the LIHTCs was permissible. The Partnership received notification that the IRS Appeals Division ruled in favor of the IRS findings. The Partnership does not expect the IRS to reverse its decision and, as a result, it is expected that there will be a recapture of the LIHTCs taken for those years.   The apartment projects received failing inspection reports from HUD and TDHCA. The Partnership has commenced repairs at Pleasant Village with the financial support of WNC & Associates, Inc. (the “Sponsor”). It is expected that once the repairs are completed in March 2014, Pleasant Village will request that TDHCA conduct a re-inspection.   Additionally, Walker Guardian stopped making the mortgage payment for Grove Village and Pleasant Village in May 2013. To prevent the lender from commencing a foreclosure action against the apartment projects, the Sponsor negotiated the purchase of notes. Thereafter, the legal proceeding was commenced.
Item 1A.	Risk Factors
	No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	NONE
Item 3.	Defaults Upon Senior Securities
	NONE
Item 4.	Mine Safety Disclosures
	NOT APPLICABLE
Item 5.	Other Information
	NONE
Item 6.	Exhibits

 

31.1	Certification of the 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)
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Balance Sheets at December 31, 2013 and March 31, 2013, (ii) the Condensed Statements of Operations for the three and nine months ended December 31, 2013 and 2012, (iii) the Condensed Statements of Partners’ Equity (Deficit) for the nine months ended December 31, 2013 (iv) the Condensed Statements of Cash Flows for the nine months ended December 31, 2013 and 2012 and (v) the Notes to Condensed Financial Statements.
	Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

 

 

SIGNATURE

 

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

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

 

By:	WNC National Partners, LLC                     General Partner
By:	/s/ Wilfred N. Cooper, Jr.
	Wilfred N. Cooper, Jr.
	President and Chief Executive Officer of WNC & Associates, Inc.
Date:	February 20, 2014
By:	/s/ Melanie R. Wenk
	Melanie R. Wenk
	Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date:	February 20, 2014